Article 33 Summary: Digitizing consumers in India's ConsumerTech market

Report by BCG & Matrix

Summary

This document provides a comprehensive overview of digitizing consumers in India's ConsumerTech market. It emphasizes the importance of omnichannel distribution, the democratization of online commerce, the focus on healthier lifestyle choices, sustainability, and re-commerce. The document provides valuable insights and recommendations for startups and existing companies in the industry.

Let’s get started !

The Indian economy is experiencing sustained growth, driven by increasing affluence and discretionary spending. The pandemic has accelerated digital adoption, particularly in e-commerce, projecting 350–400 million online shoppers by 2025. The Indian ConsumerTech sector has seen substantial value creation, with over 40 unicorns and a valuation exceeding USD 250 billion as of December 2022. With over 630 million internet users and 98 million digital natives, the market is ripe for growth.

Key trends shaping the ConsumerTech landscape include:

• Expansion of online commerce to older demographics and tier 2+ cities
• Growth of omni-channel retail and digitally influenced spending
• Increased time spent on social media leading to discovery-led shopping
• Marketplaces becoming preferred over search engines for product searches
• Rise of Q-commerce for quicker delivery options
• Emergence of new commerce models such as influencer and live/video commerce
• Shift towards healthier and sustainable lifestyle choices
• Emerging technologies like generative AI are expected to further impact e-commerce.?

• To sustain growth, companies need to focus on maximizing customer lifetime value, expanding distribution channels, evaluating international markets, and optimizing profitability.?

Decoding the ConsumerTech landscape:

• Indian economy is demonstrating sustained growth among global macroeconomic headwinds. India grew at ~3x faster rates vs. USA and EU?
• Affluence is increasing in India - aspirer, affluent and elite households will account for ~50% by 2030.?
• Increasing affluence will drive discretionary spending and spur growth in categories beyond food and clothing?

• The pandemic accelerated adoption of e-commerce and brought new shoppers online?
• Increasing digital penetration and higher adoption of internet services leading to deepening of internet ecosystem?

• The ConsumerTech space has seen large value creation in recent years - $250Bn valuation and 40+ unicorns?
• Rapid surge in new Indian ConsumerTech startups over the last 7 years?
• Multiple ConsumerTech startups have gone public, while many are on the path to profitability?
• ConsumerTech's funding are back to 2018 and 2019 levels with a spike in 2021 due to digitization?

Evolving trends shaping ConsumerTech space?

• High founder confidence in growth potential of beauty & personal care, food & FMCG and healthcare categories?
• Significant increase in time spent online on social media and photo/ video apps, also becoming an important channel for e-commerce?

• Marketplaces overtaking search engines as new search sites1 for select user categories

• Digital influence growing: 6–8x growth in digitally influenced retail spending; leading to increased importance of omnichannel
• Democratization of online commerce with the rise of new online shoppers across age, income, gender and geography?
• Founders believe 35+ age group, Tier 2+ cities will drive demand in the next 3 years?

• Consumers are increasingly looking for quicker gratification in the form of shorter delivery options?
• New commerce models will provide an impetus to existing and new shoppers?
• Exemplars of new commerce models in China and South-East Asia?
• New age commerce models have been able to scale significantly in China; but in a relatively nascent stage in India?
• Pandemic has shifted customer preferences towards healthier lifestyle choices?
• Consumers becoming more aware about sustainability and re-commerce; but yet to become mainstream and gain significant traction?
• Emerging technologies like Generative AI and ONDC have catalyzed broader public interest?
• 2x growth in digital payment volume in 7 quarters, however cash continues to remain relevant especially in rural areas?
• Rapid growth in physical infrastructure in the last decade has improved the ease of doing business by resolving logistical challenges?
• Growth in internet connectivity and improved data speeds have helped in increasing penetration of online commerce and social media apps?

Implications for startups -?

This can be divided in 2 stages:

1. Scaling in 0–to–10 phase : 4 factors are critical for scaling a startup from 0 to 10:

2. Driving sustainable growth in 10–100 phase:

• Maximizing customer lifetime value by expanding offerings, driving loyalty through customer retention and focusing on cross-sell/up-sell?
• Expanding distribution across channels and geographies to target new customer archetypes?
• Evaluating international markets for entry?
• Driving path to profitability in key levers e.g. customer acquisition costs, Revenue mix optimization (product mix, channel mix, discounting and promos), Zero-based budgeting to eliminate inefficiencies across the value chain (e.g., spend consolidation and procurement cost optimization)?

• Backward integration in matured / scaled categories to capture additional margin, supply chain, etc.?
• Harnessing the power of AI and analytics across the value chain:Prioritizing tech investment allows for operational efficiency, task automation, and innovation.?Data analytics enables personalized marketing and sales strategies, providing insights into customer preferences and behaviors.

• Unlocking founder bandwidth to focus on strategic goals via organizational build-up?

Link to the detailed article:

https://fintrest.substack.com/p/article-32-summary-digitizing-consumers