New age social commerce startups achieve high growth amid changing consumer behavior in India

New age social commerce startups achieve high growth amid changing consumer behavior in India

New age social commerce startups achieve high growth amid changing consumer behavior in India

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In India, consumer behavior is undergoing a gradual change. Led by the global pandemic outbreak, consumption habits of Indian consumers are changing, with more consumers shopping online compared to the pre-pandemic period. Notably, innovation in the e-commerce space, led by the amalgamation of online shopping and social media, has driven the industry's growth in a significant manner over the last few years.

While social commerce is still an emerging sector in the country, the strong support from new generation consumers and the consistent shift to digital channels among adults are driving the growth momentum. The growing interest from consumers has resulted in social commerce startups attaining high growth in both, customer acquisition and sales volumes, thereby helping to establish new-age e-commerce models in India. For instance,

  • In August 2022, Shopsy, the social commerce platform owned by Flipkart, announced that the firm had crossed 100 million users. This is much ahead of its planned target of having 100 million users by the end of 2022. Notably, the growth in customer acquisition has been largely driven by the global pandemic outbreak, which accelerated the shift to e-commerce platforms in India. This shift has also resulted in more consumers shopping online at a higher frequency on the Shopsy platform.
  • Between February 2022 to July 2022, Shopsy recorded a growth of 2.2 times in its sales volumes and customer base, respectively. More than 68% of its users come from Tier II and Tier III cities in India. Moreover, half of its customers are first-time e-commerce shoppers. With its growing traction among new generation online shoppers, PayNXT360 expects Shopsy to keep continuing its growth momentum further in H2 2022, as consumer sentiment remains good for the upcoming Indian festive season.
  • Some of the leading categories where consumers are increasingly making purchases on Shopsy include home products, electronics accessories, and general merchandise, among others. With over 250,000 sellers on the platform, the firm offers 150 million products to its users across 800 categories.

Along with Shopsy, many other startups in the space have recorded strong growth in 2021 and have continued their growth momentum in H1 2022. For instance,

  • Meesho, the SoftBank-backed social commerce startup, became the first e-commerce firm in India to reach 100 million transacting users in India in 2022. Notably, since March 2021, the transacting users for the firm have increased six times. Similar to Shopsy, Meesho claims that 50% of its users are first-time online shoppers in the country.

The fact that more and more first-time online shoppers prefer social commerce channels rather than traditional e-commerce platforms shows the growth potential for the industry over the next three to four years. Moreover, given the fact that there are only 200 million online shoppers in the country with a total population of 1.4 billion, online penetration is still relatively low. Consequently, the growth potential for players such as Meesho and Shopsy remains relatively high from the medium to long-term perspective.

Over the next three to four years, PayNXT360 expects consumers from Tier II and III cities to drive the growth momentum for these players. Notably, to tap into the huge Indian market, social commerce startups are adopting innovative customer acquisition strategies. For instance,

  • In August 2022, Meesho added eight more languages to its social commerce platform as it seeks to widen the reach of its services during the upcoming festival season in the country. Notably, Meesho users can now use Marathi, Telugu, Bengali, Tamil, Gujrati, Kannada, Malayalam, and Odia for accessing their accounts and product information, placing and tracking orders, and making payments.

The strategy of Meesho to localize its platform is projected to help the firm in gaining more traction among Tier III and IV cities of India from the short to medium-term perspective.

Notably, the high growth achieved by social commerce players in India over the last two years is also encouraging many traditional retailers to foray into the segment to expand their online presence and generate incremental revenue. For instance,

  • In June 2022, Bata, one of the leading footwear retailers in India, announced that the firm is foraying into the social commerce segment in its bid to reach out to more consumers and drive revenue.
  • Notably, the firm is planning to display its product on social media platforms such as Instagram and offer them a link to its e-commerce platform. Through its social commerce strategy, the firm is aiming to boost digital sales, which currently account for 15% of the total volume. The firm has previously experimented with the same social commerce strategy in the United States as well.

With the growing consumer interest in social commerce and the high growth achieved by new-age social commerce startups in India, PayNXT360 expects more brands and retailers to foray into the segment from the short to medium-term perspective. Moreover, as these startups continue to grow and drive incremental revenue, PayNXT360 also expects a strong inflow of global venture capital and private equity funds in the Indian social commerce industry over the next three to four years.

To know more and gain a deeper understanding of the social commerce market in India, click here.

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