1、DIGITIZING CONSUMERS IN INDIAFuture of Indian ConsumerTech Challenges and OpportunitiesApril 2023DIGITIZING CONSUMERS IN INDIA3Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities.BCG was the pioneer

2、in business strategy when it was founded in 1963.Today,we help clients with total transformationinspiring complex change,enabling organizations to grow,building competitive advantage and driving bottom-line impact.To succeed,organizations must blend digital and human capabilities.Our diverse,global

3、teams bring deep industry and functional expertise and a range of perspectives to spark change.BCG delivers solutions through leading-edge management consulting along with technology and design,corporate and digital venturesand business purpose.We work in a uniquely collaborative model across the fi

4、rm and throughout all levels of the client organization,generating results that allow our clients to thrive.Early-stage investors targeting companies in the Indian consumer and enterprise market.Matrix Partners began in Boston in 1977,and today invests actively in the USA,India and China.Matrix Part

5、ners India was established in 2006 and invests across a variety of sectors including consumer technology,B2B,enterprise and SaaS,and Fintech,among others.We look for the best and brightest founders and teams.In our experience,the quality,passion and commitment of a companys core team are more import

6、ant than any other element.We invest in between seed and series B initially in each company.We like to get to know founders early,ideally well before they are ready to raise capital,with a focus on companies primarily targeting the Indian market.We prefer to be the lead investor.We often invest on o

7、ur own but also co-invest with other investors.Founders are always first in our eyes,whether you have just a nascent idea or are already running a business,let us help you turn your ideas into reality and grow your business.We corroborated and substantiated our findings through extensive research an

8、d data analysis from Center for Customer Insight(CCI)and global knowledge teams within BCG.We also conducted a thorough analysis of investment flows in the ConsumerTech space.To explore the ConsumerTech space in India,we conducted a series of in-depth discussions with 25+founders and senior executiv

9、es in leading startups in India.In addition to this,we surveyed founders and senior executives on a broad range of topics in ConsumerTech space.We also leveraged the deep expertise across BCGs global network of partners and research teams.The founder survey underlying this report was conducted in la

10、te 2022 and 2023.Over 250 founders and senior executives were approached for the survey.The goal of the survey was to derive a comprehensive understanding of the ConsumerTech landscape,and the trends in the space along with outlook for the industry.OUR APPROACHDIGITIZING CONSUMERS IN INDIA5DIGITIZIN

11、G CONSUMERS IN INDIA6DIGITIZING CONSUMERS IN INDIA7EXECUTIVE SUMMARYThe Indian economy continues to show sustained growth,with increasing affluence and discretionary spending.The pandemic accelerated digital penetration by 1224 months across different sectors,thereby boosting the adoption of e-comme

12、rce and reaching a total of 350400Mn online shoppers by 2025.In the midst of this,the Indian ConsumerTech space has seen large value creation with USD 250Bn+in valuation and 40+unicorns as of December 2022.As Indias ConsumerTech ecosystem matures with 4K+deals and USD 54Bn fund flows in the last 5 y

13、ears,we expect that we will continue to see sustained growth in the next decade as key enablers fall into place across digital payments,physical infrastructure and logistics,and internet data connectivity.This is further bolstered by a deepening market with 630Mn+internet users and 98Mn+digital nati

14、ves in 2022,setting a robust platform for multiple large ConsumerTech companies to be built.While there is relatively high penetration and maturity of ConsumerTech in categories such as electronics,appliances,fashion and apparel,the next wave of growth is likely to be driven by beauty and personal c

15、are,food&beverages,FMCG,and furniture and dcor.Proprietary consumer research conducted by BCGs Centre for Consumer Insight,along with our discussions with 25+start-up founders and CXOs,have revealed a set of key trends which are shaping the Indian ConsumerTech landscape.Democratization of online com

16、merce with a large proportion of new shoppers being 35+years old,women and from tier 2+cities Increasing relevance of omni-channel with 68X growth in digitally influenced retail spending,reaching USD 207Mn in 2021 from USD 24.3Mn six years ago 1.8x increase in time spent online by consumers on socia

17、l media and photo/video apps in the last 3 years,leading to these channels becoming important for e-commerce with the emergence of discovery led shopping and social commerce Marketplaces are overtaking search engines as new search sites with 3540%consumers choosing marketplaces for searches in selec

18、t user categories,such as electronics,fashion,mobile,food&FMCG and beauty and personal care Consumers are seeking quicker gratification with shorter delivery options,leading to the emergence of Q-commerce,which has rapidly increased to 2530%of the overall online grocery market New commerce models su

19、ch as assisted&conversational commerce,influencer commerce,live/video commerce and group buying could provide an impetus to existing and new shoppers Shift in consumer preferences towards healthier lifestyle choices,sustainability and re-commerce Rise of emerging technologies such as generative AI c

20、ould have multiple potential applications in e-commerce(e.g.,automating product descriptions,personalized marketing content,assortment planning etc.);ONDC could provide a further fillip to e-commerce penetrationWith the landscape evolving rapidly,it is crucial for companies to navigate the landscape

21、 strategically to ensure higher odds of success.Our in-depth discussions with founders and CXOs,and analysis of a larger set of successful ConsumerTech companies reveal critical factors for success:Scaling startups from 0to101.Identifying unmet customer need,pain-points or friction in existing offer

22、ings to create a disruptive consumer proposition2.Making the right choices across pricing,optimizing unit economics and customer acquisition costs 3.Building the supply side as a potential competitive moat through deep partnerships and capability build4.Internalizing the test&learn philosophy for qu

23、icker iterations and faster route to product market fitDriving sustainable growth in 10100 phase 1.Sources of next wave of growthA.Maximizing customer lifetime value by expanding offerings,driving loyalty through customer retention,and focusing on cross-sell/up-sellB.Expanding distribution across ch

24、annels and geographies to target new customer archetypesC.Evaluating international markets for entry2.Optimizing profitability A.Driving path to profitability in key levers,e.g.,customer acquisition costs3.Capability building for scaleA.Unlocking founder bandwidth to focus on strategic goals via org

25、anizational build-upB.Harnessing the power of AI and analytics across the value chainIn this report,we have covered some of the key trends that we identified based on consumer research and extensive discussions with stakeholders across the ecosystem.It provides a ready reckoner for founders and CXOs

26、 of new and existing ConsumerTech companies,investors as well as legacy consumer companies targeting the new Indian consumer on what it will take to successfully navigate the 010 journey and then scale from 10100.ContentsTable ofDecoding the ConsumerTech landscapeImplications for companiesA.Scaling

27、in 0to10 phaseEvolving trends shaping ConsumerTech space#2443#4463#1023B.Driving sustainable growth in 10100 phase01/03Decoding the ConsumerTech landscapeDIGITIZING CONSUMERS IN INDIA12India grew at 3x faster rates vs.USA and EUNote:Annual percentage growth rate of GDP at market prices based on n co

28、nstant 2015 prices,expressed in U.S.dollars.Dollar figures for GDP are converted from domestic currencies using 2015 official exchange rates.For a few countries where the official exchange rate does not reflect the rate effectively applied to actual foreign exchange transactions,an alternative conve

29、rsion factor is used.Source:World Bank,BCG analysisIndian economy is demonstrating sustained growth among global macroeconomic headwindsAnnual GDP growth indexed to 2001Indian GDP(current$Tn)20012004200720102013201620222019ChinaSouth East AsiaUSAEUIndia0.7Accelerated growthFinancial crisisPandemicSt

30、eady recovery1.21.61.82.32.63.2325150DIGITIZING CONSUMERS IN INDIA131.Annual household gross income is based on 2019 pricesNote:Annual Gross Household incomeStrugglers:INR 20 lakhs;Source:CCI proprietary income model,BCG analysisNumber and%of households(Mn)in different income bracketsAnnual HH incom

31、e1(INR lakhs p.a.)Growth(1930)20103.920195.220307.3Annual gross HH income1(INR lakhs p.a.)Number of HHs(in million)Affluence is increasing in India-aspirer,affluent and elite households will account for 50%by 20302382891.6xAspirers 5.010.035(15%)59(21%)93(26%)1.1xNext Billion 1.55.0108(45%)130(45%)1

32、42(40%)0.6xStrugglers 20.03(1%)10(3%)23(7%)DIGITIZING CONSUMERS IN INDIA14Increasing affluence will drive discretionary spending and spur growth in categories beyond food and clothing47%6%15%3%12%3%2%12%43%7%15%3%14%3%2%12%30%7%20%5%17%4%3%14%22%8%21%6%18%5%3%17%14%8%24%5%20%6%4%19%StrugglersNext Bi

33、llionAspirersAffluentElite%Share of household spends by category across income segments for 2019Food&FMCGFashion&ApparelHousing&household productsHealthTransport&communicationEducationLeisureOther goods&servicesNote:These percentages are rounded to the nearest integerAnnual Gross Household incomeStr

34、ugglers:INR 20 lakhs;Categories are Food&FMCG(Fresh food&dairy,Staples,packaged foods&beverages,Tobacco),Fashion&Apparel(Clothing&accessories,Footwear),Housing&Household products(Housing rental,maintenance&utilities,Household goods,equipment&services),Health(Health goods&medical services),Transport&

35、Communication(Local regular commute,Air/bus/train travel,Vehicles&Maintenance,Communication-Mobile phone&services),Education,Leisure(Holidays/Entertainment incl.Eating out/Ordering food,Activity classes,Recreational Equipment),Other goods&services(incl.insurance premium/service charge payment,EMIs,P

36、ersonal care)Source:CCI category consumption survey,N=8500,2019;BCG analysis.DIGITIZING CONSUMERS IN INDIA15The pandemic accelerated adoption of e-commerce and brought new shoppers online Note:Among 18+population.Online spending is for product-only categories.Pre-COVID&post-COVID projections represe

37、nt est.online shoppers and retail spending for 2025 made in a pre-COVID period(Jan 2017)and a post-COVID period(Jan2022).Source:BCG CCI Digital Influence Study 2013-2017,2021 surveys(N=10k to 20k each year,urban&rural coverage);Consumer survey,secondary research,expert calls;BCG analysis.50100Mn new

38、 shoppers by 2025 due to pandemicOnline Shoppers(Mn)Online retail spending($Bn)201620202021Pandemic85180-200220-230300-350350-400New Shoppers(Mn)Growth in spending($Bn)Accelerated trajectoryContinued trajectoryPre-pandemicPost-pandemicPandemic1230-3550-5555-60140-16050-5540322017 2018 20192022202320

39、24EPre-pandemicPost-pandemic1822273335333844502016202020212025E2025E2017 2018 2019202220232024E34521273621167DIGITIZING CONSUMERS IN INDIA16Increasing digital penetration and higher adoption of internet services leading to deepening of internet ecosystemNote:Among 18+population;Online retail spendin

40、g and digitally influenced retail spending are for product-only categories.Internet users=consumers having internet access.Digitally Influenced shoppers=consumers who have done online research before or at the time of purchase for at least one category during the calendar year.Online transactors(pro

41、ducts&services)=consumers who have purchased products in at least one category online during the calendar year.Source:BCG CCI Digital Influence 2021 surveys(N=10,000 to 20,000 each year,urban and rural coverage);Oxford Economics;BCG analysis.630Mn320Mn260Mn98Mn Internet users Population with interne

42、t accessDigitally influenced population Consumers who have researched online before or at the time of purchase for at least one category Includes people primarily using social media and video apps for entertainment Online transactors(products&services)Consumers who purchased in atleast one category

43、in a calendar year Includes people who are new to online commerce and use internet to access basic needs like online recharges,bill payments,search,etc.Digital natives Moderate online transactors(products and services)who purchase in three to five categories,also ordering food online,buying mobiles,

44、and booking travel tickets Includes heavy online transactors(products and services)who purchase in six or more categories,also buying home dcor,home care,insurance,watches,and OTT video subscriptionsIncreasing Internet Maturity(2022)50%40%15%DIGITIZING CONSUMERS IN INDIA17The ConsumerTech space has

45、seen large value creation in recent years-$250Bn valuation and 40+unicornsNote:1.Apparels,narrow category marketplaces;2.International education,Extra-curricular upskilling;etc.3.Music streaming,OTT content;4.FnB review,recommendation;5.Intra-city,Car renting,New car purchase,6.Caregiving,wellness g

46、adgets,Medical tourism;7.Event booking,Subscription based services;8.Recycling,Renewable energy,White collar services,Home appliances,Rentals 9.AgriTech,Toys,Baby products,Gifting,Impact/Charity,Robotics,Pet care,Spiritual content,etc.10.Includes live commerce,assisted commerce,group buying etc.Sour

47、ce:Tracxn investment flow data for India,China,South-east Asia and the US for Jan 2017Nov 2022(data pulled Dec 2,2022);BCG analysisBroad category marketplacesBPCAccessoriesNew-age commerce10K-12 educationProfessional upskillingCompetitiveexam preparationOthers2Others1Gaming TechSocial MediaNews&Cont

48、entOthers3Food deliveryFood andbeverage productsQuick CommerceOthers4Ride hailingSecond hand car purchaseEV andenergy solutionsOthers5PharmacyandConsultationWellness servicesWellness productsOthers6Diagnostics&recordsTravel bookingUsed gadgetsHousingElectronics&smart productsTravel advisory/informat

49、ion providerOthers7At home servicesHome Dcor&furnitureOthers8Fashion,Accessories&BPCEducationMedia&EntertainmentFood&NutritionMobilityHealthcare&WellnessRecreationHousing&utilityOthers967393630281817Valuation in$Bn As of Dec 2,2022No.of Unicorns12947664237225443DIGITIZING CONSUMERS IN INDIA181.South

50、-East Asia includes Brunei,Burma(Myanmar),Cambodia,Timor-Leste,Indonesia,Laos,Malaysia,Philippines,Singapore,Thailand and VietnamSource:Tracxn investment flow data for India,China,South-East Asia and the USA for Jan 2018Nov 2022(data pulled Dec 2,2022);Press search;BCG analysisIndian ConsumerTech ec

51、osystem occupying a significant space in the global landscapeNumber of Deals(Jan18Nov22)Number of Startups(Raised fundingJan18Nov22)Total Funding($Bn)(Jan18Nov22)7,3094,638151USA92669792China4,3511,95154India89150328South-East Asia1DIGITIZING CONSUMERS IN INDIA19Note:Data for 2022 includes actual da

52、ta of 11 months and extrapolated data for December22Source:Tracxn investment flow data for India;BCG analysisRapid surge in new Indian ConsumerTech startups over the last 7 yearsCumulative number of startups in ConsumerTechNumber of ConsumerTech startups in IndiaNumber of Unicorn as of 2022,in their

53、 founding yearFlipkart,VerSe,Games 24x7Dream Sports,Zomato,Quikr,CarDekhoLenskart,FirstCry,Ola,Paytm Mall,EruditusNykaa,HikeRebel Foods,bigbasket,Purplle,BYJUsSwiggy,PharmEasy,Urban Company,LivSpace,Droom,NoBrokerLicious,1mg,Meesho,CARS24,ShareChat,Unacademy,Spinnycult.fit,Mamaearth,PhysicsWallah2x

54、increase in startups over 7 years,20 new unicorns2,5002008200920112013201520172019202120102012201420162018202020222,0001,0001,500500The Good Glamm Group,GlobalBeesGlance,ApnaOLA Electric Pristyn Care,MPL,DealShareOYODIGITIZING CONSUMERS IN INDIA20Note:Data for 2022 includes actual data of 11 months

55、and extrapolated data for December22Source:Tracxn investment flow data for India;BCG analysisIncreasing investment share of ConsumerTech funding in early-stage startupsQoQ ConsumerTech funding scaled over time with Q118 as 100Q118Q218Q418Q219Q419Q220Q420Q221Q421Q222Q318Q119Q319Q120Q320Q121Q321Q122Q3

56、22Q4228006004002000Series D and aboveAngel&SeedSeries A,B,CSteady investment flows in early-stage fundingSpike in funding owing to COVID induced push to digitizationDIGITIZING CONSUMERS IN INDIA21Multiple ConsumerTech startups have gone public,while many are on the path to profitability$3Bn raised b

57、y ConsumerTech startups while going publicStartups are reaching profitability sooner as wellIPO yearValuation at IPO($Bn)Founded yearReported PAT,FY21($Mn)1212610.50.310318278411413 5 yearsTime to profit:ZomatoNykaaPolicyBCarTNazaraEaseMyT2021201620162016201220102008200820062006Source:Traxcn;MCA fil

58、ings,BCG analysisBoatMamaearthPhysicsWallahNykaaFEaseMyTDream11Game 24X7CarTDIGITIZING CONSUMERS IN INDIA22Funding back to 2018 and 2019 levels in ConsumerTech ConsumerTechs funding are back to 2018 and 2019 levels with a spike in 2021 due to digitizationQ1Q1Q1Q1Q121004200630084001000Q2Q2Q2Q2Q2Q3Q3Q

59、3Q3Q3Q4Q4Q4Q4Q4There is increased pressure from investors to reduce burn and move towards profitability.Owing to this,we undertook several measures to shift from growth at all costs to sustainable growth.Founder,ConsumerTech startupWe continue to remain bullish on the Indian ConsumerTech space;it wi

60、ll continue to grow in the next 3-5 years.However,it is necessary for startups to balance growth and profitability and build a sustainable business.Investor,ConsumerTech startup20202019201820212022Investment($Bn)Investment($Bn)No.of dealsNo.of dealsNote:Data for 2022 includes actual data of 11 month

61、s and pro-rata for December22Source:Tracxn investment flow data for India;BCG analysis;Press searchSpike in funding owing to COVID induced push to digitizationDIGITIZING CONSUMERS IN INDIA231.Q:What are your views on the funding landscape(likelihood of funding)for consumer-tech companies in the next

62、 12 months?N=42 as on 20th Jan 2023 2.Q:How likely are you to pick ConsumerTech as your next venture;N=42 as on 20th Jan 2023 Source:BCG Matrix ConsumerTech survey23;BCG analysisFounders are cautious about raising funds in near term,but have an optimistic outlook on the ConsumerTech sector in mid-lo

63、ng termOutlook on funding for ConsumerTech startups in the next 1 yearLikeliness to pick ConsumerTech for the next venture%respondents1%respondents2Optimistic52%NeutralPessimistic24%24%Neutral12%Highly likely81%Highly unlikely7%Evolving trends shaping ConsumerTech space02/03DIGITIZING CONSUMERS IN I

64、NDIA26CategoryElectronics&appliancesFashion&apparelBeauty&personal carePetcareFurniture&DcorFood&FMCG1.Ease of payments2.Internet connectivity&reliability3.Logistics infrastructureTrendEnablers1.Significant increase in time spent online on social media and photo/video apps7.Shifted towards healthier

65、 lifestyle choices10.Rise of Generative AI models and ONDC2.Marketplaces overtaking search engines as new search sites3.Increasing relevance of omni channel with growing digital influence4.Democratization of online commerce with the rise of new shoppers5.Quicker gratification with shorter delivery o

66、ptions6.New commerce models-Assisted&conversational commerce;Influencer/live video commerce and Group buying8.Increasing awareness for environmentally conscious behaviour9.Growing acceptability for second-hand goods and re-commerceSignificance of trends and business models Established trend in India

67、Early signs of shift in India/other marketsEvolving trends shaping ConsumerTech spaceDIGITIZING CONSUMERS IN INDIA27Note:Exhibit covers e-retail spending among 18+adults.Electronics&appliances=desktop,laptop computers,tablets,PCs and mobile accessories,TVs,washing machines,refrigerators,ACs,water pu

68、rifiers,and small appliances;Fashion and Apparel=footwear,accessories&jewelry;Food&FMCG=fresh food(excl.food orders),staples,packaged F&B,health&nutrition products,homecare,alcohol bev.,and childrens food;Furniture&decor=furniture,home decor,lighting,wires,switches,sockets,building materials&paints;

69、Beauty&personal care=skin&hair care,makeup,eye care&baby care;Other categories include OTC&prescription medicines,recreational items(toys,books,stationery,movie tickets),automotive&maintenance.%may not total 100 due to rounding.Source:Forrester;CCI e-commerce model,BCG CCI Digital Influence Study 20

70、13-2017,2021 surveys(N=10k to 20k each year,urban and rural coverage);BCG analysisOnline retail expected to grow faster in beauty&personal care,food&FMCG and fashionTotal online retail($Bn)Share of online retail spending(%)10132015505520211401602025E2225Electronics and appliances1517Mobile Devices20

71、222224Others17203033Furniture and decorFood and FMCG2730273062320732201352720212025 CAGR(%)Fashion and apparelBeauty and personal care52516562011452723CATEGORYDIGITIZING CONSUMERS IN INDIA28WIPNote:Q:Rank the following sub-categories in order of decreasing expectation of growth in the next year;N=42

72、 as on 20th January 2023 Source:BCG Matrix ConsumerTech Founder survey23High founder confidence in growth potential of beauty&personal care,food&FMCG and healthcare categoriesCategory growth potential as of 2023CategoryWhich category has highest growth potential?(%respondents)?Beauty&Personal CareFo

73、od&FMCGHealth&wellnessPetcarePetcareFashion&ApparelTravelFurniture&DecorElectronics&appliances31Consumer preference for a convenient&organized market and a shift from utility to more aesthetically pleasing products are encouraging signs for the Furniture space as they shift towards online furniture.

74、Founder&CEO,ConsumerTech startup8Rising awareness,caution&affordability among consumers are key factors that will drive growth of the BPC segment online.Moreover,newer online brands are emerging in under penetrated categories like skincare&haircare.Founder&CEO,ConsumerTech startup1241444451616185CAT

75、EGORYDIGITIZING CONSUMERS IN INDIA29Significant increase in time spent online on social media and photo/video apps,also becoming an important channel for e-commerceAverage time spent per user across apps category(Hours)Most often used e-commerce channel1(response,%)Social&CommunicationPhoto&VideoGam

76、esEntertainmentOthersMarketplacesSocial media and chatConsumer to Consumer portalsBrand websites48%22%19%7%4%2.7CY18CY1801234544%22%21%8%5%3.7CY1943%25%19%9%4%4.1CY2046%25%18%7%4%4.7CY21CY2160%8%11%20%54%23%20%3%1.8x increase in time spent online,70%time spent on social media and photo/video apps3x

77、increase in use of social media for online purchases3x growth25%growth10%growth15%growth1.Q:Which of these platforms have you used most often in the last nine months to make an online purchase?Note:Among urban(metro to tier 3 cities),adult online shoppers.Because of rounding,bar chart segment number

78、s may not add up to 100%;Consumer-to-consumer portals-Such as OLX and Quikr(similar to Craigslist in the US)Source:Data.ai(prev.App Annie)stats for Indian internet users;BCG CCI Digital influence Study 2013-2017,2021 surveys(N=10,000 to 20,000 each year,urban and rural coverage);BCG analysisTREND1.N

79、ew channels for e-commerceDIGITIZING CONSUMERS IN INDIA30Marketplaces overtaking search engines as new search sites1 for select user categories1.Search sites incl.search engines,online blogs&forums,and comparison websites Note:These percentages are rounded to the nearest integer.Among urban(metro to

80、 tier 3 towns),adult,digitally influenced consumers.Electronics=desktops&laptops,tablets,PCs&mobile accessories;Fashion=apparel,footwear&accessories;Food&FMCG=fresh food(excl.food orders),staples,packaged F&B,health&nutrition products,homecare&alcoholic bev.;Beauty&personal care=skin and hair care,m

81、akeup,eye care,baby care&personal care;Recreational=toys,books,and movie tickets;Appliances=TVs,washing machines,refrigerators,ACs,water purifiers,and small appliances;Furniture&decor=furniture,home decor,lighting,wires,switches,sockets,building materials,and paints;Travel=air,train,and bus bookings

82、&hotels Source:BCG CCI Digital Influence Study 2013-2017,2021 surveys(N=10k to 20k each year,urban and rural coverage);BCG analysis Q:From which of the following online platforms did you receive the information that most influenced your purchase decision?7%15%22%28%28%20185%10%16%23%46%6%11%17%23%44

83、%5%11%18%25%40%5%13%20%27%35%7%13%20%26%34%10%17%22%20%30%5%15%18%33%30%4%14%17%36%29%11%10%19%44%16%14%12%19%28%27%8%12%19%28%34%2021Brand websitesYouTubeSocial Media&chatSearchMarketplacesMost influential online channel(all responses,%,2021)ElectronicsFashionMobileFood&FMCGBeauty&PersonalFood orde

84、ringRecreational AppliancesFurniture&decorTravelTREND2.Marketplaces-dominant search siteDIGITIZING CONSUMERS IN INDIA311.Among 18+population;the online retail spending and digitally influenced retail spending shown are for product-only categories.Digitally influenced shoppers=consumers who have done

85、 online research before or at the time of purchase for at least one category during the calendar year.1 USD=80 INR Q:In your opinion,how important is omnichannel distribution for building a profitable business?N=19 as on 20th Jan 2023 Source:BCG CCI Digital Influence Study 2013-2017,2021 surveys(N=1

86、0k to 20,000 each year,urban and rural coverage);Oxford Economics;BCG Matrix ConsumerTech Founder Survey 2023;BCG analysis Digital influence growing:68x growth in digitally influenced retail spending;leading to increased importance of omnichannelDigitally influenced spending has grown 68x over last

87、6 years80%of founders believe that omnichannel distribution is importantDescriptionSpending(in INR 000Bn)29305256Total retail spending1 0.60.844.56xDigital online retail282948522xOffline retail spending22.116178xDigitally influenced offline retail20152021How important is Omnichannel distribution for

88、 building a profitable business?%of survey respondentsNeutral5%Not important16%Important79%2xTREND3.Omnichannel relevanceDIGITIZING CONSUMERS IN INDIA32Democratization of online commerce with the rise of new online shoppers across age,income,gender and geography Note:The exhibit shows online shopper

89、 share%only among adults 18+(metro to tier 3 cities)for age,gender and income and for adults 18+(metro to tier 4 and rural)for geography.New shoppers=consumers who purchased online for the first time in the last 1 year;Struggler=annual income below$2,000.Next billion=annual income between$2,000 and$

90、6,999.Aspirer=annual income between$7,000 and$12,999;Affluent+=annual in-come$13,000 or more.Because of rounding,bar chart segment numbers may not add up to 100%.Source:BCG CCI Digital Influence Study 2021 surveys(N=10,000 to 20,000 each year,urban and rural coverage);BCG analysisOnline shopper shar

91、e by cohorts(%)Number of shoppers3429308202026233813202121173427202087305520213433181520212031282020215720214360202040AgeGenderIncomeGeographyOver 45 age group forms largest cohort of new online shoppersIncreasing share of women amongst new shoppers“Next billion”segment emerging as the largest cohor

92、tIncreasing contribution of Tier 2+consumers180200Mn180200Mn180200Mn180200Mn3040Mn3040Mn3040Mn3040Mn45+years3544 years2534 years1824 yearsMenWomenMetroTier 1Tier 2/3/4RuralAffluent+AspirerNext BillionStrugglersNew shoppersNew shoppersNew shoppersNew shoppersTREND4.Democratization of online commerce

93、DIGITIZING CONSUMERS IN INDIA331.Q:How much do you expect customers from each of the following regions will approximately contribute to your overall revenue 3 years from now?2.Q:How much do you expect customers from each of the following age groups will approximately contribute to your overall reven

94、ue 3 years from now?N=42 as on 20th Jan 2023Source:BCG Matrix ConsumerTech Founder Survey 2023;BCG analysisConsumerTech startups will continue to focus on working professionals and young parents as they have significantly higher disposable income and are more open to trying newer brands and products

95、.Founder,ConsumerTech startupDiscretionary spending is largely trending upwards in Tier 2/3 cities as consumers are becoming more brand conscious.We are expanding operations to these regions as we expect them to drive growth.Founder and CEO,ConsumerTech startupFounders believe 35+age group,Tier 2+ci

96、ties will drive demand in the next 3 yearsHow much revenue will each age group contribute in the next 3 years?1 How much revenue will each geography contribute in the next 3 years?2 Age group%revenue contribution%revenue contributionAge less than 18 years10%Between 1824 years23%Between 2534 years34%

97、Between 3550 years23%Older than 50 years10%46%38%16%Tier 2+citiesMetro&Tier 1 citiesRural areasTREND4.Democratization of online commerce DIGITIZING CONSUMERS IN INDIA341.Google search trend volumes for trends related to quick commerce-fast delivery,quick delivery,deliver now,immediate delivery,expre

98、ss deliveryNote:Numbers represent search interest relative to search volume at the start of Jan 2019.A value of 100 is the means that the term was as popular as on the first week of Jan 19Source:Google search trends;BCG analysisConsumers are increasingly looking for quicker gratification in the form

99、 of shorter delivery optionsGoogle search trends1 in India,201922(Scaled interest over time with Jan19 as 100)Customer expectation for faster delivery is continuing to increase over the yearsPre-COVIDCOVIDPost-COVID300400200100143194243Jan 19Jan 20Jan 21Jan 22Jan 233188We launched a never seen befor

100、e 24hour delivery service in furniture category to meet the customer expectation for faster deliveries and installation.Founder,ConsumerTech startupQuick commerce which emerged as a pandemic phenomenon has changed customer expectations.However,it is difficult to make unit economics work without larg

101、e number of orders and higher AOVs.Founder,ConsumerTech startupTREND5.Quicker gratification Quick commerce has gained share and accounts roughly 25-30%of the overall online grocery market in IndiaDIGITIZING CONSUMERS IN INDIA35New commerce models will provide an impetus to existing and new shoppers

102、Both existing online and offline shoppers looking for differentiated features(2021)New models emerging to cater to evolving needs of online shoppersOnline platform featuresNononline shopperExisting online shopper63%58%56%76%75%69%55%70%Option to buy online at discounted price if purchased in bulkOpt

103、ion to buy online from local shops or known individualsOption to buy online after negotiating a price with sellerOption to buy online after interacting with seller(queries,pics,videos,livestream,etc.)Influencer and live/video CommerceLeverages influencers power to provide trusted reviews through liv

104、e/video and nudging the customersXiaohongshuTaobao LiveWeChatWhatsapp for BusinessAssisted and conversational CommerceEnabling chat-based interaction with seller or leveraging trusted local contacts to aid online transaction,especially for new to-ecommerce customersPinduoduoDealshareGroup buyingEnab

105、les bulk discounts on collective group purchasesTREND6.New commerce models DIGITIZING CONSUMERS IN INDIA36Source:Press Search;BCG analysisGroup buying ecommerceChinaChinaSouth-East AsiaPinDuoDuoType of ModelGeographySize of businessKey AttributesStrategic moves to winCommunity-based e-comm platformX

106、iaohongshu(Little Red Book)E-commerce with in-app live streaming platformShopeeBeauty led platform for cosmetics,skincare and fashion productsLeading ecommerce platform with SE Asia with 350Mn monthly users160Mn+monthly with 2/3rd female users generating user generated contentGenerated$60Bn GMV in F

107、Y21 while handling 2Mn orders on a quarterly basisSeamless integration of product discovery and purchase,generating$1Bn GMV through e-commerce in 20212Mn hours of live video content with 5Mn views in the annual 9.9 Shopee salePopular influencer marketing platform for leading brandsWide scale and dis

108、tribution with core e-comm platform having 400Mn monthly sessionsPioneer in group buying e-comm:$383Bn GMV in FY21,valued at$120Bn currentlyUniquely win customers in lower tier cities,has around 750Mn monthly users of which 75%are from Tier 2 and below citiesLow price:low acquisition cost;direct-to-

109、market suppliers reduce cost of intermediariesDuring 11.11 Festival in 2021,PDD reached$6Bn GMVExemplars of new commerce models in China and South-East AsiaTREND6.New commerce models DIGITIZING CONSUMERS IN INDIA37New age commerce models have been able to scale significantly in China;but in a relati

110、vely nascent stage in India 1.Multi-channel networksSource:Data.ai(prev.App Annie);CCI Center for Customer Insight;Press search;Expert interviews;BCG researchWhy did these new-age commerce models achieve traction and scale in China?MetricsChinaIndiaWhat will it take to take-off in India?Adoption by

111、existing large platforms and integration of social commerce capabilitiesConsistent growth in digital advertisement spend on influencer marketingDeepening of creator support ecosystem with growth in multi-channel networks,content creation agencies,etc.Market size for new commerce($Bn)Share of online

112、retail(%)Users traffic(Number of monthly users in Mn)1701520WeChat(1060)Douyin-Tiktok(900)PinDuoDuo(700)22.535Instagram(300)Meesho(110)Josh(180)Large distribution platforms giving scaleHigh customer traffic and engagementSupport ecosystem to drive the flywheel in motionHigh DAU/MAU ratio(0.6)Presenc

113、e of MCNs1 to identify,train influencers and work with brandsLow DAU/MAU ratio(1.3x global category average0.9 to 1.1x global category average1.1 to 1.3x global category average0.7 to 0.9x global category average0.7x global category averageTREND8&9.Sustainability and re-commerceDIGITIZING CONSUMERS

114、IN INDIA40Emerging technologies like Generative AI and ONDC have catalyzed broader public interest 1.As of 13 Mar23Source:Namma Yatri website,Expert interviews;BCG analysisGen AI platform ChatGPT reached 1M users in 5 days,a fraction of the time it took previous viral hitsONDC is slowly gaining trac

115、tion across ecommerce and mobility,with other use cases currently under various stages implementation20,000 400,00040,000 Merchants onboarded on ONDCRides completed on ONDC mobility platform Namma Yatri1Auto-drivers onboarded on Namma Yatri1 GPT3 has already reached 100Mn monthly active users within

116、 3 months of launch1,250,0001,000,000750,000500,000250,0000255075100125150Stylized path to 1Mn users*(number of days from launch)*Path is stylized to the 1Mn milestoneGen AI applications in ConsumerTech have been increasing and seen across multiple use cases like-product descriptions,personalized ma

117、rketing content,assortment planning,supply chain management,consumer sentiment analysis,design inspiration etc.Number of daysChatGPT5 daysInstagram75 daysSpotify150 daysE-commerceMobilityFrom October to December,we had around 1,000 merchants come live and ONDC scaled to approximately a 130 transacti

118、ons a day.In the last 2 months,this has scaled to 20,000 merchants and 200250 transactions a day.By April end,we targeting 5,00010,000 transactions a day and hyperlocal deliveries in around a 100 cities.Senior executive,ONDCTREND10.Emerging technologiesDIGITIZING CONSUMERS IN INDIA412x growth in dig

119、ital payment volume in 7 quarters,however cash continues to remain relevant especially in rural areas1.Digital payments include RTGS(customer and inter-bank transactions),retail electronic clearing NEFT,IMPS,NACH(credit,debit and APBS),card payment transactions(excl.cash withdrawal),PPI payment tran

120、sactions(excl.cash withdrawal),UPI(including BHIM&USSD),BHIM Aadhaar Pay,AePS fund transfer and NETC(linked to bank accounts).;2.BCG CCI Digital Influence Study 2013-2017,2021 surveys(N=10,000 to 20,000 each year,urban and rural coverage);Source:PIB,RBI;NPCI;BCG analysisDigital transactions have inc

121、reased steadily with early signs of stabilizationCash continues to be king,especially in rural areasThough digital adoption is on the rise,rural consumers continue to rely on cash primarily due to lower trust in online payments and preference to test and check before any purchase.CXO,ConsumerTech st

122、artupCOD order share by geographies2(2021)43%Rural57%60%Urban40%Digital paymentsCash on delivery100%Digital payment volume(Bn)419367427463487480511Q4FY21 Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23Digital Payment Value1(in INR 000Bn)1314172022252719192223252731Digital payment volume(Bn)Average transac

123、tion value(INR 000)ENABLER1.Digital paymentsDIGITIZING CONSUMERS IN INDIA42Rapid growth in physical infrastructure in the last decade has improved the ease of doing business by resolving logistical challengesAir passenger traffic(Mn passengers)1.7X air passenger traffic in 10 yearsNumber of Airports

124、2.7X number of airports in 10 yearsLength of national highways(000 Kms)FY13FY13FY13FY16FY16FY16FY22FY22FY221.8X length of national highways in 10 yearsNote:Air passenger traffic includes inbound and outbound domestic and international traffic;Source:Ministry of Statistics and Programme Implementatio

125、n,Govt.of India.(ON2985),AAI15922426779101144491251331.8X1.7X2.7XENABLER2.Physical infrastructureDIGITIZING CONSUMERS IN INDIA43Growth in internet connectivity and improved data speeds have helped in increasing penetration of online commerce and social media appsAverage wireless internet usage per u

126、ser per month(GB)Average mobile download speeds(Mbps)3.9X increase in data speed in 6 yearsRapid adoption of 4G and launch of 5G has increased data speeds1FY2112FY2230FY19FY22FY181FY15FY16FY208FY17FY20FY16FY14FY12114.015.84.19.90.411.81.17.60.3Note:1.Average internet speed(broadband+wireless)by Akam

127、ai Source:Ministry of Statistics and Programme Implementation,Govt.of India.(ON2985),Statistics Division Dept.of Telecom;Akamai;Ookla Speedtest3.9X3.8XENABLER3.Internet penetration03/03Implications for startupsA.Scaling in 0to10 phaseB.Driving sustainable growth in 10100 phaseDIGITIZING CONSUMERS IN

128、 INDIA45Implications for startups-03/03A.Scaling in 0to10 phaseDIGITIZING CONSUMERS IN INDIA47Scaling in 0to10 phase|4 key themesOf every 100 startups that are born,about 10 surpass the seed funding stage&23%attain a valuation of$100Mn1.Analysis of the early stages of these successful startups and i

129、n-depth discussions with 25+Indian founders reveal 4 critical factors during this stage of a startups journey.Identifying unmet customer need,pain-points or friction in existing offerings to create a disruptive consumer proposition1Making the right choices across pricing,optimizing unit economics an

130、d customer acquisition costs 2Building the supply side as a potential competitive moat through deep partnerships and capability build3Internalizing the test&learn philosophy for quicker iterations and faster route to product market fit4Source:1.Traxcn investment data for India;BCG analysisDIGITIZING

131、 CONSUMERS IN INDIA48It is critical for founders to sharply define the problem basis the potential to disrupt the market.Disruption can mean targeting an untouched white space,creating a differentiated offering in an existing space or addressing friction points in existing market offerings.The true

132、differentiator,irrespective of the path chosen,will be an approach focused on fundamental innovation.The mattress market in India was dominated by inferior coir foam mattresses through contract manufacturing at the mass price points,as superior memory foam was imported from China and had high logist

133、ic cost.Seeing this gap,we quickly moved to inhouse manufacturing of memory foam to keep prices down and control quality.We complemented it with innovative content-led marketing to educate customers and best-in-class return policies to induce purchase.Co-founder,Leading D2C mattress brand1.Identifyi

134、ng unmet customer need,pain-points or friction in existing offerings to create a disruptive consumer propositionA leading group buying ecommerce platform,gained traction in Tier 2/3 cities initially with a simple to use user interface and straightforward transaction journey.Ensuring affordability fo

135、r new online shoppers-It aimed to ease the first time E-commerce purchases for online shoppers operating in Tier 2/3 cities.It aimed to fulfill the unmet needs of these customers by ensuring affordability across grocery SKUs.Simplifying buying journey-solving the issue of complicated transaction jou

136、rneys through a simple to use user-interface,and building trust in the platform by referrals from existing customers.A leading mattress brand disrupted the existing market by offering mass-premium mattresses at affordable prices.The traditional market was dominated by players who imported high volum

137、etric foam from China at high logistics cost leading to higher product pricing.Moreover,the competition offered 150-200 SKUs with little to no differentiation among the products leading to unclear value prop for consumers.Focus on E2E product development with limited SKUs-2 mattresses on Day 0 with

138、3 foam types and built an in-house foam manufacturing unit to produce superior specs and easy to deliver foldable mattresses at affordable pricing.Flexible returns policy-It also offered a first-of-its kind flexible returns policy(30-day,later extended to 100 days)to induce customer purchase.DIGITIZ

139、ING CONSUMERS IN INDIA49It is important for startups to make a conscious choice between pricing,or optimizing unit economics and balancing customer acquisition.Since there are typically limited benchmark offerings for startup founders,it is imperative to use consumer insight to ascertain their willi

140、ngness to pay to ensure no value is left on the table,and the right pricing level is set from the beginning.The Indian small appliances market has been dominated by local brands,with limited tech-led product innovation.We developed a superior BLDC technology in fans,which allowed us to offer better

141、aesthetics and energy efficiency,for which our customers are willing to pay a premium”Co-founder,D2C appliances2.Making the right choices across pricing,optimizing unit economics and customer acquisition costsA leading eye wear player optimized for affordability of good quality frames by backward in

142、tegrating into production.The eyewear industry had a complicated supply chain with brands relying on 3rd party manufacturers,leading to high cost of production for eye frames and higher end prices for consumers.Backward integration into manufacturing-Control over manufacturing allowed it to lower co

143、sts,eliminate the middlemen and pass on the benefits to the consumers.A D2C electronic appliances player decided to focus on commanding a price premium with its differentiated and tech-led innovative fans and products basis customer willingness to pay.Emphasis on continuous customer feedback-Emphasi

144、s on continuous customer feedback.Superior tech-led product-BLDC motor vs AC or brushed motor;enabled it to priced at higher levels basis customers willingness to pay.Continued focus on product innovation The brand to fully capture category potential vs portfolio proliferation and stay ahead of comp

145、etition.DIGITIZING CONSUMERS IN INDIA50Building a deep partnership with the supply side value chain is one of the important ways to create a competitive,sustainable moat for the longer term.This complementary relationship is important for both product or services startups and can manifest in the for

146、m of core business elements,such as defining detailed SOPs and quality norms,standardizing sourcing,selecting the right set of partners,hands-on training and onboarding,and so on.The Indian customer is hesitant of at home-services due to quality,trust and safety concerns.Therefore,while there was su

147、fficient quantum of supply in the market,it was not reliable.We could not have solved this only through an online platform.We invested behind rigorous training,standardization,equipment,devices etc.to ensure to ensure reliable and high-quality service standards.Chief Business Officer,Home services p

148、layer3.Building the supply side as a potential competitive moat through deep partnerships and capability buildThe furniture industry is highly unorganized and hyperlocal(sourcing,production and sales limited to 10yrs of experience across B2C brands&services having worked across companies like BCG,fo

149、odpanda/Ola and Glance/Inmobi as well as being a D2C founder himself.Nitin Bobba is AVP,Matrix India and looks at investments in commerce and marketplaces.Nitin comes with a combination of operating and consulting experience across Meesho and Bain&CompanyAcknowledgementsThis report is a joint initia

150、tive of Boston Consulting Group(BCG)and Matrix Partners India.We thank all the participants of the DCII survey,1on1 discussions and panel discussions for their valuable contributions towards the enrichment of the report.We are thankful to Jasmin Pithawala,Sucheta Desai and Komal Mohan for marketing

151、and communications support;and to Jamshed Daruwalla,Saroj Singh,Pradeep Hire,Sujatha Moraes,Abbasali Asamdi,Nitesh Tirkey,Naman Arora,and Yashit Shukla for their extensive design and report production support.We are also thankful to Reneta Kriplani,Garima Pandey,Binita Singh and Nipun Singhal for th

152、e marketing support and co-ordination.We also extend our appreciation to Ankit Sharma,Vishal Medida,Shravan Jain and Prerna Mour for their contributions to the report.For information or permission to reprint,please contact BCG at To find the latest BCG content and register to receive e-alerts on this topic or others,please visit .Follow Boston Consulting Group on Facebook,Instagram and Twitter.Boston Consulting Group 2023.All rights reserved.04/23