India's social commerce sector may grow to $16-20 billion in GMV in 5 years

India's social commerce sector has the potential to grow to USD 16-20 billion in gross merchandise value (GMV) over five years from USD 1.5-2 billion currently, a report by Bain & Company and Sequoia India said.

This is poised to grow further to USD 60-70 billion by 2030, driven by formats ranging from conversational commerce on chat platforms to video-led commerce and a vibrant social reseller community, the report titled 'The Future of Commerce in India - the rise of social commerce', said.

"Social commerce in India is broadening India's e-commerce sector and paving the way for a model that's built on community, connection and trust. While traditional e-commerce will continue to flourish, social-led models will broaden the reach of e-commerce for Indian consumers," Arpan Sheth, partner and leader of Bain & Company's Asia-Pacific Technology, Vector and Advanced Analytics practices, said.

Indian e-commerce - powered by cheap data, supply-side innovations and digitally savvy customers - has become a USD 30 billion GMV industry in fiscal year 2020 (FY20). Also, India has the second-highest number of connected users globally, at around 572 million with substantial room for growth (41 per cent penetration).

India is in the early stages of online commerce, with only 8 per cent of Indians (about 105 million) shopping for products online, accounting for an average spend of USD 286 per year - much lower than other markets, the report noted.

"Social commerce is playing a key role in democratising online commerce, connecting brands, consumers and small businesses directly through social platforms and meeting the modern consumers' need for personalised, differentiated products," Sequoia Capital India LLP Vice President Shraeyansh Thakur said.

Thakur added that social-first models have been able to scale with much lower customer acquisition costs globally and similar trends are being seen with Indian startups experimenting in this space.

"While early in its evolution in India, it's set to scale rapidly in the next 5-10 years, offering a huge opportunity for innovative new products and business models," Thakur said. Fashion is the most popular social category, followed by beauty and personal care, food and grocery. Social commerce has the potential to empower over 40 million small businesses and entrepreneurs across India.

A large percentage of sellers using social commerce are small, offline-oriented retailers who have found that social channels open new avenues for growth.

A subset of resellers are often first-time entrepreneurs earning Rs 5,000 to 10,000 a month and leveraging the power of their existing social networks to sell to friends and family.

Given that the process of initiating contact with the customer, negotiating and then closing a sale often spans multiple platforms, a more streamlined order-management process and better customer analytics are the biggest asks from sellers.