With Zero Mega Deals In Sight, Ecommerce Funding Falls 47% YoY To $224 Mn In Q3 2023

The Indian ecommerce industry stands as a transformative force, which is capable of reshaping the country’s retail sphere so that it is abreast of how digital consumers shop today. 

According to Inc42’s latest “State Of The Indian Ecommerce Report Q4 2023”, launched in partnership with Simpl, the market opportunity for ecommerce is going to be $400 Bn+ by 2030. Additionally, it is anticipated that the number of online shoppers will reach an estimated 500 Mn during this period.

Over the years, the growth in this sector has been fuelled by factors such as increased internet penetration, a rising digital-savvy population and increased online spending. However, investor confidence, too, has dwindled due to startups struggling to demonstrate profitability and high cash burns. 

According to Inc42, of the 19 Indian ecommerce unicorns, whose all financial metrics are available publicly, only six were profitable in the financial year 2021-22 (FY22). 

While the FY23 financials for the majority of companies are not yet available, names like Beardo, Bluestone, boAt, CaratLane, idfresh, Paperboat, and Purplle are in the red.

This has further dented investor confidence and reduced funding in the ecosystem, according to Inc42’s Q4 2023 report. Between July and September, the ecommerce funding stood at $224 Mn, down 47% in the same period a year ago, while the deal count dropped 26% year-over-year (YoY) to 52.

DOWNLOAD THE FREE REPORT

With Q4 (October to December) 2023 data yet to be compiled, let’s steal a glance at what fresh challenges 2023 brought during the July to September quarter in the ecommerce realm.    

With that said, here are a few key funding trends that we have noted in our latest ecommerce report — State of Indian Ecommerce In Q4 2023.

Key Funding Trends In the June To September Quarter

Zero Mega Deals Observed

In Q3 2023, zero mega deals were observed in the ecommerce sector in India, indicating that investors are being cautious with their money. Surprisingly, only two startups were able to secure mega deals for the period between January and September  2023 — Fresh To Home, which raised $104 Mn in February 2023, and Lenskart, which secured $500 Mn in March 2023 and an additional $100 Mn in June 2023.

D2C Remained The Most Sought After Sector

Despite the prevailing downturn, the direct-to-consumer (D2C) sector stands out as a beacon of promise within the ecommerce sphere. Continuously proving its mettle, the D2C segment has solidified its position as the most promising domain within the ecommerce landscape, a trend that carried through into Q3 2023. 

Remarkably, the D2C segment secured substantial funding of $192 Mn, comprising a striking 84.9% of the total ecommerce funding for this quarter. Moreover, the segment claimed 33 deal counts, representing 63.5% of all deals within the ecommerce sector.

Additionally, D2C funding increased by 13.6% YoY during the quarter. Noteworthy D2C players that secured substantial funding in Q3 2023 included Furlenco ($36.6 Mn), Third Wave Coffee ($35 Mn), GIVA ($33 Mn), and Pepperfry ($23 Mn).

Seed Stage Continued To Gain Traction

Despite an overall downturn in funding and deal counts across various funding stages in Q3 2023, a noteworthy exception emerged. Seed stage funding during the quarter rose 11% YoY to more than $29 Mn. 

However, a contrasting trend was observed in the growth stage, as the funding nosedived 78% YoY to over $78 Mn. Similarly, late-stage funding stood at $95 Mn, sustaining a 37% YoY decline.

DOWNLOAD THE FREE REPORT

Positive Consumer Sentiment Gave A Boost To Online Festive Sales

Struggling to make a comeback in the year of the extended funding winter, the ecommerce segment witnessed a positive spike in sentiment. 

According to Inc42’s consumer sentiment analysis, conducted in association with Clootrack, customers embraced the digital shopping experience with heightened enthusiasm. 

As a result, the Gross Merchandise Value (GMV) for online festival sales in 2023 (for the period between October 1 and November 15) stood at an impressive $11 Bn, up 16% during the same period a year ago.

This surge underscores the escalating trend of consumers favouring online platforms for their festival shopping escapades, indicating a burgeoning reliance on digital avenues for shopping convenience and diverse offerings.

Delving into the specifics of these festival sales reveals intriguing insights into consumer preferences. Here are some of the key findings from the survey:

• Electronics Commanded The Most Share: Commanding a total GMV of $4.7 Bn, electronic items such as mobile phones, tablets and laptops accounted for a staggering 42% of the total GMV, signifying the robust demand for electronic gadgets and appliances during festival seasons. Following closely, the fashion category stood out prominently, boasting a GMV of $2.8 Bn, contributing significantly with 25% of the total GMV. This notable preference for fashion-related products during festival sales highlights the enduring allure of clothing and accessories as quintessential festival purchases for consumers.
• Price & Value Superseded Discounts: Between October 1 and November 29, consumers were seen focussing more on price and value than discounts. This contrast illuminates a newfound appreciation for product quality, signalling that consumers prioritise intrinsic value over mere discounted prices. Moreover, the emerging trend underscores that customer satisfaction stands as the second most pivotal factor guiding consumer behaviour during online festival sales. This shift accentuates a changing consumer psyche — one that places heightened importance on the overall shopping experience, valuing satisfaction derived from quality purchases over fleeting price reductions.
• Delivery Experience Continued To Be A Concern: Amidst the bustling fervour of online festival sales, consumers navigate through significant hurdles, particularly concerning the timely delivery of purchases and the efficacy of customer service interactions. The delivery process, plagued by delays, communication lapses, or logistical complexities, remained a substantial concern, impacting overall satisfaction. Additionally, inadequate customer service responsiveness, unresolved queries, and post-sales support deficiencies pose critical challenges, shaping consumer perceptions profoundly.

What To Expect In 2024?

There’s no denying the fact that the troubles for Indian ecommerce startups are far from over. However, with D2C leading the command in terms of funding and companies like Nykaa and Mamaearth making it to the public markets, the sector is expected to regain its investors’ confidence.

Further, the buoyant festival sales vividly underscore the ecommerce sector’s enduring influence, evidenced by the consistent year-on-year increase in GMV. 

Yet, amid this privilege and growth, challenges persist. From refining delivery experiences to elevating customer service and navigating funding fluctuations, these hurdles need to be addressed for sustained progress. 

To ensure a robust and consumer-centric ecommerce landscape, companies must prioritise innovative solutions. By addressing these challenges head-on, the sector can pave the way for a more resilient and gratifying ecommerce experience for both businesses and consumers alike in India’s dynamic ecommerce market.

DOWNLOAD THE FREE REPORT