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Retail tech funding in India more than triples in 2021

Written by Moulishree Srivastava Published on     2 mins read

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Over 200 small and mid-sized retail technology companies have raised a total of USD 843 million between January and September 2021.

Retail tech is taking off in India. In the first nine months of 2021, investors pumped an additional 260% of capital into local firms offering tech solutions for online and offline retailers compared to the entire 2020.

Over 200 small and mid-sized retail technology companies have raised a total of USD 843 million between January and September 2021, per a report by Economic Times, which cited data from research firm Tracxn. In comparison, companies of this type raised USD 235 million last year.

Retail tech companies comprise those which provide services like digital ledgers, inventory management, payments solutions, and tools for logistics and fulfillment. These features are developed primarily for mom-and-pop stores, neighborhood grocery shops, and online brands.

More than 90% of India’s retail sector is currently offline. According to an August 2021 report by Bain & Company and Flipkart, online retail coverage in the country stood at 4.6% by the end of March 2021. But, notably, over 75% of the total retail tech funding went into firms that provided services to online retailers as merchants moved to digitize their operations during the pandemic.

In September, New Delhi-based e-commerce enablement startup GoKwik raised USD 5.5 million in a pre-Series A round led by Matrix Partners India. Dukaan, another startup backed by Matrix Partners that helps businesses digitalize operations, received a USD 11 million investment led by 640 Oxford Ventures. Meanwhile, logistics aggregator Shiprocket, which has been focusing on direct-to-consumer (D2C) brands, is reportedly in talks with Singapore’s Temasek for a USD 200 million funding round.

Local D2C brands doubled in number between 2018 and 2020, from 40,000 to 80,000. The tally is expected to reach 200,000–250,000 by 2025. These brands play a pivotal role in fueling the growth of e-commerce enablement startups in the country.

The surge in online retail came on the back of rapid, massive digital adoption in the country due to the ongoing healthcare crisis. Since the pandemic hit India in March 2020, 30–35 million new customers began transacting online, taking the total number of online shoppers to 140 million by the end of March 2021. This count is the third highest globally, behind China and the US. Still, less than 25% of India’s 625–675 million internet users make purchases over the internet, which means the market remains massively untapped.

Despite the second wave of COVID-19 that ravaged India in April and May this year, the e-commerce sector in the country is projected to surge by 25–30% to USD 47.5 billion this financial year ending March 31, 2022. Over the next five years, the online retail market’s value is expected to reach USD 120–140 billion.

However, retail tech investments made up a mere 11% of USD 7.49 billion in funding that flowed into India’s overall retail sector this year, said the Economic Times report.

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