COVID-19: A Boon for the Digital Economy?

Aman Kumar, Co-founder, Kalagato

November 2020


COVID 19 gave a phenomenal digital fillip to our lives over the last couple of months. According to an IAMAI-Nielsen Report on Digital India, as of November 2019, the total number of internet users in India stood at 504 million, out of which 433 million internet users were above the age of 12. It would not be an exaggeration then to say that this pandemic achieved a considerable digital growth in a few months that would otherwise have taken a number of years.


The year 2020 will forever be characterized by COVID-19. Life as we knew it, came to a standstill ever since the first lockdown was enforced on March 23 across the country. Confined to their homes, those who could - took to the internet.

According to an IAMAI-Nielsen Report[1] on Digital India, as of November 2019, the total number of internet users in India stood at 504 million, out of which 433 million internet users were above the age of 12.

The fillip to our digital lives has been phenomenal over the last couple of months, courtesy COVID-19. It would not be incorrect to say that this pandemic achieved digital growth and consumer adoption in a few months that would otherwise have taken a number of years.

This can also be attributed to the fact that the fear of venturing out and catching the virus still looms large in people's minds. Subsequent 'unlocks' have made life slightly better, but in the absence of a vaccine, people are still restricting themselves when it comes to moving freely a la pre-pandemic. Although the latest visuals from New Delhi may indicate otherwise.

1. An E-com Slump & Recovery?

Kalagato, an automated consumer and market insights platform, collected and analysed consumer behaviour data from 5.5 million smartphone users. The data collated revealed that the year began on a happy note compared to 2019, but as soon as the lockdown was announced, all e-metrics collapsed in terms of actual sales and usage. 

Figure 1.1 – Average Monthly Spend Value (INR) 2019 vs 2020

Figure 1.2 – Tier-wise Percentage of Internet Users Shopping Online 

Figure 1.3 – Change in Percentage of Internet Users Shopping Online

With lockdown in place, no deliveries other than essentials were being made. That perhaps explains the crash which hit all e-commerce players during the months of March-April. As Unlock 1.0 began, starting May 17, the situation started to improve with authorities allowing the sale of non-essential items in designated 'Green Zones,' and thus, unleashed some pent-up demand as is seen in the exhibit above. With shopping arcades opening up in July end, the only option was to shop online. It was literally, the only market people had access to.

The data we collated brought out an interesting facet of the growing online adoption. COVID-19 merely acted as a “stumbling block” as the increase in e-commerce usage was already taking place. As the infographic reflects that, while tier-one and tier-three cities have recovered, tier-two cities are taking longer. Interestingly, a large part of digital consumption and growth comes from both tier-two and tier-three cities in India.

However, it may be too soon to call it a V-shaped economic recovery. While the data may indicate a return to pre-COVID levels, a significant portion of online shopping may be pent-up demand from previous quarters, so the next few quarters are critical.

A word of caution — these are online sales — and India is still not an out and out e-commerce country. Even by the best estimates, only about 500 million people have internet access, leaving most of the populace out of the digital economy.

2. Online Fashion Not Fashionable Anymore?

One of the most vibrant segments, online fashion, has been a booming space. India's youth is brimming with rising aspirations. It also forms the largest chunk of its population. As per a report[1] by RedSeer Consulting, in 2019, while India's fashion market was growing at a Compound Annual Growth Rate (CAGR) of 11 percent, the online fashion segment was growing faster at a CAGR of 32 percent.

Things seemed to be well laid out for the fashion industry until the pandemic normalised ‘Working from Home’ (WFH). Consequently, business suits, trousers, crisp collared shirts were replaced by shorts, workout tights and t-shirts, or ‘athleisure’. Afterall, who wears a tie for a Zoom meeting?

Figure 2.1 Reach by App Install for E-Commerce Fashion Sector

Figure 2.2 Total Session Time per day for E-Commerce Fashion Sector

Figure 2.3 Daily Active Users for E-Commerce Fashion Sector

Consequently, online fashion retailers who were doing well in January and February saw demand dip in March and April. The lockdown taught consumers to live with less and reprioritize their spending. This, despite the fact that many online fashion retailers are allowing customers to shop offline, delivering products from the nearest store, some are even booking potential buyers in separate slots for store visits.

Exhibit above shows that going by the Daily Active Users (DAU), online e-commerce fashion platforms Ajio and Myntra have recovered from the slump in demand due to coronavirus and the subsequent lockdown. However, Club Factory and SHEIN have not been able to resurrect themselves mainly due to the Indian government’s ban on Chinese applications owing to Indo-China territorial dispute.  

With many online fashion retailers launching new collections ahead of the upcoming festive season and offering deep discounts to clear aging inventories, the sector is pinning its hopes on the festive spirit for a revival in demand.

3. Self-Care is Self-Love

For many of us - COVID-19 gave self-care a major push. During our previous normal, shuttling between home and office, self-care took a back seat. The lockdown turned out to be the change in pace that many people were looking for.

Figure 3.1 Reach by App Install for Health and Beauty Sector    

Figure 3.2 Daily Active Users for Health and Beauty Sector

Figure 3.3 Total Session Time per day for Health and Beauty Sector

The beauty and health segment picked up post-May after a slump in March-April. Fear and concern drove people to invest in one's health and order products such as masks, sanitisers, disinfectants, immunity booster packs to herbal concoctions far more than ordering beauty products and cosmetics. Thus, the daily active users of beauty retailers like Purplle and Nykaa saw a bigger slump as compared to online pharmacies like 1MG and HealthKart.

It is surprising to see the growth in usage of platforms like Purplle and Nykaa which are primarily focused on the beauty products category at a time when social & professional engagements are at an all-time low.

However, this space has seen considerable and steady growth over the last three months. With the pandemic changing lifestyles and consumer focus turning towards inner well-being, the spend on preventive consumer health care and do-it-yourself beauty products is likely to continue in the future.

4.  Love in the time of Corona

We are living in the "Swipe Right" era when it comes to matchmaking or finding a date. Online platforms such as Tinder, Bumble, OkCupid and Aisle promise to make finding companionship a bit easier.

Figure 4.1 Reach by App Install for Matchmaking-Dating Sector

Figure 4.2 Daily Active Users for Matchmaking-Dating Sector

Figure 4.3 Total Session Time per day for Matchmaking-Dating Sector

However, like many relationships, this segment has also seen some volatility. These apps witnessed a decline in their reach by May-June after getting fairly decent “engagement” amongst users at the start of this year. While Bumble and OkCupid crashed by almost 50 percent, Aisle seemed to be the preferred choice as it remained close to its pre-COVID levels of usage.

5. For the Love of Food: From Dalgona Coffee to Handmade Pizzas

During lockdown, Social media influencers of every ilk turned into "MasterChefs". With restaurants and hotels closed across the country, food delivery platforms struggled to serve users. From a heady start in January, this segment witnessed its lowest point in April. Naturally, so, popular online food ordering apps such as Zomato, Swiggy and Dominos did not have “foodful” encounters with their users.

Figure 5.1 Reach by App Install for Food Sector

Figure 5.2 Daily Active Users for Food Sector

Figure 5.3 Total Session Time per day for Food Sector

In a cruel and capital hungry world – some of these food delivery platforms came up with grocery delivery options to retain users by introducing Zomato Market and the ‘Swiggy Store’.   Simultaneously, several big-ticket FMCG companies, including ITC, Vishal Retail, etc. partnered with the food delivery platforms to ensure the delivery of groceries, packaged food items and cooking ingredients to the last household in the lane.

It was only May onwards that food aggregators were back in business. Even then hotel and restaurant businesses were grappling with a gamut of problems such as staff shortages (workers moved back to villages), fractured supply chains, and a lack of consumer confidence.

To meet these challenges, food aggregators have had to reimagine operations making safety and hygiene coupled with contact-less delivery a permanent offering. Dine-in restaurants are displaying agility in transitioning to delivery and online food delivery platforms. The sector's recovery trends are strong and likely to bounce back to the pre-pandemic levels in the coming months.

6.  Keep Calm and Netflix On:

The lockdown brought cities to a grinding halt. Stuck at home, streaming services like Netflix and Amazon Prime – providers of ‘Over the Top (OTT)’ content thrived. It was one of the few segments that saw a major upswing in subscribers during the peak pandemic period.

Figure 6.1 Reach by App Install for Video-OTT Sector

Figure 6.2 Daily Active Users for Video-OTT Sector

Figure 6.3 Total Session Time per day for Video-OTT Sector

OTT platforms have been keeping us hooked with tailor-made content for every age group. Per our  data, an average Netflix user spent about 48-79 minutes a day (peaking at 80 minutes a day) while a Hotstar Premium consumer spent about 38 minutes and the lesser popular platform MXPlayer also had an average user spending about 47 minutes watching its content.

However, as cities unlocked, the comforts of working from home gradually receded. The authorities allowed workspaces to open with a skeletal staff and return to some normalcy. This has had a direct impact on the total amount of time spent on OTT platforms.

7.  Zooming into House Party:

If COVID-19 forced us to practice social distancing, video calling platforms such as Zoom, Microsoft Teams, Houseparty, et al. brought us closer. Till very recently, the popularity of online meetings was still nascent in India. However, WFH Quickly changed old habits.

Figure 7.1 Reach by App Install for Video-Calling Sector

Figure 7.2 Daily Active Users for Video-Calling Sector

Figure 7.3 Total Session Time per day for Video-Calling Sector

Globally, video conferencing software saw a massive surge in new downloads. As per a report by Research and Markets on the videoconferencing industry[1], video conferencing apps saw a record of 62 million downloads globally in March.

Houseparty witnessed significant growth spurt initially, but then the euphoria died its Daily Active Usage has fallen from a peak of 38.5% to at the end of March 2020to just under 3% as of mid-August 2020. Similarly, Skype and Google Hangouts (probably due to its bundling with Gmail) also went down in terms of reach over the past few months.

The beneficiary of the lockdown seems to be Zoom which is now the preferred choice for majority of office meetings and even social events - including both weddings and funerals. Sample this - the total time spent on Zoom exponentially grew from 21 minutes in January to about 46 minutes in July. Zoom’s almost around 2.2X growth in session time since the beginning of this year is indicative of its adoption.  As the economy has opened up; we’ve seen some decline in Zoom’s usage; But even as we return to offices – I think we might find that many meetings which were previously done in person are now conducted online.

Unintended Consequences

An accidental by-product of the lockdown is that digital adoption has increased multifold in India. While the ride ahead may not be smooth – the seeds sown today will reap an exponential harvest for consumer internet companies in the years to come. People were forced to learn new ways of conducting businesses, procuring essentials, and finding entertainment. In the coming few years, we will witness the effects of this exponentially larger digital user base across every sector.



Keywords: Resilience, Covid, Pandemic, Future, Innovation, Sustainability