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Tier II and III markets fuelled the ecommerce ecosystem in 2022, with a majority of orders coming from those cities.

Ecommerce order volumes grew 36.8% in 2022 compared to last year, despite the strong revival of physical retail channels, according to a report by ecommerce solutions provider Unicommerce.

Nearly six out of 10 orders shipped this year came from buyers in Tier II cities, while orders from Tier III markets surged 65% in the year, the report said.

The year saw a change in consumer behaviour and preferences as buyers adopted both offline and online modes of shopping, Online commerce continued to see growth momentum largely due to the availability of large assortments at affordable prices in under-penetrated markets.

The market share of Tier III cities in ecommerce grew to 41.5% from 34.2%, while the Tier II market share grew to 21.4% from 19.4% this year.

Meanwhile, Tier I cities lost their market share, dropping to 37.1% from 46.4%, according to the report.

In terms of order volumes, Tier III markets grew a massive 64.7% in 2022 (over 2021), while Tier II markets also clocked an impressive 50.9% growth in the same period. Order volumes from Tier I cities recorded a modest 10.3% growth in 2022, compared to 2021.

Tier II and III cities not only accounted for a majority (nearly 63%) of total orders placed by users, but both are also growing much faster than Tier I markets, clearly setting the stage for the next layer of ecommerce growth in India, powered by users living outside big cities, the report noted.

Beauty and personal care as well as eyewear and accessories segments witnessed a year-on-year order volume growth of 76.6% and 55%, respectively, during the year. On the other hand, the fashion and accessories category continued to receive the highest order volume.

Product returns, which cause a significant drain on an ecommerce firm’s revenue, dropped to 15.8% of the total order volumes in CY 2022, from 17.4% last year.

This year also observed higher adoption of omnichannel among retail brands, with companies leveraging their offline stores to fulfil online orders. The ship-from-store channel witnessed a 55.6% growth in order volume, with an increasing number of brands going omnichannel and existing brands adding more stores, the report added.

Unicommerce CEO Kapil Makhija said the growth was a result of technology adoption which “improved capabilities of brands.”

“Technology will continue to drive business growth, increased efficiencies and enhanced user experience as ecommerce becomes a mainstream channel across all parts of the retail ecosystem. We look forward to continuing to enable the growth of ecommerce in India and beyond,” he added.