Do you want to create your own online store?

Insights from Indus Valley Annual Report 2023


The Blume Ventures report, Indus Valley Annual Report 2023, has created a storm among founders and investors alike and they are going gaga over the report. All over the country and beyond, everyone is talking about the insights and observations in this long 125-page report. We at Potlee@fynd have also read the report and picked out some of the most valuable insights for you in this newsletter to keep you in the loop.

Indus Valley Report 2023: Introduction

The Indus Valley Annual Report 2023 by Blume Venture sheds light on the state of digital India covering its economy, where it stands on the world's stage and the demographics of India in its first subchapter. Its second subchapter explores geographical distribution of startups in India along with the growth of regional VCs and startups. It explores government initiatives which led to growth of digital India, top drivers aligning together for the next phase of growth and India’s economic demographic division. Third subchapter includes the world's perspective on India and its growth. These three subchapters conclude the first chapter called Interpreting India. Its second chapter is called India’s soft power which starts with venture capital and investment distribution over the years, Indian VC vs other neighboring countries in Southeast Asia and comparing it with developed countries. The third chapter talks about the state of startups in India. For people short on time, below are few of our top observations from the report. Others can read the full report here.

#1 Is India's digital penetration reaching a saturation point?


As the Indian economy experiences exponential growth in online infrastructure and a corresponding boost in the e-commerce market, we must ask ourselves: have we already consumed the low-hanging fruits? In the past five years, the number of smartphone users in India has doubled from 400 million to 800 million. But the growth of internet penetration has flattened and decreased from 50% in 2019 to 45% in 2020 and 47% in 2021. This trend is also reflected in the smartphone market, which saw an annual growth of 7% in 2017, a negative growth of 4% in the following year, and an 11% growth in 2021 before contracting by 5% in 2022.

The effect of demonetization, the launch of the Jio service in 2007, and the pandemic that initially led to skyrocketing digital adoption have all begun to wane. As per TRAI, Total wireless subscribers decreased from 1,143.04 million at the end of November-22, to 1,142.93 million at the end of December-22, thereby registering a monthly decline rate of 0.01%. According to Statista, In the fiscal year 2022, the wireless subscriber base of Reliance Jio Infocomm Limited across India amounted to approximately 410 million. There was a slight decrease in the number of subscribers of Jio in comparison with the previous year. These trends indicate that the Indian market may be reaching a saturation point.

UPI transactions volume declined by 6.3% month on month in Feb’23 as per recent data from NPCI. Whereas the total transaction value declined by 4.8%. Prior to this February dip, the volume and value of UPI transactions had risen for seven straight months.

What does the above narrative mean?

The Indian e-commerce sector has witnessed significant growth over the past few years, primarily driven by factors such as increased adoption of UPI payments, improved internet penetration, and the pandemic-induced shift towards online shopping. However, this growth may have reached a saturation point, with the sector potentially having already acquired the majority of the "cream" or high-value consumer base residing in tier 1 cities, which accounts for around 6-10% of total consumers.

Question is: Should these companies expand to tier 2 and beyond cities?

The law of diminishing marginal utility suggests that the benefit a person derives from a given increase in their stock of anything diminishes with the increase in the stock they already have. In this context, we can think of consumers as stocks and e-commerce as a person. According to Credit Suisse, companies will need to spend between ₹5,000 to ₹12,000 per household to acquire the next 30 million new households, which would cost them between $1.8 billion to $4.5 billion. Adding a consumer from tier 2+ cities may not be cost-effective as they spend less than half of what tier 1 city customers spend. The return on investment may not be worth it for e-commerce companies.

#2 Evolving e-commerce industry playbook

When Flipkart was announced as the poster boy of Indian startups in 2014, little did anyone know that e-commerce would become a dual between Flipkart and Amazon, which entered India in the summer of 2013. Other Indian e-commerce companies, such as Snapdeal, ShopClues, Homeshop18 and Naaptol struggled to compete with the scale and resources of Amazon and Flipkart.

So what playbook has been found by some well-known successful startups now that is helping them thrive in the Indian e-commerce environment? Well, it seems it’s the combination of private label brands, curated commerce and discovery commerce.

#2.1 Building own private label brand

Since 2016, Flipkart has had its private label brand called "Flipkart SmartBuy," which offers a range of affordable electronics and home accessories. Similarly, Amazon has several private label brands in India, including "Solimo" (home and kitchen products), "Symbol" (clothing and accessories), and "AmazonBasics" (electronics and home appliances). Myntra has launched several private label brands including "Roadster," "HRX," and "All About You".


According to the Indus Valley Annual report, the private label brand sales are almost double for apparels, grocery, furniture and wellness products implying that private label brands are more profitable than normal brands on the online platforms. But since the secret is out already so what is next which these platforms have tried? It is ‘curation as commerce.’

#2.2 Curated commerce

Initially, in the early days of eCommerce, the focus was on offering a large number of products online. This meant that companies with the largest product catalogs, such as Amazon and Flipkart, were the dominant players in the market.

Curated commerce has a unique advantage as it utilizes a merchant's understanding of customers' lifestyles and preferences to provide personalized, boutique-style shopping experiences with specialized products tailored to their individual needs.Due to this unique knowledge of its customers, other large online platforms in food, grocery, content, entertainment, lifestyle etc. were also able to provide curated commerce to engage customers. Few examples of platforms offering curated commerce:

LBB (Little Black Book) is a lifestyle discovery platform that curates personalized recommendations for users across a range of categories to help them discover new travel experiences and products

Zomato uses curation to recommend the best restaurants in a user's area based on factors like cuisine, location, and price, using a team of food critics and reviewers along with data analysts

ScoopWhoop curates news, entertainment, and lifestyle content for its users using its expertise to deliver engaging and shareable content to its audience and providing personalized affiliate recommendations

#2.3 Discovery commerce is the new black

What really stood out? Cred. According to the Indus valley report, CRED’s store has scaled 10x times over the last 2 years, helping drive discovery for new-age D2C brands. Cred is building its curated commerce (selection of brands and products) using discovery commerce features and gated access to the top earners in India's creamy layer to generate massive sales for D2C brands, playing by new rules in e-commerce that prioritize entertainment and personalized discovery.

Cred is playing beyond the basics. Rather than just providing superior features like a user-friendly interface, multi-platform accessibility, a wide range of products, etc. it provides high-energy, boredom-killing entertainment on its platform. It uses its own store to provide rewards on the brands that have listed their products like Bombay Shaving Company, Portronics, Ambrane, Hammer, Happilo, etc.


The slot machine on the app often offers prizes or discounts that users can win which in turn can be consumed to shop. Many people play it just for fun, hoping to get lucky and win big rewards by getting 777. The slot machine gives instant gratification by awarding rewards. However, this often leads to users making transactions on the platform because they're tempted by the rewards they've won. According to the report, as per sources, for some of its partner brands CRED helps generate sales of as much as 50% of Amazon. CRED is emerging as an interesting sideways disruptor in e-commerce leveraging its base of creditworthy members.

Well, these are our few observations on this fantastic report. Let me know what you can add to the above playbook? You may share your thoughts on this topic by replying to this newsletter.

Share this Article

Insights from Indus Valley Annual Report 2023

  • January 23, 2024
Financial Ripples

Sign up for our newsletter to receive the latest trends in fintech, economy, innovations, and more

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
View newsletters