India's online retail sector, which stood at $70 billion in 2022, is expected to surge to $325 billion by 2030, according to a report by Deloitte Touche Tohmatsu India.
Online retail penetration is projected to grow at an extraordinary rate, outpacing offline retail by 2.5 times in the next decade, says Deloitte India's 'Future of Retail' report. India will become the world's third-largest consumer market during this period, the report says.
Deloitte India's report attributes these projections to the rapid growth of e-commerce in tier-2 and tier-3 cities, which have surpassed tier-1 markets in terms of total orders.
In 2022, these cities accounted for over 60% of all orders, with tier-3 cities experiencing a remarkable 65% growth in order volume and tier-2 cities witnessing a substantial 50% growth. Meanwhile, tier-1 cities observed a modest 10% growth.
The surge in online retail can be attributed to various factors, says Deloitte India. The convenience of ordering and returns, bolstered by a robust logistics infrastructure spanning over 19,000 pin-codes, has played a pivotal role.
India boasts a digitally savvy consumer base of 220 million online shoppers, further driving the growth of e-commerce. The sector has witnessed significant investments from private equity and venture capital firms, totaling $23 billion over the past five years.
Consequently, online sales are poised to surpass organised retail, with a growing emphasis on omnichannel retail strategies where retailers seamlessly integrate their offline and online channels to provide consumers with the best of both worlds.
"Accelerated technology investments are vital to meeting the demands of tech-savvy consumers," states Anand Ramanathan, partner, and Consumer Industry leader - Consulting, Deloitte India. "I am optimistic about the exponential growth potential of India's retail sector, driven by rising incomes, the expanding middle-class, and rapid digitalisation. By harnessing the power of technology, sustainability, and forward-thinking strategies, retailers can create an ecosystem that not only meets evolving consumer demands but also sets new benchmarks for value, engagement, and unforgettable shopping experiences," Ramanathan says.
The report identifies several key forces that are expected to reshape the retail landscape in India. These include changing consumer patterns, societal and cultural influences, the scale of exponential technology, industry disruptions, climate considerations, and the impact of economics, policy, and power dynamics. The report also highlights that establishing consumer confidence through sustainability initiatives is crucial in the era of conscious consumerism.
Deloitte recommends six future scenarios for Indian retailers to strategise around. These include rise of new commerce, technology, kirana tech, rise of luxury market, private labels and experiential retail.
