The e-retail landscape in India is projected to exceed the $160 billion (over ₹13 lakh crore) by 2028, according to a report released by Bain & Company in collaboration with Flipkart. Anticipated to reach approximately $57-60 billion in 2023, the e-retail market is poised for significant expansion, with an annual shopper base of approximately 240 million. This represents an incremental addition of $8-12 billion annually since 2020, the report says.
Presently, online spending constitutes only 5-6% of total retail spending in India, in stark contrast to the U.S., where it comprises 23-24%, and China, where it is 35%. This huge gap compared to major economies suggests substantial potential for growth in the Indian e-retail sector, the report highlights.
The landscape of e-retail has undergone a remarkable transformation over the past three years, marked by notable doubling of e-retail spending per customer. The year 2022 saw a significant surge, with the addition of twice as many sellers compared to the preceding year.
“E-retail spending per customer doubled over the past three years. Twice as many sellers were added in 2022 compared to 2021.Two-thirds came from Tier 2+ cities, and three-fourths operate in the lifestyle, home, and electronics categories” the report says.
In India, more than half of the seller base hails from seven cities i.e. Delhi NCR (20-22%), Surat (11-13%), Jaipur(6-8%), Mumbai (4-6%), Bengaluru (2-4%), Hyderabad (1-3%), Kolkata(1-3%), creating seller hubs, shows the data.
The report claims government programmes like the Open Network for Digital Commerce (ONDC) will contribute to the continued expansion of e-retail in India.
“Currently, 7 out of 10 online shoppers reside in Tier 2+ cities, and a third of online shoppers are from low-income or low-middle-income cohorts,” says the report, adding that ‘Q-commerce’ orders doubled over the last year, and now account for 40%–50% of India’s e-grocery spend.
On rising business models, the report says these models encompass quick commerce (Q-commerce) platforms, hyper-value commerce, inspiration-driven commerce (live commerce), and fast fashion.
“Inspiration-led commerce (live commerce) has grown rapidly in markets like Southeast Asia, where it accounted for approximately 15% of Gross Merchandise Value (GMV) in 2022. India’s fast fashion market is nascent but expected to grow at 30%–35% per annum between 2022 and 2027,” the report suggests.
In addition to ongoing enhancements in basic business economics, e-retailers are focussing on monetisation by employing five primary strategies: advertising, seller services, fintech, externalisation of services (eg: logistics, cloud), and subscription-oriented loyalty programs. “Global e-retailers use multiple monetization levers, but advertising is the core lever in India. E-retail ad spending quadrupled, yet there’s still massive potential for growth,” the report says.
