The Indian retail industry has come of age, says Gaurav Khurana.


India has emerged as one of the most dynamic retail industries in the world. Accounting for over 10 per cent of the country's Gross Domestic Product (GDP) and approximately 8 per cent of the employment, it is expected to nearly double from US$ 600 billion in 2015 to US$ 1 trillion by 2020. That would mean a Compound Annual Growth Rate (CAGR) of 16.7 per cent over 2015-2020.


India's growing per capita income, a rising middle class, the changing demographic profile, urbanisation and attitudinal shifts in consumer spending pattern all indicate the retail sector's potential to be the real growth engine of the economy.


The retail industry, which currently stands at US$ 625 billion, has evolved over the past decade with major domestic and international players playing a significant role. They have long-term plans of expanding business across verticals, cities and formats owing to a spurt in online retail activity in the last few years.


Online retail is catching on fast, not just in larger metros but also in the Tier II and Tier III cities. This growth can be attributed to increasing internet penetration and the smartphone revolution. Today, the number of tech-savvy consumers who explore multiple channels before making crucial purchase decisions has grown manifold.


Keeping in mind growing online potential, not just brands but retail chains are upgrading sites to make it more convenient for customers to shop online. Going forward, the total number of online shoppers is estimated to grow 3.5 times from 50 million in 2015 to 175 million by 2020.


Consumer goods in different categories including electronics, food, grocery, apparel and home appliances are available online and the range of products is expected to grow further. An interesting trend is that online fashion is emerging as the fastest growing category in India's booming e-commerce market, backed by strong technology and marketing strategies.


By 2020, India is expected to generate US$ 100 billion online retail revenue out of which US$ 35 billion will come from fashion e-commerce. This clearly implies that online apparel sales are set to grow four times in the next five years and will contribute significantly to the burgeoning growth in e-commerce.


This may surprise a few since Indian apparel shoppers have traditionally been skeptical about shopping for clothes online, as they loved the touch, feel and fit of their garments. This initially deterred them from buying online. Today, that hurdle is a thing of the past. With increased awareness and easy-to-use applications, shoppers have largely migrated to shopping online for apparel.


E-tailers are constantly trying innovative strategies to cater to the unique needs and preferences of customers. They provide consumers quality products and services to strengthen the trust. They have bridged the gap between retailer and customer through online to offline space leading to an enhanced shopping experience for the customer.


An interesting fact is that almost all the internet growth in India is happening on the mobile and is driving growth across platforms. By 2018, India is set to witness 500 million internet users and the 280 million smartphone users would be the key drivers for e-commerce portals.


The online retail sector has got a further boost with the government of India's Digital India initiative. The government will deliver services via mobile connectivity. It is expected to take Internet and broadband facilities to remote corners of the country, providing the underlying connectivity for e-commerce. This will further expand the reach of the e-commerce market into the country's Tier IV towns and rural areas.


The government is also revamping the Indian Postal Service to develop it as a distribution channel for e-commerce services. This will significantly improve delivery services and cash transactions via cash on delivery payment options in more remote and rural areas, increasing the reach of e-commerce players and expanding the market.


Contemporary customers have an ever-increasing choice of products at the lowest rates. E-commerce is creating the biggest disruption in the retail industry. This trend will continue. The coming years are expected to bring transformation in technology usage as small and medium businesses make their online presence felt. With more and more businesses embracing e-commerce and many roadblocks like connectivity and logistics being sorted out, the Indian online retail arena will drive consolidation in the market.


About the author

Gaurav Khurana is Chief Marketing Officer and Head of Online & Affiliate Business at Payback India. He plays the role of a brand custodian responsible for driving customer engagement in the company.



1. The Boston Consulting Group and Retailers Association of India report

2. PWC Report

3. Report - Digital Retail 2020 by Google and AT Kearney

4. Forester Consumer Research

5. Report - Internet and Mobile Association of India