India's e-retail market set to reach $57-$60 bn in 2023: Report

15 Dec '23

3 min read

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Insights

India's e-retail market is projected to hit $57-$60 billion in 2023, an annual rise of $8-$12 billion since 2020.
Growth slowed to 17-20 per cent, impacted by inflation.
Online spending in India, just 5-6 per cent of total retail, has room to grow, with a diverse shopper base from Tier 2+ cities and Gen Z.
By 2028, the market could exceed $160 billion.

India's e-retail market is poised for significant growth in 2023, with estimates projecting it to reach $57-$60 billion, as per a report by Bain & Company in collaboration with Flipkart. This marks a steady increase of $8-$12 billion annually since 2020. Despite the slowdown from the historic growth rate of 25-30 per cent to a current 17-20 per cent, the sector shows resilience in the face of inflationary pressures that have impacted consumer spending and sentiment.

The growth trajectory, albeit slower, reflects a steady rise in online adoption over the last year. However, there's still considerable potential for expansion. Currently, online spending in India constitutes only 5-6 per cent of the total retail sector, compared to 23-24 per cent in the US and over 35 per cent in China. Three key factors have driven this growth in India: increased access through affordable data and logistics, enhanced affordability and convenience, and the emergence of digital ecosystems.

The fourth growth driver, affluence, remains underdeveloped. A significant increase in e-retail is anticipated once GDP per capita crosses approximately $4,000. It's expected that 60-70 million Indian households will enter the upper-middle and upper-income brackets by 2028, potentially accounting for 85 per cent of e-retail spending. Government initiatives like the Open Network for Digital Commerce are set to further boost the e-retail sector, as per the report ‘How India Shops Online 2023’.

Forecasts suggest a return to 23-25 per cent growth levels, with the market reaching over $160 billion by 2028. The annual transacting e-retail shopper base in India is expected to grow to 230-250 million in 2023, with over 100 million new shoppers added in the last three years.

The e-retail landscape in India is increasingly diverse. Now, 70 per cent of online shoppers are from Tier 2+ cities, and a third belong to Gen Z. Interestingly, about a third come from low-income groups. Mature shoppers are also a growing segment, with those who started shopping in 2019 doubling their engagement and spending.

The next decade of e-retail growth in India will hinge on adding new shoppers and increasing per shopper spending. E-retail platforms are focusing equally on retaining existing customers and acquiring new ones. Catering to the diverse shopper base, with varied preferences and requirements, will be key. Voice and vernacular offerings are gaining popularity, especially among new shoppers from smaller cities.

The seller ecosystem is evolving rapidly to meet these demands, with a significant increase in sellers from Tier 2+ cities and insurgent online-first brands experiencing significant revenue growth.

Fibre2Fashion News Desk (DP)

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