The Covid-19 pandemic has accelerated e-commerce in India, estimated at a staggering 180–190 million online shoppers in 2021, making it the world’s third-largest online shopper base, the management consulting firm Bain & Company said in a report.
The study titled “How India Shops Online 2022” said the pandemic had fueled “hyper-growth” in the Indian e-commerce sector, firmly placing it in a position to surpass the US to become the second-largest shopper base in the next one to two years. It said India has already become the third-largest shopper base globally, with 180–190 million online shoppers in 2021.
India’s e-retail market is set to reach $50 billion in 2022 from around $40 billion in 2021.
The study observed that the country’s strong fundamentals, which support a continued boom in e-commerce, make it an incredibly attractive e-retail market.
Moreover, it noted that the market and economic indicators, in terms of per capita income and product penetration, “provide the perfect ingredients for sustained growth.”
The study found that India’s smartphone penetration stood at 36 per cent versus 63 per cent in China and 76 per cent in the US, offering massive headroom for growth. Additionally, the per capita income or affluence gap provides a significant growth opportunity. For example, India’s per capita income is only $2,000 compared to $12,000 in China and $69,000 in the US.
Rising Income To Accelerate Consumption
Despite a headwind due to the current inflationary environment, the study forecast that India’s rising income would accelerate consumption and increase spending per shopper in the medium to long term.
It said India’s e-retail market will likely grow by 25–30 per cent annually to $150–$170 billion by 2027, while market penetration would double over the next five years.
It expects a massive shift in online product sales over the next five years. Although mobile phones, electronics, and appliances currently hold the lion’s share, fashion, general merchandise, grocery, etc., have massive headroom for penetration in the e-retail market that will fuel growth.
It said that these categories will account for about two-thirds of the e-retail market by 2027, and the number of online shoppers will also increase to 400–450 million by 2027.
India’s e-shopper base grew by around 35 per cent in 2021 from the previous year, mainly in Tier-3 and smaller cities, driven by the Gen Z population, who primarily purchase fashion products.
Also, the percentage of daily active users to monthly active users rose to over 25 per cent in 2021, from 18-20 per cent in 2019. In addition, the study said that consumers now spend 20 percent more time per month on a retail platform than last year.
India’s E-Retail Boom
The e-retail boom is supported by tremendous growth in the supplier and logistics ecosystem. The country’s online seller base, it said, grew 35 per cent annually over the past year, with around 40 per cent of new sellers coming from tier-2 or smaller cities.
Besides, the government’s Open Network for Digital Commerce (ONDC ), which offers an interoperable network for digital commerce similar to the Unified Payment Interface (UPI) network for payments, has played a critical role in democratising e-retail in India. The study said that although ONDC is in a nascent stage, its successful execution could give a fillip to India’s e-retail ecosystem.