India’s e-commerce market is experiencing exponential growth, positioning the country as a significant player in the global marketplace. This growth can be attributed to several factors, including a well-developed digital infrastructure, a thriving startup ecosystem, and proactive government support.
The statistics speak for themselves, from the highest rates of mobile data usage to the startling increase in online investments and transactions. IBT explores the factors contributing to the immense growth of the E-commerce industry in India.
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Over the last three years markets around the world have been shaken by a few disruptive events, starting with the COVID-19 pandemic. Lockdowns and social distancing boosted the growth of eCommerce, however, the economic headwinds have put a dent in the overall consumer confidence. With the increasing maturity of eCommerce, we believe the time is right for a tool to indicate how consumers plan to spend on eCommerce in the future.
Driven by improving digital infrastructure, 312 million online shoppers, and a supporting FinTech infrastructure, India is ranked first worldwide, poised to become a global e-commerce hub. While the growth is increasingly broad-based, this rapid growth is also fueling growth in the periphery industry, particularly in online content creation, reverse logistics, warehousing, and financial services.
According to the Economic Survey 2022-23 by the Government of India, the e-commerce market is projected to grow at 18% annually through 2025. This e-commerce growth and rising focus of the government with initiatives such as ONDC and PM Gati Shakti National Master Plan further strengthen the belief of businesses in the future of e-commerce in India and presents an opportunity to thousands of businesses across India.
Source: EY Report
According to a report by Redseer, the Indian e-commerce industry is predicted to grow five-fold to $300 billion by 2030, with third-party logistics providers expected to handle 17 billion shipments in the next seven years. It is 6-8 times of the 2022 levels, as the third-party logistics (3PL) scales up, the cost per shipment is projected to decrease by 23%, dropping from Rs 60 in 2023 to Rs 47 by 2030.
E-commerce platforms have been highly successful in delivering standardized consumer experience on the platform while offering precisely the products in demand. The growth in D2C brands online also compelled traditional brands to go digital and offer competitive shopping experiences. In all, the efforts led to increased adoption and wallet share growth across customer cohorts while also driving robust and democratic sales across categories.
Over the last three years, new users who are willing to try e-commerce throughout the country have increased and non-metro users account for a large share of the total user base in FY23. Indian e-tailing industry has gradually slowed post-pandemic but continues to perform better than overall retail consumption to grow Gross Merchandise Value(GMV) at 22% in FY23 to reach US$ 60 billion, where the JFM23 (January (J) to March (M))quarter was effectively 2.5 times in scale compared to the JFM20 (pre-COVID) quarter
However, the growth pattern in FY23 (and likely going forward as well) is different wherein the ‘regular shoppers’ i.e. the monthly user base is now larger than ever before. The monthly shopper base (MTU) which stood at US$ 65 million in FY23 is now 31% of the annual e-tailing shopper base – the same metric which was just 23% in a pre-pandemic era. This goes to show that the e-tailing user base is maturing and customers now shop online more frequently across a range of categories.
Source: Redseer Research, Redseer Analysis
As a result of the category mix evolving towards non-mobile segments, the overall take rate of the e-tailing industry has improved to 1.2x from the pre-COVID era. This allowed the industry’s revenues to reach $6 Bn in FY23 and also set up the industry for robust revenue growth in future.
The rapid growth of the Internet and e-commerce sector in India is enabled by a robust ecosystem that revolves around digitization, high data consumption, startup growth, and increasing government support. India boasts the highest mobile data consumption rate in the world, supported by having the fifth-lowest data rates globally.
A robust startup ecosystem ensures the presence of 16 e-commerce unicorns in India, with the segment attracting PE/VC investments of US$ 15.4 billion in 2022. The Indian government is also actively playing a role in enabling e-commerce payments and digital transactions. Government e-Marketplace, an online platform for public procurement in India, witnessed 160% YoY growth in 2022.
A strong environment sets the stage for ongoing e-commerce growth with:
Digitization of SMEs Government-e-Marketplace (GeM) saw a 160% growth, driven by a 57% MSME contribution. SME revenue increased by 194% through e-commerce adoption. During the pandemic, 65% of MSEs upgraded their digital landscape, and 82% of Kirana stores adopted new digital tools.
High data consumption India leads with the world’s highest mobile data consumption at 12 GB per month. Users spend an average of 6 hours and 37 minutes online daily. The average price for 1GB of data is just US$ 0.17, far below the global average of US$ 3.12. Additionally, users in India spend 156 minutes per day on smartphone entertainment content.
Robust start-up ecosystem India ranks third globally for startups, with over 88,000. It has 16 e-commerce unicorns (out of 109 worldwide) and attracted US$15.4 billion in PE/VC investments in the e-commerce sector in 2022.
Government support to build Digital India India witnessed 346 million online transactions, and $1.5 trillion in UPI transactions in 2022, administered 2.2 billion CoWin vaccinations, and issued 5.6 billion DigiLocker documents.
India’s e-commerce industry has seen impressive growth due to a combination of factors, such as a strong digital infrastructure, a thriving startup ecosystem, and support from the government. This has led to India’s position as a potential global hub for e-commerce. The statistics support this growth, with high mobile data consumption rates and significant growth in online transactions and investments.
As the e-commerce landscape evolves, it’s evident that India is not merely catching up but also setting new standards. The maturity of this ecosystem is driving frequent online shopping among a diverse range of users. This changing landscape is reflected in the industry’s revenues, which are on a steady upward trajectory.
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