India’s e-commerce industry eyes a 141% boom by 2025

SNAP ANALYSIS
India’s e-commerce industry eyes a 141% boom by 2025
A Fedex employee scanning a bill at a courier station before delivery. The Indian e-commerce industry is set for unprecedented growth by 2025.Courtesy: Getty Images

Long-term outlook is optimistic, supported by rising income, favorable demographics and the entry of foreign players.

The Covid-19 pandemic has opened up new avenues of consumer demand fulfilment for retailers around the world – and India is no different.

Even with the pandemic abating from its peak of the second wave, the retail industry has been at the forefront of the economic disruption in the country. As brick-and-mortar business operations come under pressure due to frequent local lockdowns, consumers are increasingly preferring the online mode to purchase goods and services.

Thanks to this increasingly robust trend, the Indian e-commerce industry in retail is expected to grow at a jaw-dropping 141% rate from $46.2 billion in 2020 to $111.4 billion in 2025, according to GlobalData.

“The retail industry is the second largest employer in India. Small and medium-sized firms alone employ about 400-450 million people. However, the heightened inflation rate along with an equally high unemployment rate is weakening the consumer sentiment and affecting their purchasing power. On the other hand, the liquidity in the retail businesses is driven by seasonal sales and collections,” said Suresh Sunkara, retail analyst at GlobalData.

But GlobalData’s Q1 consumer survey in India reveals that 84% of the consumers are still concerned about the impact of COVID-19 pandemic.

The long-term outlook for Indian retail, boosted by entry of international players, increasing urbanisation and omnichannel platforms suggests good returns in the sector.
The long-term outlook for Indian retail, boosted by entry of international players, increasing urbanisation and omnichannel platforms suggests good returns in the sector.Courtesy: Getty Images

Post-pandemic scenario

In the post-pandemic scenario, Indian retailers across sizes are set to understand the power of omnichannel digital transformation, since the most resilient ones surviving this crisis are the omnichannel retailers. As a result, retailers with such an approach have better chances of survival due to the convenience and experience that they offer.

“The long-term outlook for the Indian retail industry looks optimistic, supported by rising income, favorable demographics, the entry of foreign players and increasing urbanisation. Meanwhile, Indian retailers should look up to their peers in China, Singapore and South Korea to chart a quick road to recovery,” Sunkara said.

The buoyancy in growth comes as India proposed several new rules for e-commerce retailers last week – including a ban on flash sales and preventing their affiliate entities from being listed as sellers in the world’s second-largest market.

Smartphone penetration in India is boosting e-commerce activities. This is largely thanks to the ‘Digital India’ programme.
Smartphone penetration in India is boosting e-commerce activities. This is largely thanks to the ‘Digital India’ programme.Courtesy: Getty Images

Guidelines for retailers

In its proposal, India’s Ministry of Consumer Affairs said that e-commerce firms should not be allowed to hold flash sales in India. These flash sales, akin to Black Friday and Cyber Monday sales in the US, are very popular during the festive season in the country. During flash sales e-commerce firms have traditionally observed the biggest spikes in customer orders as brands offer heavy discounts on their products.

“Certain e-commerce entities are engaging in limiting consumer choice by indulging in ‘back to back’ or ‘flash’ sales wherein one seller selling on platform does not carry any inventory or order fulfilment capability but merely places a ‘flash or back to back’ order with another seller controlled by platform. This prevents a level playing field and ultimately limits customer choice and increases prices,” the ministry said in a statement.

While e-commerce has transformed the way business is done in India, the overall e-commerce market is expected to grow to $200 billion by 2026.

Much of the growth for the industry has been triggered by an increase in internet and smartphone penetration. As of September 2020, the number of internet connections in India significantly increased to 776.45 million, driven by the ‘Digital India’ programme.

Related Stories

No stories found.

Podcast

No stories found.

Defence bulletin

No stories found.

The power of the quad

No stories found.

Videos

No stories found.

Women Leaders

No stories found.