Hyper-value And New Trends Driving E-commerce Growth In India
Quick commerce expansion, newer subscribers in tier 2 and tier 3 cities offer a broad growth runway.
The Gist
- Private consumption growth has decreased from 11% to 8% due to inflation and stagnation.
- Quick commerce is expected to grow over 40% annually through 2030, appealing to older demographics.
- Trend-first commerce, fueled by social media, is projected to quadruple in size by 2028.
India has pipped the US to become the world’s second-largest e-commerce market in terms of the number of shoppers.
With 270 million people shopping online, the market is now worth a massive $60 billion as of 2024, a report from Bain & Company said.
The market, however, is far from saturation and has plenty of room for growth across regions, demographics, and value segments.
Manan Bhasin, partner at Bain & Company, said a great shift is underway across the Indian retail ecosystem as it moves from an unorganised to an organised market.
Over 85% of India's overall retail market is unorganised, whereas the corresponding figures in China and the US are around 25% and less than 5%, respectively.
“That fragmentation creates a pretty interesting sort of element for any company, both a retailer as well as an e-commerce company, to navigate. How the digital stack has evolved in India is somewhat underappreciated. In the context of depth in the third-party logistics network, fintech etc. I think India's penetration is still about 5-6% and is quite uneven. There is a lot of headroom for growth,” said Bhasin.
The Deloitte and FICCI report found that online retail in India will grow from $75 billion in 2024 to $260 billion by 2030, expanding its share from 7% to 14% of total retail.
All this, while the retail pie itself is projected to grow from $1.06 trillion to $1.93 trillion by 2030, the report adds.
The heavily unorganised retail market is now moving to an organised market. “E-commerce is helping formalise this fragmented, unorganised trade that existed. In the past, you would not know who MSMEs, SMEs are, who are selling, how they're selling. Now it’s helping formalise some part of the undocumented, unorganised sector,” said Sangeeta Gupta, senior VP at National Association of Software and Service Companies (NASSCOM).
The Tier 3 And Beyond Growth Story
Most of the ‘new’ e-commerce shoppers are evolving beyond metros. According to a report by Deloitte and the Federation of Indian Chambers of Commerce & Industry (FICCI), over 60% of e-commerce transactions now originate from Tier II and III cities, signalling a retail shift beyond the metros.
“Of tier two cities, if you really think about it, the missing piece of the puzzle was never aspiration, it was always access. It may not be economically viable for a brand to actually have a local presence there. Yet there are consumers who are travelling to another city just to buy that particular product or waiting to buy that particular product,” said Bhasin about the tier II markets’ purchasing power.
This ‘spreading’ of shopping behaviour has also thrown up interesting trends. The seller base has been diversifying too — with a large chunk of new sellers hailing from Tier-2 or smaller cities. Open Network for Digital Commerce (ONDC), a government initiative, is also giving wings to smaller retailers to be able to throw their net wide.
“Whether it's e-commerce, fintech, logistics technology, personalisation tools or AI tools, I think the entrepreneurial ecosystem has also been a great unlock for e-commerce in India,” said Nasscom’s Gupta.
The deep system, experts hope, will attract more users, increase purchases from existing users, and drive higher consumption.
The Path Ahead
While e-commerce has seen a good run during the pandemic and also benefited from the post-pandemic boom, an overall consumption slowdown has set in.
Bain found India’s private consumption growth was at around 11% between 2017 and 2019.
It has slipped to around 8% between 2022 and 2024, thanks to high inflation and stagnation of real wages. It has impacted e-commerce growth as it waned to 10-12% in 2024, after clocking in around 20% in its good years.
Despite the roadblocks, retail experts believe that there is room to grow for e-commerce within a slowly growing retail pie. One such comfort factor comes from Gen Z’s direct spending capacity of $250 billion, as per the Deloitte report.
The universe of e-commerce itself is evolving into new avatars – one of them being quick commerce, which promises 30-minute delivery or less. It’s projected to grow at over 40% annually through 2030, and is expanding across categories, geographies, and customer segments.
“E-commerce earlier was very much centred around younger consumers or relatively younger consumers. But with QuickCommerce, even somebody who is in their late 60s or 70s is actually quite open to using it,” said Bhasin.
Trend Commerce & Hyper Value Commerce
A newer development is trend-first commerce, which sees frequent launches of trend collections, especially in sneakers and Korean glass skin routines.
This segment, fuelled by social media trends and GenZs who take shoppies cues from it, is expected to grow fourfold from its current size to $8-10 billion by 2028.
Driven by trend-spotting algorithms, they enable platforms to restock popular styles. Flipkart Spoyl, Myntra Fwd and Shein, along with emerging brands like Urbanic, Snitch, and NewMe, are also looking to join the bandwagon. Internationally, factors like live commerce, creator commerce are picking up very fast in Southeast Asia.
Gupta said that social commerce and voice shopping might also see a runway for growth. “I think niche vertical platforms are seeing some of that growth in India,” she added.
Hyper-value commerce caters to lower-middle-income consumers in smaller cities with an affordable product assortment. They have rapidly expanded their seller base by offering seller financing and zero-commission models.
While players like Meesho have been a part of this category, larger players are also opening up to deliver Costco-like benefits to online shoppers – expanding the gateways of the e-commerce universe.
This series is supported by Flipkart.
