Indian Ecommerce Industry Analysis

The Indian E-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second largest E-commerce market in the world by 2034. India e-commerce sector will reach US$ 99 billion by 2024 from US$ 30 billion in 2019, expanding at a 27% CAGR, with grocery and fashion/apparel likely to be the key drivers of incremental growth.

Online penetration of retail is expected to reach 10.7% by 2024, versus 4.7% in 2019. Online shoppers in India reached 120 million in 2018 and are expected to reach 220 million by 2025. Online retailers deliver to 15,000–20,000 pin codes out of nearly 100,000 pin codes in the country. In 2019, it was estimated that one in every three Indian shopped via a smartphone.

The Indian online grocery market is estimated to exceed sales of about Rs 22,500 crore (US$ 3.19 billion) in 2020, a significant jump of 76% jump over the previous year.

Much of the growth in the industry has been triggered by increasing internet and smartphone penetration. By 2022, smartphone users are expected to reach 859 million, whereas, E-commerce sector is expected to grow 1,200% by 2026. Smartphone shipments in India increased 8% y-o-y to reach 152.5 million units in 2019, thereby making it the fastest growing market among the top 20 smartphone markets in the world.

Internet penetration in India grew from 4% in 2007 to 54.29% in 2019, registering a CAGR of 24%. The number of internet users in India is expected to increase from 718.74 million in 2019 to 829 million by 2021.

A young demographic profile, rising internet penetration and relative better economic performance are the key drivers of this sector. The Government of India's policies and regulatory frameworks such as 100% Foreign Direct Investment (FDI) in B2B E-commerce and 100% FDI under automatic route under the marketplace model of B2C E-commerce are expected to further propel growth in the sector. As per the new FDI policy, online entities through foreign investment cannot offer the products which are sold by retailers in which they hold equity stake.
In February 2019, the Government released the Draft National E-Commerce Policy, which encourages FDI in the marketplace model of E-commerce. Further, it states that the FDI policy for E-commerce sector has been developed to ensure a level playing field for all participants. According to the draft, a registered entity is needed for E-commerce sites and apps to operate in India. Government also proposed the National E-commerce Policy to set up the lawful agenda on cross-border data flow – no data will be shared with foreign Governments without any prior authorisation from the Indian Government.

Through its Digital India campaign, the Government of India is aiming to create a trillion-dollar online economy by 2025.