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’s e-commerce sector is expected to reach US$ 111.40 billion by 2025 from US$ 46.20 billion in 2020, growing at a 19.24% CAGR, with grocery and fashion/apparel likely to be the key drivers of incremental growth. The Indian online grocery market is estimated to reach US$ 26.93 billion in 2027 from US$ 3.95 billion in FY21, expanding at a CAGR of 33%. E-commerce sales are expected to increase at a CAGR of 18.2% between 2021-2025 to reach Rs 8.8 trillion (US$ 120.1 billion).
For the 2021 festive season, Indian e-commerce platforms generated sales worth US$ 9.2 billion gross GMV (Gross Merchandise Value), a 23% increase from last year’s US$ 7.4 billion.
The B2C E-commerce is expected to grow steadily over the forecast period, recording a CAGR of 8.68% during 2023-27. According to a recent report by Redseer, India’s e-B2B market is projected to reach a GMV of US$ 100 billion by 2030.
India’s booming e-commerce market is driven by affordable smartphones and low-cost data plans, leading major retail and consumer goods makers to increase their investments in the online space.
The Indian e-commerce sector is ranked 9th in cross-border growth in the world, according to the Payoneer report. Indian e-commerce is projected to increase from 4% of the total food and grocery, apparel, and consumer electronics retail trade in 2020 to 8% by 2025.
Government e-Marketplace (GeM) is an online platform for public procurement in India that was launched on August 9, 2016 by the Ministry of Commerce and Industry with the objective of creating an inclusive, efficient, and transparent platform for the buyers and sellers to carry out procurement activities in a fair and competitive manner. Through automation and digitization of processes, GeM has led to higher process efficiencies, better information sharing, improved transparency, reduced process cycle times, and a higher level of trust among bidders, which in turn have resulted in greater competition and higher savings. In FY23, the procurement of goods and services from the government portal crossed the Rs. 2 lakh crore (US$ 24 billion) mark. As of November 2022, the GeM portal served 12.28 million orders worth Rs. 334,933 crores (US$ 40.97 billion) from 5.44 million registered sellers and service providers for 62,247 buyer organizations.
India’s social commerce has the potential to expand to US$ 16–20 billion in FY25, at a CAGR of 55-60% with a potentially monumental jump to US$ 70 billion by 2030, owing to high mobile usage. India's e-commerce order volume increased by 36% in the last quarter of 2020, with the personal care, beauty & wellness (PCB&W) segment being the largest beneficiary. Driven by the beauty and personal care (BPC), India's live commerce market is expected to reach a gross merchandise value (GMV) of US$ 4-5 billion by 2025.
Huge investments from global players—such as Facebook, which is investing in Reliance Jio—are being recorded in the e-commerce market. Google also reported its first investment worth US$ 4.5 billion in Jio Platforms. This deal was followed by the purchase of Future Group by Reliance Retail, expanding the presence of the Ambani Group in the e-commerce space.
Much of the growth for the industry has been triggered by an increase in internet and smartphone penetration. The number of internet connections in 2021 increased significantly to 830 million, driven by the ‘Digital India’ programme. Out of the total internet connections, ~55% of connections were in urban areas, of which 97% of connections were wireless.
Online penetration of retail is expected to reach 10.7% by 2024 compared with 4.7% in 2019. Moreover, online shoppers in India are expected to reach 220 million by 2025. According to a report published by IAMAI and Kantar Research, India’s internet users are expected to reach 900 million by 2025 from ~622 million internet users in 2020, increasing at a CAGR of 45% until 2025. The contribution of online retail market in the total retail market in India is estimated to increase to 10.7% by 2024, when compared to 4.7% in 2019.
India’s overall smartphone market grew by 7% in 2021 with Samsung capturing the top position with a market share of 17% in 2021. The number of smartphone users in India is expected to reach 887.4 million by 2030. India has the highest data consumption rate worldwide at 14.1 GB of data per person a month. By 2025, India will be home to 650 million users who consume short-form videos.
India has gained 125 million online shoppers in the past three years, with another 80 million expected to join by 2025, according to a report by Kantar.
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 an equity stake.
Through its Digital India campaign, the Government of India is aiming to create a trillion-dollar online economy by 2025. It has formed a new steering committee that will look after the development of a government-based e-commerce platform. The new committee, set up by the Commerce Ministry, will provide oversight on the policy for the Open Network for Digital Commerce (ONDC), which is an e-commerce platform that the government is backing for development. The ONDC will serve as the infrastructure for setting up the final storefront, which will be similar to Flipkart and Amazon.
