E-commerce Revolution in India: Driving Growth in Rural Areas and Reshaping Consumer Behaviour

In recent years, India has witnessed a transformative shift in its economic landscape, fuelled by the rapid growth of the e-commerce sector. The spread of affordable smartphones, increased internet penetration and supportive government policies have collectively accelerated the adoption of online shopping across the nation. Once considered a privilege of urban consumers, e-commerce is now reaching the remotest parts of India, offering rural consumers access to a diverse range of products and services. Major players like Amazon and Flipkart, and several homegrown platforms have tailored their approaches to meet the needs of rural buyers, resulting in an inclusive e-commerce ecosystem that spans across the country.

Digital access in rural areas has surged in the past decade. According to the Telecom Regulatory Authority of India (TRAI), rural internet subscribers reached 398.35 million at the end of March 2024, up from 357.99 million a year ago. The widespread availability of low-cost mobile data, particularly through government-backed initiatives like BharatNet and the Digital India mission, has brought millions of rural consumers online. This development facilitated an economic transformation, as rural communities are not only accessing goods and services online but are also increasingly participating in the digital economy as sellers and entrepreneurs. These shifts are reshaping the rural economy, driving consumer demand and altering traditional buying patterns and market dynamics.

E-commerce landscape in India

India's e-commerce industry has evolved rapidly, becoming one of the largest and fastest-growing markets in the world. This growth has been fuelled by increased internet accessibility, an expanding middle class and a surge in digital payment options. Initially concentrated in urban areas, e-commerce has since extended its reach to tier 2 and 3 cities and, more recently, rural areas, where it is gradually transforming local economies and consumer habits.

Source: Statista, F- Forecasted

According to Deloitte, India’s e-commerce market was valued at approximately US$ 67 billion in 2021 and is expected to reach nearly US$ 123 billion by 2024 and US$ 325 billion by 2030, delivering a CAGR of 25.3%. This growth has been driven by growing mobile and internet penetration and the rising popularity of online shopping across demographic segments.

E-commerce in India began gaining traction in the early 2000s, but it was not until the 2010s, with increased smartphone usage and better internet connectivity, that the industry grew. During this period, e-commerce giants like Flipkart and Snapdeal capitalised on India’s young, tech-savvy urban population, offering goods ranging from electronics to apparel. The entrance of Amazon in 2013 intensified competition and spurred the development of a customer-centric ecosystem, with companies investing heavily in logistics and technology to improve delivery speed, product variety and user experience.

Recently, the focus has shifted toward inclusivity and localisation. e-commerce platforms now offer interfaces in regional languages, have partnerships with local stores, and use AI-driven algorithms to tailor recommendations for diverse audiences. The COVID-19 pandemic accelerated these trends as lockdowns increased online shopping demand across urban and rural areas. These trends resulted in an e-commerce landscape that caters to a broad demographic, including a large segment of rural consumers.

According to RedSeer, there is a notable shift in India’s retail landscape, with online retail expected to capture a growing share of the market by 2028. In 2023, the retail sector in India offline retail holds a 92% share, while online retail accounts for just 8%. However, the projections for 2028 indicate that online retail will expand and hold a 14% share, with offline retail expected to reduce to 86%.

This shift underscores the rapid digital adoption and popularity of e-commerce in India, driven by improved internet penetration, growing smartphone usage and enhanced digital payment infrastructure. Furthermore, the expansion of e-commerce giants and local startups is broadening product availability and offering competitive pricing. As India’s consumer behaviour evolves, this trend highlights the growth potential of the online retail sector in future.

E-commerce growth in rural India

India's rural market has shown immense growth potential for e-commerce. With significant investments, companies are tapping into previously underserved markets, driven by rapid smartphone penetration, and expanding internet connectivity. The rural economy's digital transformation is reshaping how businesses reach customers, opening pathways for economic growth.

• Rural market potential

India’s rural population comprises over 65% of the country's total population, representing a massive market with untapped potential. Despite lower income levels than urban regions, rural consumers are estimated to contribute significantly to India’s GDP, with a rural retail market size valued at approximately US$ 1 trillion. This growth is fuelled by increasing income levels, rising aspirations, and government schemes.

In 2021, the National Sample Survey Office (NSSO) reported that over 70% of rural households have seen an improvement in living standards in the last decade. This trend, along with rising literacy rates, indicates a market poised for more discretionary spending. McKinsey research suggests that the rural e-commerce market in India could reach over US$ 100 billion by 2025, presenting opportunities for growth.

• Impact of affordable smartphones and internet

The launch of low-cost smartphones and ultra-affordable internet plans, primarily led by Reliance Jio, has made digital platforms accessible to rural communities.

Source: Telecom Regulatory Authority of India

India's ‘Digital India’ campaign played a crucial role in improving digital infrastructure, particularly in rural areas. The campaign, launched in 2015, aimed to provide universal access to mobile connectivity, public internet, and Wi-Fi services in rural regions. Consequently, the number of rural internet users rose from 285.97 million in March 2020 to 398.35 million by March 2024. For many first-time internet users in these areas, mobile phones are a gateway to e-commerce.

The availability of local language support on smartphones and e-commerce platforms has made online shopping approachable for rural consumers. Amazon and Flipkart provide options to browse in multiple Indian languages, making it easier for non-English speakers to participate in the digital economy.