The Indian e-commerce market is poised for explosive growth, with its size estimated at USD 112.93 billion in 2024 and projected to reach USD 299.01 billion by 2029, growing at a CAGR of 21.5% during the forecast period according to Mordor Intelligence Report. This remarkable expansion is driven by several key factors, including rapid urbanization, rising internet penetration, and the proliferation of smartphones and other digital devices. These elements have collectively transformed the landscape of commerce in India, enabling businesses to operate without the need for a physical presence and significantly reducing costs related to infrastructure, communication, and overhead.
The Indian government has played a pivotal role in fostering this growth through progressive policies. Notably, the introduction of 100% Foreign Direct Investment (FDI) in B2B e-commerce via the automatic route in the marketplace model of B2C e-commerce has been a significant boost. Under the new FDI policy, online entities with foreign investment are prohibited from selling products from retailers in which they hold an equity stake, ensuring a level playing field and promoting healthy competition.
The India Brand Equity Foundation (IBEF) highlights the government’s Digital India initiative, which aims to propel the country into an online economy worth trillions by 2025. This initiative has led to the formation of a new steering group to oversee the development of an e-commerce platform for government use. Additionally, the commerce ministry’s new committee to review the Open Network for Digital Commerce (ONDC) strategy aims to create an e-commerce infrastructure akin to major players like Flipkart and Amazon, further driving market growth.
Increasing Online Retail Penetration and Internet Use
By 2024, online retail penetration in India is expected to reach 10.7%, up from 4.7% in 2019, with the number of internet buyers projected to reach 220 million by 2025. A Payoneer report ranks India’s e-commerce sector as the 9th fastest-growing for cross-border growth, with e-commerce expected to double its share of total retail sales in food, groceries, fashion, and consumer electronics from 4% in 2020 to 8% by 2025.
The COVID-19 pandemic significantly accelerated the adoption of e-commerce in India. Lockdowns and mobility restrictions introduced a large segment of the population to the convenience of online shopping, leading to a surge in both new shoppers and sellers on digital platforms. This shift has had lasting effects, embedding e-commerce more deeply into consumer behavior and setting the stage for sustained growth.
Role of Internet and Smartphone Penetration
Internet and smartphone usage has been a cornerstone of the industry’s expansion. Thanks to the Digital India campaign, internet connections surged to 850 million in 2022. According to the Telecom Regulatory Authority of India (TRAI), as of September 2022, there were over 343.8 million rural internet subscribers and 507.8 million urban subscribers. The proliferation of 4G technology has significantly contributed to this growth, with wireless mobile subscribers exceeding 1 billion in 2022.
Digital payments are also on the rise, predicted to account for 80% of all transactions by 2025. This shift is driven by a young, tech-savvy population increasingly using smartphones for transactions. India is adopting digital eWallets at a faster rate than the United States, the United Kingdom, and China, according to the Associated Chambers of Commerce and Industry (ASSOCHAM).
Consumer Electronics: A Major Growth Driver
Consumer electronics have been a strong contributor to the growth of India’s e-commerce market. Significant sales during festive seasons have highlighted the robust demand for products like refrigerators, washing machines, and air conditioners. The India Cellular & Electronics Association (ICEA) projects that India’s laptop and tablet manufacturing industry could be worth USD 100 billion by 2025. This expected growth in consumer electronics presents substantial opportunities for e-commerce players to expand their online product lines and develop specialized platforms for these products.
Moreover, the market for smart wearables and soundbars is also expanding, driven by rising disposable incomes and the increasing popularity of high-definition smart TVs with built-in Wi-Fi for streaming services. These trends are likely to further boost consumer spending on electronics and drive e-commerce growth.
Intensifying Competition and Strategic Investments
The competition in India’s e-commerce market has intensified as internet penetration and customer adoption of online sales channels have increased. Major players like Amazon and Flipkart are continuously enhancing their customer-centric services to improve the online shopping experience. Recent strategic investments underline the high stakes involved. For instance, Walmart has significantly increased its stake in Flipkart to 80.5% by spending USD 3.5 billion in 2023 and buying out hedge fund Tiger Global’s investment and Accel’s remaining stake for USD 1.4 billion.
India’s e-commerce market is on the cusp of a transformative journey, driven by rapid urbanization, increasing internet and smartphone penetration, and supportive government policies. As the market continues to grow and evolve, it promises to enhance consumer choice, drive innovation in product distribution, and offer vast opportunities for businesses to thrive in a digital economy.
