Only 25% of 850M internet users in India shop online
What's the story
A recent report by McKinsey & Company has highlighted the immense potential of India's e-commerce sector. The study revealed that only 20-25% of India's 850 million internet users currently engage in online shopping. This is a stark contrast to developed markets like the US and China, where over 85% of internet users shop online. The report also noted that e-commerce contributes to just 7-9% of total retail sales in India.
Growth projection
E-commerce's contribution to India's total retail sales to double
Despite its current small share, the report predicts that e-commerce's contribution to India's total retail sales will more than double (between 15% and 17%) by 2030. This growth is expected to be fueled by new business models, expansion into new categories, and rising demand from tier-two and tier-three cities. The report also highlighted a strong surge in e-commerce activity in India over the past few years.
Market evolution
New business models reshaping the industry
The McKinsey report also noted that new business models are reshaping the Indian e-commerce industry. Quick commerce and social commerce together account for over 15% of the market today, a figure that is expected to exceed 25% by 2030. E-commerce companies are also exploring new categories like instant bookings for domestic services, professional help, and medical aid.
Emerging sle lowdown
Growth driven by entry into new segments, smaller cities
The next wave of growth in Indian e-commerce is likely to be driven by two main factors: entry into new segments like B2B commerce and building materials, and rising demand from tier-two and tier-three cities. These smaller cities are witnessing faster income growth than metro and tier-one cities. Between 2023-24, monthly incomes in these areas grew by 18%, outpacing bigger cities.