India’s e-retail market rose to nearly $40 billion in 2021 and is slated to reach $50 billion this year, according to a joint report by Boston-based consulting firm Bain & Company and Flipkart. Massive headroom in terms of smartphone penetration and affluence, and low data prices provide the perfect ingredients for sustained growth, it said.

The country’s e-retail market is estimated to rise to $150-$170 billion by 2027. This implies 25-30 per cent annual growth and doubling of market penetration to 9-10 per cent over the next five years, it said.

India’s e-retail market rose to nearly $40 billion in 2021 and is slated to reach $50 billion this year, according to a joint report by Boston-based consulting firm Bain & Company and Flipkart. Massive headroom in terms of smartphone penetration and affluence, and low data prices provide the perfect ingredients for sustained growth, it said.

Smartphone penetration is 36 per cent in India compared to 63 per cent in China and 76 per cent in the United States.

India now has the third-largest shopper base globally, with 180-190 million online shoppers in 2021. It is poised to surpass the United States to have the second-largest shopper base in the next one to two years, the report said.

Rising affluence will fuel consumption and increase spending per shopper. Although the current inflationary environment might prove to be a short-term headwind for the market, these structural drivers will ensure healthy growth in the medium to long term, it said.

Historically, categories such as mobile phones, electronics, and appliances have accounted for the lion’s share of the e-retail market. This will change over the next five years.

Fashion, general merchandise categories (including personal care) and grocery have the highest penetration headroom compared to mature markets and will therefore fuel growth. These categories will cumulatively account for as much as two-thirds of the e-retail market by 2027, the report said.

The country’s online shopper base is estimated to increase to 400-450 million by 2027. Most of these shoppers are already in the digital funnel—450-500 million used social media while only 180-190 million shopped online in 2021.

In 2021 alone, between 40 and 50 million new shoppers were added to the India e-retail market, which is approximately 30-35 per cent growth over the online shopper base in 2020.

These new shoppers largely belong to tier-3 or smaller cities and include Gen Z—which will become a critical cohort in the future. They primarily purchase fashion as the first category online, and they typically start buying at entry price points.

The existing shopper base is simultaneously maturing. Overall engagement on retail platforms is increasing. The percentage of daily active users to monthly active users has risen to more than 25 per cent in 2021, from 18 per cent to 20 per cent in 2019, it said.

Sustained e-retail growth has also been accompanied by tremendous growth in the supplier and logistics ecosystem. India’s online seller base has grown 35 per cent annually over the past year, with approximately 40 per cent of new sellers coming from tier-2 or smaller cities.

In addition, growth in e-retail shipments has enabled the development of a deep and efficient logistics network. Accompanied by technological advances, e-retail has seen a steady year-over-year decline in cost per shipment by 7-9 per cent per annum from 2018 to 2021.

Reach has widened significantly—e-retail is accessible in 99 per cent of India’s pin codes, the report added.

Fibre2Fashion News Desk (DS)