India’s e-retail segment to reach over $160 billion by 2028, growth rates expected to bounce back

India’s e-retail market is expected to reach over $160 billion by 2028 as more Indian households join the upper middle and upper income consumer cohorts. According to a report released by Bain & Company and Flipkart, the e-retail market is estimated to scale up to $57-$60 billion in 2023, up 17-20 per cent from 2022.

The report noted that this was slower than earlier growth rates due to inflationary pressures that impacted consumer sentiment and reduction in discretionary spending. Stating that overall online spending is still 5-6 per cent of the total retail market, the report titled, ‘How India Shops Online 2023’ noted that there is still massive headroom for growth especially as more Indian households join the upper middle and upper income cohorts. “India’s e-retail market is expected to bounce back to 23-25 per cent growth levels and reach over $160 billion by 2028,” the report added.

Factors such as increased digital access through cheaper data plans and affordability driven by lower logistics costs are also enabling the sector grow. Government initiatives such as the Open Network for Digital Commerce (ONDC) will further propel the growth of e-retail in India, the report noted.

Diverse markets

Meanwhile, India’s annual transacting e-retail shopper base is estimated to scale to 240–260 million people in 2023. The growing base of transacting shoppers has also led to the emergence of diverse consumer micro-segments.”Now 7 out of 10 online shoppers reside in Tier 2+ cities, and a third of online shoppers are part of Gen Z/Alpha (born in or after 1997). About a third of online shoppers come from low-income or low-middle-income cohorts,” the report added.

There is also a growing base of mature shoppers spending bigger bucks on online shopping. Shoppers that came onboard e-retail in 2019 have doubled their engagement, frequency of purchases and spending on digital platforms over the past three years, it added.

In the coming decade, the e-retail sector’s growth will be fuelled by the addition of new shoppers and higher online spends per shopper. The report added that e-retail platforms are investing as much in retention as they are in new shopper acquisition.

“India will need multiple models to build, scale and serve the needs of this diverse shopper base, which has varying price sensitivities, service and speed expectations and language requirements,” the report noted.