India’s e-commerce market is expected to reach over $160 billion by 2028, up from an estimated $57-60 billion in 2023.
Online retail has accelerated after COVID-19, with the market expanding by $8-12 billion yearly since 2020, according to the How India Shops Online 2023 report by Bain and Co., in collaboration with Walmart-owned Flipkart, which tracked consumer spending on e-commerce.
Growth is projected at 17-20% in 2023, albeit slower than 25-30% in 2019-2022, as high inflation dampens discretionary spending.
The pandemic has been an inflection point for e-retail adoption globally. India saw an acceleration in e-retail penetration post-pandemic. Despite rising adoption, e-commerce still only accounts for 5-6% of overall Indian retail spending, versus 23-24% in the U.S. and over 35% in China, highlighting significant room for growth.
Major e-commerce players such as Amazon, Flipkart, and Reliance Retail‘s Ajio are ramping up investments to capitalize, with Amazon recently committing an additional $15 billion by 2030, hiking its total India investment to $26 billion.
India added 120 million online shoppers from 2019-2022. Spending per customer doubled, signifying greater engagement and spending. Shoppers acquired in 2019 doubled engagement, purchase frequency and spending by 2022.
Smaller city customers are driving adoption, with 7 of 10 buyers from Tier II and III cities. A third of online shoppers are young Gen Z-Alpha consumers. About a third come from low or low-middle income groups. There is also a growing base of mature shoppers.
Future e-retail growth will stem from new shoppers and higher per-shopper spending. As older consumers get comfortable, they experiment across categories, a key growth lever. The seller ecosystem catering to these consumers is also expanding, with twice as many new sellers in 2022 versus 2021.
Sankalp Mehrotra, vice president of monetization at Flipkart, said. “We are seeing diversity in the number of categories customers are buying. We also see an increase in number of transactions on a monthly basis. Typically, entry categories for customers are small electronics, mobile phone cases or t-shirts. Then you see evolution into various categories, such as fashion, large electronics. We’re seeing all of that play out.”
