Indian online retail is set to become the third-largest online retail market by CY2030 after the US and China, with an annual gross merchandise value (GMV) of $55 billion in CY2021, up from $38 billion in CY2020 and $350 billion in CY2030.

Nearly 90 per cent of online shoppers that are expected to be added between 2020-2030 will come from tier 2+ cities. More than $7 billion cumulative incremental online retail transactions are expected to be added from tier 2+ customers, while more than $150 billion cumulative incremental online retail GMV is expected to be added from tier 2+ customers over CY 2020-2030, said home grown consulting firm RedSeer at its flagship event Ground Zero 5.0.

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The event was attended by Amitabh Kant, CEO of Niti Ayog along with TV Mohandas Pai, Chairman, Manipal Global Education Services and Sanjeev Bikhchandani, co-founder, Info Edge along with start-up founders.

Driving factors behind growth

Some of the factors that will drive this growth for the next few years include companies’ focus on tier 2 markets, lower costs of servicing tier 2,3,4 markets, growing online spend by ‘digital natives,’ supply-side innovations, and the outbreak of the pandemic that has deepened e-commerce beyond metros.

India’s consumer digital economy including all large consumer facing sectors like travel, ride-hailing, food delivery, e-commerce etc., which was pegged at $85-90 billion in CY2020, is expected to grow to a $800 billion market by 2030. Sixty per cent of travel, 40 per cent of non-grocery retail, 30 per cent of education, 25 per cent of food and beverage services and 6 per cent of pharma/grocery are expected to go through digital channels by CY2030, said RedSeer.

“Today, 50 per cent customers say they use online services because of convenience compared to a few years ago, when 70 per cent of customers said the key reason is discounting. But, after Covid-19, digital services have undoubtedly served customers very well, which is evident in high customer satisfaction and their willingness to keep using digital as a key channel to fulfil their needs. The next wave of entrepreneurs will create innovations which will make the Indian model successful globally,” said Anil Kumar, founder and CEO, RedSeer.

Emerging Trends

Kiranas are expected to achieve approximate $1.5 trillion sales by CY2030 driven by platforms that are digitising these start-ups. Shared mobility saw a sharp decline due to the second Covid wave-led lockdowns in the last two months. Although the autorickshaw segment recovered the fastest, the overall sector merely clocked 18 million rides, a drop from 113 million rides in January 2020. Online used-car transaction penetration is expected to grow 9x in the next 10 years. Another category that is ripe for digital disruption is the car service and repairs market which is still a highly fragmented market that faces challenges like inefficiencies, bloated pricing and poor experience for both consumers and service workshops. This segment is expected to penetrate 15 per cent of this highly fragmented market by CY2030.

Online content is seeing phenomenal growth leading to the overall growth of the digital ad industry as well. Monthly active users (MAU) have become democratised with increasing adoption of varied digital services and platforms. Another example of democratisation is seen in an increasingly large base of active digital content users now coming from tier 2+ cities with the top two categories being Facebook-owned WhatsApp followed by news aggregators.

E-logistics players created an opportunity of 500,000 jobs for gig workers in 2020. It has become the fastest growing market globally with over 3 billion shipments in 2020, of which new age 3PL logistics players have delivered 850 million shipments in 2020. Today, over 90 per cent of orders fulfilled by online commerce is done by these e-logistic firms, a fledgling sector which has come up only in the last one decade, which is expected to deliver 2.5 billion D2C shipments by 2030.

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