Republic Economic Summit: India's e-commerce industry continues upward trend amid COVID

In the lead up to the first-ever Republic 'India Economic Summit' scheduled for November 26 in the national capital, Republic World establishes an overview of the world's fifth-largest economy and key contributory factors to its growth, crisis and sustenance. At the Republic Economic Summit 2021, Union Ministers and top corporates are set to ideate on pressing questions, especially in a post-COVID apparatus, while profound economists will place the world's fastest-growing major economy under the microscope. 

At a time when the global economy is showcasing an inflection point amid COVID-19, let us understand the penetration of e-commerce & retail in the Indian context. 

Nature of e-commerce & retail in India

With an internet user base of more than 696.77 million, reflecting about 40% of the country's population, India's e-commerce sector is growing at an unprecedented pace, especially in the aftermath of nationwide lockdowns in a work-from-home economy of the post-COVID era.

In addition to customers' convenience and endless products via e-shopping, India's e-commerce industry thrives on the sale of more hard-to-find items instead of only selling large volumes of popular items, thus realising significant profits. Strategists say that e-commerce has led to the emergence of several niche players who primarily specialise their products closer to a theme, and get acquired by big players subsequent to getting popular in-demand amongst consumers. 

According to the National Investment Promotion & Facilitation Agency, the country's e-commerce sector is estimated to surpass the USD 350 billion mark in gross merchandise value (GMV) (volume of goods sold via e-commerce platforms) and become the third-largest online retail market by 2030.

India's e-commerce & retail in recent past

Driven by socio-demographic and socio-economic factors such as urbanisation, income growth along a drastic surge in nuclear families, the concept of door-step delivery comes across as a boon. In light of smartphones and the internet being recognised as basic amenities in the fast-paced system, e-commerce in the retail industry has transformed India's business approach. 

Since 2014, GoI's initiatives such as Digital India, Make in India, Start-up India, Skill India dovetaile with the country's image as a thriving forum to launch numerous digital initiatives and sustain them too. 

Driven by the strong adoption of online services in day-to-day purposes such as food delivery, apparels sales and the education sector, India's e-commerce accounted for almost half of smartphones that were sold and about a fifth of clothes purchased in the first half of 2021. In 2020 itself, e-commerce entities logged more than USD 8 billion in private equity and venture capital across 400 legally enforceable deals. 

India's e-commerce & retail amid COVID-19

While the retail market in India was rather unorganised amid COVID-19, the sector did not witness a downward trend in customers' demands or even options made available to them. The organised retail market has increased significantly between 2012-2020 to its current value at 12% of total retail and is expected to climb to 18% by 2025. 

Surveys denote 75% of traditional grocery stores (kirana), after the COVID-19 outbreak, are interested in venturing into digitisation and while only 3% were tech-enabled in 2018, nearly 70% in tier 1 cities and 37% in tier 2 cities currently are keen to resort to technology to augment their business operations. Also, owing to the National Payments Corporation of India's UPI (Unified Payments Interface), anyone with a bank account and a cellular phone can transfer money to beneficiaries using a mobile phone, in a country with approximately 75 crore mobile users which is the second-highest in the world. 

Secondly, other than online grocers, prominent retail categories that recorded notable increases were the apparels and accessories sector with 18% growth while consumer electronics and home and living recorded a 6% growth. Notably, the growth in the e-commerce industry has directly impacted micro, small & medium enterprises (MSME) with cascading effects on several other sectors too. Understandably so, a boost in the aforementioned sector has likely enhanced employment, revenues from export and provided better quality products and services to customers.

Of late, the resultant upward trajectory in India's e-commerce is advanced by technology-enabled innovations such as customer engagement, advertisements, digital mode of payments, payments getaways, a study of demand basis hyper-local analytics, etc.

The government, under the leadership of PM Narendra Modi, has repeatedly stated the need to prioritise digital upliftment and readiness in a bid to attract more homegrown, indigenous and local businesses as producers and not only consumers in the e-commerce and retail industry.