Online Retail Market in India 2023 – 2028

Online Retail Market in India 2023 – 2028

The retail industry encompasses all businesses providing products and services to consumers. Globally, there exists a variety of distinct retail store types, ranging from supermarkets and independent stores to department stores, DIY outlets, electrical stores, and specialty stores. The consistent year-over-year growth of the retail business, propelled by the increasing popularity of online retail, contributes to the employment of a significant workforce on a global scale.

Market Insights:

In FY 2023, the online retail market was assessed at INR 4,822.80 billion and is anticipated to reach INR 15,159.11 billion by FY 2028, demonstrating a Compound Annual Growth Rate (CAGR) of 24.93% during the forecast period from FY 2024 to FY 2028. The significant surge in India's online retail sector is primarily driven by the robust growth of fashion e-commerce, offering an extensive array of clothing, footwear, and accessories. Notably, the market share of e-commerce in Tier-3 cities witnessed an upswing, escalating from 34.2% in 2021 to 41.5% in 2022. Similarly, Tier-2 cities also experienced a rise, advancing from 19.4% to 21.4% during the same period. Conversely, the market share in Tier-1 cities observed a decline, decreasing from 46.4% in 2021 to 37.1% in 2022. In terms of geographical coverage, online retailers now extend their delivery services to 15,000-20,000 pin codes out of approximately 100,000 in the country.

Market drivers:

The expansion of the India e-commerce market has been facilitated by the availability of budget-friendly hardware such as laptops, notebooks, desktop PCs, and smart handheld devices. This growth is further propelled by the widespread adoption of the internet. The surge in smartphone usage, coupled with the increasing penetration of 4G and 5G network services, has resulted in a rapid increase in the number of internet users. As incomes in India continue to rise, consumers are displaying an increasing willingness to invest in premium products, further contributing to the growth of the online market.

Market challenges:

In India, the rural population remains largely unaware of the existence and applications of the internet. Interestingly, even within the tech-savvy urban demographic, there is limited understanding of online business and its associated benefits. Due to this lack of skill and expertise, sellers often make costly mistakes when initiating their online ventures. The presence of industry giants with global reach and substantial financial resources, including Amazon India, Flipkart, Snapdeal, among others, poses a significant challenge for new entrants attempting to establish themselves in the market.