As retail in India bounces back from Covid, the growing number of value-conscious online shoppers is reshaping India’s e-commerce landscape. This value segment is pegged to grow rapidly and emerge as a US$ 215 bn+ market by 2030. While only 4 percent of this demand is today served by online channels, this will rise to 19 percent by 2030 creating a US$ 40 billion market for value e-commerce in India.
As more Indian buyers embrace online shopping, the contours of India’s e-commerce are also changing to reflect the needs and aspirations of newer cohorts of Indian online buyers. The preferences and distinctive buying behavior of value-conscious online buyers have led to the emergence of value e-commerce, a differentiated business model, optimized to serve value-conscious buyers’ demand online. Currently valued at US$ 4 billion, value e-commerce is expected to grow rapidly to reach US$ 20 billion by 2026 and to US$ 40 billion by 2030, which is a 10X growth in 10 years.
The findings are part of a report published by global consulting firm Kearney published titled 'Value E-commerce: The Next Big Leap in India’s Retail Market' that outlines a US$ 40 billion market opportunity that is shaping up as India’s value-conscious buyers go online.
Manoj Muthu Kumar, Principal, Kearney, highlights, “Value-conscious consumers are shifting to online buying, driven by huge adoption in mobile internet – we estimate 350 million active internet users by 2026, of which nearly 90 million will be from rural India. These value-conscious consumers from Tier-II and rural areas will contribute to 38 percent of India’s value e-commerce market demand by 2026. As these value consumers increase online buying, they tend to replicate their offline buying behaviour. Hence, there is a tremendous opportunity for players to craft a sharp value proposition around desirable quality at affordable price.”
After a pandemic-caused disruption in 2020, India’s retail market has started to grow again. Over the next ten years, it will grow at 8.5 percent CAGR to reach nearly US$ 2 trillion by 2030. Amidst overall retail growth, the lifestyle retail consisting of discretionary categories like apparel, footwear, fashion accessories, cosmetics and home décor & furnishing will recover faster. It will grow at a faster clip of 9 percent CAGR to reach US$ 374 billion by 2030. Nearly 70 percent of this demand is driven by value-conscious consumers buying affordable, small ticket items. Known as value lifestyle retail, this is slated to be a US$ 215 billion market by 2030, driven by households earning less than Rs 10 lakh per annum, and predominantly from Tier-II cities.
While the value lifestyle market is growing fast, it is also rapidly going online. Today only 4 percent of this demand is served online through value e-commerce. However, this is expected to gain channel share rapidly and by 2030, 19 percent of the value lifestyle demand is expected to be served through value e-commerce. The number of online shoppers is expected to grow at 17 percent CAGR to nearly 350 million by 2030, the rate of growth being faster in Tier-II cities.
“Value Lifestyle retail is pegged to grow to US$ 215 billion markets driven by India-2 (mainly, mid to low income in Tier-II towns) – their online purchase behavior is set to increase the value e-commerce from a 4 to 40 billion market. Online players that craft a sharp value proposition around relevance, convenience, and trust, focused on needs of India-2 will emerge strong contenders to capture this 40 billion market,” says Karan Dhall, Partner, Kearney.
Several factors driving value e-commerce growth are:
• The growth in the number of online users (1.1 billion users) & 350 million online buyers by 2026.
• The emergence of India-2 (low-income groups, predominantly from Tier-II / rural cities) will drive most of this demand.
• With the increase in overall household income and relatively stable levels of savings, this segment is expected to spend more on the value lifestyle segment. A lack of adequate brick-and-mortar options could lead them to rely more on e-commerce.
• India-2 drives 70 percent of value lifestyle demand, but only 16 percent is online due to lack of trust, resistance to online and to so extent due to limited access to the Internet). Pandemic has whittled away at this resistance towards online buying.
• Gen Z will be joining millennials as independent shoppers over the next five years; their preferences towards online buying are higher
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