The Indian online retail market to grow at 30% CAGR over the next five years: Study

Bain & Company has launched a new report titled “How India shops online”, which addresses one of most topical issues of the new economy today - the online-shopping landscape. The report in partnership with Flipkart, notes that the $850 billion Indian retail market, the fourth largest in the world, is on the cusp of a transformation, led by the emergence of e-retail and its growing influence on Indian shoppers. While Covid-19 has caused an inflection in e-commerce penetration globally driven by consumers’ need for safety and convenience and even in India, online is gaining salience.

According to the report, the Indian e-retail market is primed to reach nearly 300 to 350 million shoppers over the next five years—propelling the online Gross Merchandise Value (GMV) to $100 to 120 billion by 2025. It adds that e-retail is democratising the shopping landscape, with access to 97% of India’s pin-codes, and empowering Bharat’s small sellers while breaking go-to-market barriers for insurgent and incumbent brands. It concludes with an interesting summary of consumer trends, the future outlook and suggests value levers for brands to win the online race.

Here are a few highlights:

• The Indian e-retail industry has seen an upsurge in the last five years with online retail penetration currently at 3.4%, indicating a strong headroom for further growth.
• Bain and Company estimate, the Indian online retail market to grow at 30% CAGR over the next five years.
• Online shoppers in tier-2 and smaller towns makeup nearly half of all shoppers and contribute to three out of every five orders for leading e-retail platforms.
• Consumers are increasingly opting for e-retail platforms for product searches—nearly one in three product searches in India already starts on an e-retail platform, with vernacular searches on the rise.
• To increase conversion, sellers must invest in high-quality product images and high impact summary product descriptions. One in two visitors browses the image gallery and only 1 in 15 click the detailed product description.
• In China, e-retailers are trying to win women shoppers in tier-3 and tier-4 towns through social shopping.
• For the next wave of online customers, peers and community play a much larger role in influencing purchase decisions than for the current online shopping base.
• More than 50 private equity and venture capital investments in social commerce were closed in the last five years.