Online Retailing Market: Growth and Emerging Trends

As per market reports, the e-commerce market is expected to grow to US$ 200 billion by 2026 against US$ 38.5 billion as of 2017.
Online Retailing Market: Growth and Emerging Trends

The ongoing pandemic situation has brought in a lot of unprecedented actions and changes in force affecting individual behavior and social norms or shall we say the new normal. However these factors have fuelled and empowered e-commerce and online retail to new heights, from being an option to being a preferred way of shopping.

As the nation crawled into lockdown days since past year owing to the detrimental effects of the Covid-19 pandemic, the e-commerce market in India, started getting an additional impetus. Strict lockdown imposed on local and daily needs market people in India took to online shopping in a more active way. 

As per market reports, the e-commerce market is expected to grow to US$ 200 billion by 2026 against US$ 38.5 billion as of 2017. In fact, much of the growth of the industry has been triggered by an increase in Internet and smartphone penetration in the country. Reports say that, as of September 2020, the penetration of Internet connections in India increased significantly to 776.45 million, driven by the Ministry of Electronics and Information Technology (MeitY)’s ‘Digital India’ program.

Market Size

The market share of the online retail market is not only spreading its gamut across domains, but it has steadily managed to sky-rocket its trends and market share with all-time high dynamics. Reports suggest that the Indian online grocery market is estimated to reach $18.2 billion in 2024 from $1.9 billion in 2019, expanding at a CAGR of 57 percent. India's e-commerce orders volume increased by 36 percent in the last quarter of 2020.

In June 2021, Grofers, the grocery delivery start-up, reportedly entered the unicorn club, after raising $120 million from Zomato, the food delivery platform. In February 2021, Zomato entered into an agreement with the Ministry of Housing and Urban Affairs (MoHUA) to introduce 300 street food vendors on its portal. In May 2021, Flipkart strengthened its grocery infrastructure to cater to customer safety and demand across India with planning to further expand its fulfillment center capacity for grocery by over 8 lakh square feet across Delhi, Kolkata, Chennai, Coimbatore, and Hyderabad, in the coming quarter.

Government Initiatives

Since 2014, the Government of India has announced various initiatives, namely Digital India, Make in India, Start-up India, Skill India, and Innovation Fund. The timely and effective implementation of such programs will likely support the growth of e-commerce in the country. Some of the major initiatives taken by the Government to promote E-commerce in India are as follows:

As of June 25, 2021, the Government e-Marketplace (GeM) portal served 6.87 million orders worth Rs 116,291 crore ($15.67 billion) from 2 million registered sellers and service providers for 52,651 government buyers. In a bid to systematize the onboarding process of retailers on e-commerce platforms, the Department for Promotion of Industry and Internal Trade (DPIIT) is reportedly planning to utilize the Open Network for Digital Commerce (ONDC) to set protocols for cataloging, vendor discovery, and price discovery.

The government had identified five areas in its proposed national retail policy - ease of doing business, rationalization of the licensing process, digitization of retail, focus on reforms, and an open network for digital commerce - stating that offline retail and e-commerce need to be administered in an integral manner.

The Consumer Protection (e-commerce) Rules 2020 notified by the Consumer Affairs Ministry in July directed e-commerce companies to display the country of origin alongside the product listings. In addition, the companies will also have to reveal parameters that go behind determining product listings on their platforms.

Government e-Marketplace (GeM) signed a Memorandum of Understanding (MoU) with the Union Bank of India to facilitate a cashless, paperless, and transparent payment system for an array of services in October 2019.

In October 2020, Minister of Commerce and Industry, Piyush Goyal invited start-ups to register at the public procurement portal, GeM, and offer goods and services to government organizations and PSUs. Amending the equalization levy rules of 2016, the government-mandated foreign companies operating e-commerce platforms in India to have permanent account numbers (PAN). In order to increase the participation of foreign players in e-commerce, the Indian Government hiked the limit of FDI in the e-commerce marketplace model to up to 100 percent (in B2B models). 

Road Ahead

The e-commerce industry has been directly impacting micro, small and medium enterprises (MSME) in India by providing means of financing, technology, and training and has a favorable cascading effect on other industries as well. The Indian e-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second-largest e-commerce market in the world by 2034. Technology-enabled innovations like digital payments, hyper-local logistics, analytics-driven customer engagement, and digital advertisements will likely support the growth in the sector. The growth in the e-commerce sector will also boost employment, increase revenue from export, increase tax collection by exchequers, and provide better products and services to customers in the long term. The rise in smartphone usage is expected to rise 84 percent to reach 859 million by 2022.

The Ground Reality

Besides the stats and figures, the ground reality behind the surge in online retail is simply rocketing ahead based on shifting consumer preference to online buying, from groceries to cars to apartments, it's all being made available and bought online. This shift in consumer behavior is supported by:
1. Convenience of armchair shopping
2. Plethora of buying, payment, and financing options
3. Better deals offered as the business is direct to consumers
4. Increasing adaption of new social norms and health concerns

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