The Indian e-commerce market is expected to surpass modern trade by the financial year (FY) 2024-25, according to Flipkart’s Kalyan Krishnamurthy.
The e-commerce market size is expected to grow from $29 billion in FY20 to $100-105 billion by FY25 in comparison to modern trade’s $50-billion size that may increase to $85-90 billion during the same period.
“In next few years, we believe the Indian e-commerce ecosystem will be bigger than what we term as modern trade today. The pre-Covid growth rates of e-commerce were roughly 26-27 percent but if you look at post-Covid estimates, it has gone closer to 30 percent. We do believe the Kirana ecosystem will continue to see a huge spike and e-commerce will see an increased adoption slightly at the cost of modern retail,” Krishnamurthy said.
The modern trade is likely to grow at a post-Covid compound annual growth rate (CAGR) of 12-13 percent during FY20-25 period.
"The opportunities that modern retail present are significant for businesses of all sizes, including the kirana ecosystem. Flipkart is also doing its best to help small businesses and artisans embrace the power of technology and be a part of the modern retail opportunity," he said.
Krishnamurthy noted that e-commerce has been gaining traction over the years and in 2019, more than 10 percent of Indians had already shopped something online.
This trend was further accelerated after the lockdown forced people to stay indoors. Many turned to online platforms for buying grocery and other essentials during this time and have continued to do so after the lockdown was lifted.
The market share of the e-commerce sector is also likely to grow from 3.45 percent of around $840 billion retail market in FY20 to 8.75 percent of around $1.2 trillion retail market by FY25. On the other hand, the e-commerce market excluding the grocery vertical may further penetrate from 10.5 percent post-Covid in FY20 to 24-25 percent by FY25. Meanwhile, the Kirana ecosystem, which has become the catalyst to the rise of e-commerce marketplaces including Amazon, Flipkart, and others, is expected to see 5-6 percent growth during FY20-25.
"Close to 100 percent of pin codes in India have seen e-commerce adoption. This includes categories like fashion, appliances, furniture... More than 60 percent of transactions and orders in India come from tier two cities and smaller towns. We still believe that we are scratching the surface when it comes to e-commerce adoption in India," he said.
He pointed out that only 3.5 percent of Indian commerce is online as compared to more than 25 percent e-commerce adoption in China, and other developed economies that have 10-25 percent adoption rates.
Krishnamurthy said innovations around voice-based commerce, vernacular support, use of videos and affordability are playing an important role in the growth of e-commerce as more Indians come online and start conducting digital transactions.