Growing shoppers from tier 2, 3 markets to drive a four times growth in India's ecommerce market by 2035: Report

India's e-commerce market has seen rapid growth over the past decade, as more and more shoppers flocked to platforms like Amazon, Flipkart, Myntra and many others. This is no more an urban phenomenon. As more people from tier 2 and 3 markets take the online route, the market is expected to quadruple over the next ten years, according to a report.

The report released by consulting firm Anarock and ETRetail projects India's e-commerce market will clock a 15 per cent compounded annual growth of 15 per cent to touch $550 billion by 2035 from an estimated $125 billion in 2024. In contrast, the overall retail industry in the country will be at around $2.5 trillion, growing at a 6 per cent compounded growth from $1.2 trillion in 2023.

There are various developments that have been key to the surge in e-commerce in the country. Smartphone adoption has grown rapidly and internet penetration too has been increasing. At the same time, digital payment infrastructure has evolved; digital payments today are much more convenient and quick. Add to it the burgeoning middle class and rising disposable incomes. A lot of this growth has been driven by today's young and tech-savvy population, which also gets reflected in the rapid rise of quick commerce.

Constantly evolving supply chain and logistics across the country are also making it easier for people from even smaller markets to order online and for e-commerce companies to deliver farther away.

"Besides the metros, e-commerce players are also tapping the growing demand from smaller towns and cities. Resultantly, the share of online shoppers from Tier 2 and 3 cities has increased to 56 per cent in FY2024 from 46 per cent in FY2020, and is expected to reach 64 per cent by FY2030," said Anuj Kejriwal, CEO and MD of Anarock Retail.

Kejriwal notes that today major e-commerce giants are touching all the postal pincodes covering the entire span of the country.

The unorganised sector, comparising neighbourhood kirana stores and other standalone independent stores, has been the backbone of India's retail industry. They accounted for 79 per cent of the total retail market in 2023. While they will continue to dominate even after a decade, their share is expected to come down to 61 per cent. At the same time, organised retail will grow 12 per cent to 17 per cent. E-commerce, which accounted for just 9 per cent share in 2023, will grow to 22 per cent by 2035.

Currently, the e-commerce market is dominated by horizontal marketplace players like Flipkart and Amazon due to extensive product catalogues, competitive pricing, and robust logistics among other things. However, growing popularity of niche vertical marketplaces like Nykaa and even BigBasket and the emergence of direct-to-consumer brands, as well as social commerce is expected to drive a gradual shift in market dynamics, Anarock estimates.

As consumers seek more personalised and category-specific shopping experiences, these emerging players are likely to capture an increasing share of the e-commerce market in the coming years, the report added.