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Indian e-retail market expected to grow to $140bn by FY26

Indian e-retail market expected to grow to $140bn by FY26

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NEW DELHI: E-Retail has particularly been a boon during the Coronavirus (Covid-19) pandemic after the setbacks caused by widespread disruption (for consumers and small businesses) and loss of jobs. In the future, the e-retail market is expected to grow to $120–140 billion by FY26, increasing at approximately 25 per cent–30 per cent per annum over the next 5 years, according to the report ‘How India Shops Online 2021’ by Bain & Company in association with Flipkart.

The growth will be led by smaller towns that account for four out of five new shoppers. In addition to small towns, women and older shoppers have gained prominence in the online shopper base over the last year, and this trend is expected to continue, report agencies.

“Small-town India will fuel this growth, accounting for four of every five new shoppers,” said the report. “During the Covid-19 pandemic, reverse migration from metro cities further accelerated growth in smaller towns. In addition to small towns, women and older shoppers continue to increase the e-retail base.”

The fiscal year ending March 2021 was one of contrasts for India’s retail market. The overall retail market shrank by 5 per cent, along with a 7.3 per cent contraction in gross domestic product (GDP). However, the Indian e-retail market saw a 25 per cent growth despite a two-month national lockdown and multiple prolonged disruptions in regional pockets over the year, according to the report.

“The pandemic was a watershed moment for India’s e-retail market, driving a 12-month acceleration in e-retail penetration, which was at 4.6 per cent by end of FY21,” said the report.

This acceleration was even higher in the top 8 metro cities, where online shopping is more common: one in three people shopped online at least once last year in the top 8 metro cities.

This Covid-19 induced inflection in e-retail is a global phenomenon driven by an enhanced consumer need for safety and convenience, especially during prolonged stay-at-home periods. This has also played out in India wherein e-retailers have been the lifeline for both consumers and sellers—enabling access to essential commodities and hygiene products to millions of households during the lockdown, and providing business avenues to thousands of sellers.

E-retail categories have seen disparate growth and recovery patterns during and post the Covid-19 pandemic. First, select categories (e.g., mobiles, electronics, appliances) saw a massive one-time spurt that then cooled off due to longer replacement cycles and recovery of offline retail. These categories did not see as substantial a jump during the second wave over April–May 2021.