Why in News?

• India's e-commerce market has reached $60 billion in gross merchandise value (GMV), becoming the world's second-largest online shopper base.
  • GMV is the total value of merchandise that's sold over a given period through a customer-to-customer (C2C) exchange site.
• However, growth slowed to 10-12% in 2024, down from the historical 20%, due to higher inflation and stagnant real wages, according to a Flipkart-Bain report.
• Despite short-term challenges, long-term prospects remain strong, driven by three key trends: quick commerce, trend-first commerce (especially in fashion), and hyper-value commerce.

What’s in Today’s Article?

• Government Initiatives Boosting E-commerce in India
• E-Retail Slowdown
• Key Drivers of E-Retail Growth

Government Initiatives Boosting E-commerce in India

• Digital Infrastructure & Policy Support
  • The Indian government has launched key initiatives like Digital India, Make in India, Start-up India, and Skill India, driving e-commerce growth.
  • The Government e-Marketplace (GeM) has surpassed ₹4 lakh crore GMV in FY24, enhancing procurement efficiency.
• Expanding E-commerce Access
  • Collaborations like CSC-ONDC (Open Network for Digital Commerce) aim to extend e-commerce to rural areas.
  • The National Retail Policy focuses on digitization and ease of business, while FDI in B2B e-commerce is now allowed up to 100%.
• Regulatory & Tax Measures
  • Consumer Protection (E-commerce) Rules 2020 ensure fair competition.
  • 5G expansion is expected to further accelerate digital commerce adoption.

E-Retail Slowdown

• India’s private consumption growth has slowed from 11% (2017–19) to 8% (2022–24), driven by high inflation and stagnant real wages.
• This has impacted e-retail, with growth dropping to 10–12% in 2024, compared to historical rates of over 20%.
• Expected Rebound and Future Growth
  • Fiscal and monetary policy interventions are anticipated to revive e-retail growth, particularly from the 2025 festive season.
  • By 2030, the market is expected to reach $170–190 billion, growing at over 18% annually.
  • As India's GDP per capita crosses $3,500–4,000, discretionary spending is set to rise, with nearly 1 in 10 retail dollars projected to be spent online.

Key Drivers of E-Retail Growth

• High-frequency categories like grocery, lifestyle, and general merchandise will fuel e-retail expansion, making up two-thirds of total online spending by 2030.
• E-retail penetration in these segments is expected to grow 2–4 times over this period.
• Rise of Tier-3 and Smaller Cities
  • Online shopping adoption is shifting from Tier-2 to Tier-3 cities, with 60% of new shoppers since 2020 coming from smaller cities.
  • The Northeast has 1.2 times higher e-retail penetration than the rest of India.
  • Additionally, 60% of new sellers since 2021 are from Tier-2 or smaller cities, diversifying the seller base.
• Quick Commerce’s Rapid Expansion
  • Quick commerce dominates e-grocery, accounting for two-thirds of orders and 10% of total e-retail spending.
  • It is projected to grow over 40% annually until 2030, expanding across new categories and geographies.
• Trend-First and Hyper-Value Commerce on the Rise
  • Trend-first fashion is set to grow fourfold, reaching $8–10 billion by 2028, with over half of sales happening online.
  • Hyper-value commerce, driven by ultra-low-price assortments, has grown from 5% of e-retail GMV in 2021 to over 12% in 2024, gaining traction among lower-middle-income consumers in smaller cities.
    • Hyper-value commerce refers to a retail model that focuses on offering ultra-low-priced products to attract cost-conscious consumers.