Indian e-retail market set to become $140-billion industry by FY26: Study

Growing at an annual rate of 25-30%, the e-retail market in India is projected to become a $120–140 billion industry by FY26, according to management consulting firm Bain and Company. The expansion will be spearheaded by small towns that account for four out of five new customers. The study further said that older people and women have gained distinction in the e-retailing base over the past year and this trend is likely to continue.

Smaller towns take the lead

The reverse migration from the big cities to small towns during the pandemic has enlarged the e-retailing base, said the study done in association with Flipkart.

The FY21 (ending March 2021) was a contradictory one for the retail segment in India. The Gross Domestic Product contracted by 7.3% and the overall retail market contracted by 5%, while the e-retail grew by 25%. Despite a two-month-long nationwide lockdown that disrupted almost everything imaginable in India, the e-retailing market grew by 25% despite lockdowns and pandemic-related setbacks, says the report.

India’s top 8 metro cities contributed the highest to the growth of e-retailing, the study by Bain and Company said. One in three people shopped online at least once in the top 8 metro cities.

Differential growth

Incongruent growth and recovery patterns were seen across different categories of e-retailing during and after the pandemic. Select categories that include mobiles and other electronics saw a huge one-time spurt that later cooled off due to the reopening of offline retail and longer replacement cycles. Frequent use categories consisting of groceries and FMCG saw a swift growth which is expected to accelerate in post-pandemic times. The category with the lowest relative growth is out-of-home and discretionary spending, like travel goods, fashion etc.