2 of the biggest reasons for the growing E-commerce penetration in India is availability of economical smartphones and increased internet users. As per the latest data from IAMAI (Internet and Mobile Association of India), the total population of India in 2018 is 132.42 crores (~1.3 Billion). Out of this, 32.5% (43 crores) live in urban areas and remaining 67.5% (around 89.42 crores) live in rural areas. More than 46 crore (460 Million) people in India have access to Internet.
It is estimated that by the year 2022, India will have nearly 850 million Internet users, of which 150 million are expected to start transacting online. Currently, the size of the Indian e-commerce market is 36 billion USD and it’s predicted to reach 100 billion USD in the next four years. Growth in internet penetration and e-literacy will be the major drivers for this growth.
Internet for a strong E-commerce ecosystem
There are many factors at play to unlock Internet consumption in India – rising standards of living, 2G, 3G & 4G enabled devices, reliable high-speed data, cheap data plans, and proliferation of digital content.
Geographically, we can divide the internet users in India into Tier I, Tier II and Tier III regions. The Tier I regions include the metro cities in India. One of the main reasons for the penetration of internet in the Tier II and Tier III regions is smartphones. Easy accessibility and affordable data plans are vital for the fast-developing Indian e-commerce sector and mobile internet penetration is really making a difference in numbers.
It’s observed that a very high frequency of online transactions by the consuming class (affluent and middle class) will drive the Indian e-commerce and is estimated to contribute 2% to India’s GDP in 2017, which is further estimated to increase to 4% by 2022. This consumption pattern will eventually supersede both the US and China.
As one of the largest internet users, Indians are benefiting vastly from the role technology plays in the e-commerce sector. It is expected to create 1 million+ jobs by 2022, both directly and in allied industries. This job creation has widely led to the growth of the logistics sector and estimated to contribute approximately 0.8 billion USD to the logistics sector in 2017. As e-commerce expands to Tier II / III cities and the steady demand for warehousing across all demand hubs, it is expected to drive the last-mile logistics.
E-commerce will also be supporting the growth of around 20 million MSMEs in India and this number is expected to double and increase the average revenue per MSME. MSME sellers find it profitable to engage in e-tail as it reduces sales and marketing cost by approximately 50% while providing them with wider access to the market, which can lead to more than 50% increase in revenues.
Growth in e-commerce sector also contributes positively towards multiple softer aspects of nation development
- Boost investor confidence in the Indian consumption story and positively impact FDI inflows.
- Introduces Indian employees to global best practices, trickling down from global organizations.
- Boost business for small business owners such as hotel owners and cab drivers.
- Positively impact the environment by reducing net emissions (conducting multiple deliveries instead of single trips).
- Global presence of Indian brands.
- Encourage IP development within the country.
- Encourage new SMEs to set up their business and scale them up faster.
- Encourage healthy competition by providing multiple choices to consumers, including leading global products and services.
All these prove that India’s rapidly expanding market and e-commerce presents a huge opportunity that brands cannot afford to ignore. As Internet becomes an essential part for Indians, we ill will soon become an important player in the Global Digital stage.
To know more, download our latest research paper titled “Propelling India Towards Global Leadership In E-Commerce”: https://www.nasscom.in/knowledge-center/publications/propelling-india-towards-global-leadership-e-commerce
Attached: Executive Summary of our report titled “Propelling India Towards Global Leadership In E-Commerce”