India’s New Retail Frontier

Apart from being the biggest producer of spices in the world, the largest democracy in the world, the country with 22 official languages, and the home of 40 places inscribed on UNESCO’s World Heritage List, India is also one of the largest and most exciting consumer markets globally with a retail sector expected to reach USD 1.1tn by 2027 and USD 2tn by 2032. According to UN estimates, in April 2023 India had likely replaced mainland China as the world’s most populous country – a vast number of consumers whose demand is waiting to be met.

A mixture of multinationals and domestic conglomerates, India’s retail landscape remains dominated by traditional retail, which accounted for 81.5% of the USD 836bn in retail earnings in 2022. However, over the coming five years, the share of modern retail is bound to increase, following the post-COVID boom of online retail. By 2030, India’s thriving e-commerce industry is expected to have a gross merchandise value of over USD 55bn. In 2022, e-commerce and consumer internet companies managed to raise USD 15.4bn in PE/VC funding, almost double the amount raised a year earlier. By 2023, India is seen to become the third-largest online retail market globally.

The industry modernization is underpinned by India’s young and growing affluent population, which has a strong predilection for modern retail and has the disposable income to support more discretionary purchases. Not only are the new consumers willing to pay a heftier price tag for brands that adopt green and ethical practices, but they also actively seek more than the traditional shopping experience. In order to meet that demand, virtual and augmented reality will play an increasingly important role in online retail along with customized shopping experiences on the basis of past interactions and behaviour patterns.

Another trend that is revolutionising Indian retail is q-commerce or the delivery of essential goods and services, typically within an hour or less. In 2022, consulting firm RedSeer estimated India’s quick commerce market to touch USD 5.5bn by 2025, up from USD 0.3bn in 2021.

But the booming online retail presents its own set of specific challenges. Retailers are faced with a cornucopia of tech solutions from which they have to select the one that best suits their needs. Brand loyalty will also be difficult to retain since consumers now have countless options to try before they settle down for a given brand.

Nevertheless, the future of the retail industry seems promising. Buoyed by growing urbanisation, rising purchasing power, the strongly competitive market, and the favourable demographics, India’s vast untapped market holds lucrative opportunities for both brick-and-mortar and virtual retailers.

For more in-depth information and insights on India’s retail sector, you can check EMIS Insights’ thematic report Quick Commerce Industry: Really Revolutionising Retail in India? Detailed data on the Indian consumer goods and retail sector, as well as on other select sectors of the Indian economy can be found in the EMIS Insights annual and quarterly reports on the country.