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E-commerce in India is expected to grow by 31% this year to touch $32.70 billion, led by Flipkart, Amazon India and Paytm Mall. Photo: iStock
E-commerce in India is expected to grow by 31% this year to touch $32.70 billion, led by Flipkart, Amazon India and Paytm Mall. Photo: iStock

E-commerce to touch 8% of India's retail trade by 2025: Report

  • As covid prompts more retailers to look at new ways of reaching shoppers—this will also lead to convergence of offline and online
  • Meanwhile, in the next five years, the retail sector is expected to add 9.2 million new jobs taking the sector's total employment to 45.5 million by FY25

New Delhi: The share of Indian e-commerce is set to grow from the current 4% of the country’s overall food and grocery, fashion, consumer electronics retail trade to 8% by 2025, even as the economic impact of covid-19 is set to contract India’s retail market by 25% to 40% in FY21, according to a white paper by Technopak Advisors released on Friday.

Technopak has assumed that the current and next year i.e. FY 21 and FY 22 will witness disruption in economic cycles, loss of employment and retailing opportunities across many retail categories, especially discretionary, as India emerges out of the pandemic.

“Consequently, Indian retail will witness contraction in FY 21 that can range from 25-40% from the base of FY 20," the consulting firm said. The contraction may not be as severe in food and other need-based retail categories, however even they will face a period of no-growth-to-marginal decline on the back of supply disruptions and a severe stress on domestic consumption.

This will be followed by a period of marginal recovery in FY22 “and from FY23 onwards, Indian economy may witness resumption of economic activities at pre-covid levels," the white paper said. However, the two years of lag recovery, will push the pre-covid projections that pegged India’s retail market to reach a $ 1 trillion by two years—and will now be achieved in FY25.

India’s retail trade—largely unorganized and still dominated by small stores, run by independent entrepreneurs, is set to undergo a change as the pandemic-induced restrictions accelerate digital adoption and prompt new shoppers to get online.

Technopak estimates that modern trade will grow at 15% CAGR to reach 18% of the total retail share by 2025—largely led by a growth in e-commerce, whose share in total retail stood at 4.3% in FY 20 but will touch 7.6% by 2025. Consumer electronics will still command the largest share of the online retail trade with a 28% penetration, followed by footwear, pharmacy and apparel.

Moreover, retailers will also look at omni-channel or digital activation especially in categories such as fashion, home, jewellery, especially in the post-covid world that is already nudging brands to scale up their presence online.

Pure play brick and mortar or modern trade’s share will expand from 8% currently to 10% in the next five years to touch $113 billion.

Meanwhile, the share of traditional trade will shrink from the current 88% to 82% by 2025—the format will still grow.

“In spite of this E-commerce enabled projected growth of modern retail, the size and influence of traditional Retail is expected to remain the same. Though in percentage terms its share is expected to reduce from the current 88% in FY20 to 82% in FY25, in absolute terms, traditional retail is expected to increase from the current $ 749 billion to $ 934 billion in the next five years," according to estimates by Technopak.

Technopak expects modern retail and traditional retail to “co-exist and grow going forward", especially as new modes of ecommerce develop. The inter play between the two retail channels will "create competing conditions but these will be negated by growth of assisted commerce (traditional retailers as last mile fulfilment partners for e-commerce players) and exclusive retailing markets for both in many clusters," Technopak said.

As covid prompts more retailers to look at new ways of reaching shoppers—this will also lead to convergence of offline and online.

“...going forward, modern retail will witness a convergence and digital commerce will become central to the growth of modern retail. Pure brick and mortar retailers will increasingly adopt digital technologies for accelerated growth and pure e-tailers will appreciate the importance of brick assets and outreach to be plugged in for accelerated growth plans," the paper said.

Meanwhile, in the next five years, the retail sector is expected to add 9.2 million new jobs taking the sector's total employment to 45.5 million by FY25. Close to 28% of the new employment in retail will be created by modern retail. “Contrary to the popular belief that employment in modern retail will grow at the expense of traditional retail, modern retail will create complimentary jobs in the areas of offer management, digital technologies and last mile deliveries, with higher proportion of skilled and semi-skilled employment than traditional retail," the paper said.

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