Opinion
Does e-commerce threaten corner stores? India’s consumption survey data has some clues
Summary
- The Household Consumption Expenditure Survey (HCES) of 2022-23 offers data that can help us grasp retail dynamics in the age of online shopping. E-com penetration is deepening, but there’s still space for physical format retailers.
Household Consumption Expenditure Survey (HCES) data has been making headlines for its deep dive into India’s standard of living and evolving consumption patterns.
The latest HCES 2023-24 fact-sheet, released hot on the heels of the 2022-23 micro-data, offers a treasure trove of insights into shifting consumption over the past year. But the HCES offers more than just an update on spending habits. It gives us a ring-side view of how India shops, eats and lives.
An intriguing subplot within the larger data-set is the rise of e-commerce. Data that sheds light on a crucial question: How deeply has e-commerce penetrated India? Is e-commerce the new face of shopping or just a blip?
While the HCES is not explicitly designed to map this, its data offers valuable insights on how online shopping is or isn’t reshaping consumption. We delved into the available 2022-23 numbers to unravel this.
Also Read: India’s household consumption survey doesn’t feed public policy all that well
First things first. Households with internet connections, as per the survey, constitute 62% of the total in rural India and 77% in urban areas, both exceeding earlier estimates of internet penetration.
Only 2% of rural survey respondents order or pay for food online, compared to 15.34% in urban areas.
For non-food items, 11.30% of rural respondents shop online, versus 37.33% in urban areas.
In consumables and services, digital engagement stands at 17% for rural and 46% for urban respondents.
The accompanying table details item-wise online purchase percentages for rural and urban respondents.
Categories like clothing (32.52%) and footwear (21.55%) have seen noticeable online adoption in urban areas, underlining the popularity of online platforms for discretionary spending, where, according to a report by Pahle India Foundation, convenience and choices drive consumption.
Online buying of services (43.70%) indicates strong growth in digital adoption, particularly for the payment of utility bills, entertainment and travel.
While rural households allocate almost half of their monthly consumption expenditure to food and urban households allot 39.7%, according to HCES data, the online penetration of food commodity purchases is limited in rural and urban areas alike.
Traditional retail dominates the buying of essential commodities, with online purchases quite low even in urban India for groceries (8.35%), vegetables (3.60%) and milk (3.89%).
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Rural adoption of online purchases remains modest, with notable exceptions like fuel (3.80%) and services (16.20%).
The synergy of the Centre’s Ujjwala and Jan Dhan schemes may have boosted online payments for fuel in villages, while growing internet access and digital literacy drive services like ticket bookings, recharges and bill payments online.
In general, the proliferation of digital payment platforms seems to be facilitating online transactions for various services across India.
The data indicates that e-commerce serves as a complement to traditional retail rather than a substitute.
On average, households in India report a total monthly expenditure of ₹11,730, while online spending in the last 30 days is just 4.6% of that.
If seen separately for rural and urban areas, online purchases account for only 1.87% of total consumption in rural Indian and 6.51% in urban zones.
For categories like clothing, footwear and services, urban households are embracing e-commerce as a regular part of their purchasing behaviour.
However, essentials like groceries and fresh produce indicate a gradual change rather than a wholesale shift, showing that kirana stores or wet markets continue to hold sway.
To thus answer the question posed at the start of this op-ed, e-commerce is not a blip, nor does it herald a new retail landscape with no space for physical stores.
Clothing, second only to services, drives online purchases in rural India, signalling a rising aspirational class and untapped retail potential.
Yet, the online share of clothing purchases stands at just 9.12%, despite 62% internet access and facilities like doorstep arrival, cash-on-delivery and easy returns.
Whether this share has come at the expense of physical stores or reflects extra demand—and thus an expanding market pie—warrants further research.
And finally, e-commerce expansion into rural food and groceries appears less likely, as fresh produce remains tied to local supply chains and cultural preferences, where traditional market relationships hold sway.
Also Read: An open platform for e-commerce can transform India’s economy
As we await unit-level data from the 2023-24 HCES to further enrich our understanding of Indian consumption, this data from the previous year provides the first set of empirical readings to inform the country’s discourse on the threat posed by e-commerce expansion to kirana stores.
This data should move the conversation from slanted opinions to informed analysis of the country’s retail dynamics in the age of internet businesses.
The authors are, respectively, former director general, ministry of statistics and programme implementation, and visiting fellow, Pahle India Foundation
