India’s e-retail market is moving into a new growth phase, riding on a broader consumption recovery and a rapidly expanding base of young and non-metro shoppers, according to the How India Shops Online 2026 report by Bain & Company and Flipkart.

“India is a critical consumption engine globally, poised to capture one in eight incremental consumption dollars over the next five years,” says the report.

After a brief post-pandemic slowdown, consumption rebounded sharply in 2025, with private consumption growth accelerating to 10.5%, up from 8% in the 2022–24 period. This recovery, largely supported by tax relief, easing inflation, and lower interest rates, has directly lifted online retail. 

E-retail gross merchandise value (GMV) reached $65–$66 billion in 2025, growing at 19%–21%, with momentum picking up in the second half of the year and continuing into early 2026.  Over the past five years, the market has more than doubled, while the number of online shoppers has climbed to 290–300 million. 

E-retail growth over the past five years has been supported by increases in the number of both consumers and sellers, according to the report.

What stands out is who is driving this growth. Gen Z now accounts for 40%–45% of all e-retail shoppers and nearly half of incremental orders. At the same time, Tier 2 and smaller cities are contributing roughly half of new orders, signalling a clear shift beyond metros. Per the report, even the seller base tripled over the past five years, with a sizable share emerging from Tier 2+ cities.

Despite this rapid expansion, India’s e-retail penetration remains low. It is only 1.6% of GDP, compared with 13%–14% in China but this signals significant headroom. 

The next 500 million shoppers and how they will buy

A key insight from the report is that India’s next wave of online shoppers is already within reach. Of the roughly 850 million chat and social media users in the country, two-thirds have yet to transact online. 

Currently, only about 30% of internet users shop online, far behind China (92%) and the US (74%).  This gap, combined with rising incomes as India’s GDP per capita is expected to cross $4,000 by 2030, sets the stage for a sharp increase in both shopper penetration and spending per user. 

The report estimates that India’s e-retail market will grow at over 20% annually to reach $170–$180 billion by 2030. By then, one in every ten retail dollars, and nearly one in four non-grocery retail dollars, will be spent online. 

This growth is being underpinned by improvements across affordability, access, assortment, and discovery. Platforms are doubling down on value-led propositions, mirroring global trends where low-cost, high-assortment models have scaled faster than the broader market. 

Quick commerce and AI-led shopping will reshape the market

Two structural shifts are beginning to redefine how India shops online: quick commerce and conversational commerce.

Quick commerce has scaled rapidly to a $10–$11 billion market in 2025 and now accounts for 16%–17% of total e-retail GMV.  It has doubled annually over the past two years and is expected to reach $65–$70 billion by 2030, contributing nearly half of incremental e-retail growth. 

Its impact is most visible in grocery, where online penetration has increased fivefold to 1.5% of the overall market. In metros, that figure is already at 6%–7%. 

The model operates differently from traditional e-retail. It is focused on short, high-intent shopping sessions, smaller basket sizes, and frequent top-up purchases. Micro-fulfilment infrastructure has expanded rapidly, with over 7,000 centres across 200 cities. Scale and demand density have improved profitability. However, customer adoption and profitability beyond top Metro and Tier 1 cities remain unproven, says the report.

Alongside this, conversational commerce powered by generative AI is emerging as a new frontier. India has become the second-largest market for ChatGPT, with over 160 million monthly active users after a 4.5x jump in 2025. 

Although still nascent, AI-led shopping is beginning to influence product discovery and comparison, shifting behaviour from traditional “search and browse” to “describe and get” journeys. “While conversational commerce is rarely used for end-to-end shopping today, there are early adoption use cases in research and product comparison,” the report says.