India's e-retail market is estimated to touch $150 billion-$170 billion by 2027 from $40 billion in 2021, thanks to the steady rise in the number of online shoppers, reaching a significant 180-190 million in 2021. To translate the growth of the market in detailed numbers, the estimates factor in a 25%-30% annual growth and doubling of market penetration to 9%-10% over the next five years, analysts at Bain & Company said in a report published on Tuesday in conjunction with Flipkart. India that currently has the third largest count of online shoppers after the US and China "is well poised to surpass the US to have the second-largest shopper base in the next one to two years," analysts said in the report.

The current inflationary pressures may act as a brief spoilsport but long term growth for a market with broad tailwinds bodes well. Consider this: India's smartphone penetration stands at about a mere 36% compared to China's 63% and America's 76%, carving room for higher growth. In terms of affluence, the trend is somewhat similar: per capita income in India is at about $2,000 against China's $12,000 and US's $69,000. "Rising affluence will fuel consumption and increase spending per shopper" and low data prices will only ensure sustained growth, say analysts at the global consulting firm. Already, by virtue of India's 450-500 million social media users, capturing a larger share of online shoppers should be a breeze for industry players. "Shopper addition will continue to be at the heart of future e-retail growth. India's online shopper base is estimated to increase to 400-450 million by 2027," say analysts. In fact, in 2021 alone, between 40 and 50 million new shoppers were added to the local e-retail market, translating into an approximately 30%-35% growth over the online shopper base in 2020, as per statistics mentioned in the report.

The increase in the tally of shoppers can in parts be attributed to the launch of annual festive sales by major e-commerce marketplaces like Amazon, Flipkart and now Meesho with varied deals on offer. According to analysts at Bain & Company, last year companies managed to onboard a large number of new online shoppers per day through the tenure of the sales. They estimate the number to be more than "3X." And sectoral players have innovated as well as incorporated a lot of new features to attract more shoppers, triggering an influx of small town online shoppers. For instance, almost more than 60% of new online shoppers today come from tier three cities. This trend has also been corroborated by figures shared by platforms over the past two years or so. Call it the pandemic effect but Covid nudged people across the country to shift to online purchases. Platforms like Amazon and Flipkart have been adding more shoppers from small town India expanding their footprint to nondescript places like Tawang, Jhumri Telaiya.

" shoppers largely belong to tier three or smaller cities and include Gen Z which will become a critical cohort in the future. They primarily purchase fashion as the first category online and they typically start buying at entry points," say analysts. In fact, they also say that the category mix of online purchase will evolve in the coming years. "Fashion, general merchandise (including personal care) and grocery have the highest penetration headrooms and will therefore fuel growth," accounting for as much as two-thirds of the e-retail market by 2027 and dethroning the traditional dominant categories like mobile phones, electronics and appliances, say analysts.

Among other things, companies have been able to quite successfully experiment with new business models like social commerce, video/live commerce, D2C and the newest being quick commerce, widening the accessibility net. Social commerce is estimated to grow about 50% annually from 2021 to 2025. Just to give a global reference, about 10% of Instagram users globally use Shops on Instagram. "Quick commerce, a recent disruption globally, has also gained interest in India, with players having raised more than $3 billion in funding up to June 2022," analysts said in the report. The litmus test for players will however be to navigate challenges around scaling sustainably, analysts point out.

"Sustained e-retail growth has been accompanied by tremendous growth in the supplier and logistics ecosystem. India's online seller base has grown 35% annually over the past year, with approximately 40% of new sellers coming from tier two or smaller cities. In addition, growth in e-retail shipments has enabled the development of a deep and efficient logistics network….reach has widened significantly—e-retail is accessible in 99% of India's pincodes," say analysts.

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