India’s Rapidly Growing and Changing E-Commerce Landscape

After growing rapidly in recent years, the Indian e-commerce landscape is poised for another phase of growth. To capitalize on the opportunities, retailers will need to understand changing consumer demands and navigate the rapidly evolving landscape, write experts at Metyis.

India’s emergence as a global e-commerce hub is by no means a sudden trend. Over the years, the country has seen rising internet penetration and engagement rates across age groups, with no signs of slowing down. With an expected 1.3 billion internet users by 2030, digital commerce naturally dominates as one of the top online activities for Indians.

By 2023, 300 million people in India were already buying their favorite clothes, food, electronics, and other products online. This number is expected to cross 500 million in the next decade.

Comparing these figures to the global numbers underscores India’s leadership in digital commerce. Unprecedented growth rates in online and retail activity in the country, coupled with steady growth in domestic incomes towards the middle and upper classes, are driving the country’s demand for online shopping.

India’s macroeconomic indicators confirm this trend: e-commerce is expected to exceed $100 billion by 2028, with the food and beverage (F&B) sector accounting for more than a third of the projected market size. Other growing sectors include fashion, electronics and media, each of which saw double-digit growth compared to 2023.

But despite the optimistic outlook, retailers can’t just blindly enter the Indian market and expect instant success. In a world where brands too often assume that different markets behave similarly, some enter India with a homegrown replication strategy, only to be disappointed by the country’s unique business climate.

Underlying this particular situation are changing consumer characteristics and behaviors that are changing what, how and where consumers buy their favorite products.

Changing Characteristics and Behavior of Consumers in India
As the Indian e-commerce market continues its rapid growth trajectory, businesses need to adapt to the country’s changing consumer landscape. Three key factors are fundamentally changing the characteristics of Indian consumers and online shopping behavior.

Digital knowledge
The median age in India is just 32, significantly younger than the European average of 44. This contrast is even more pronounced in the online world, where India’s tech-savvy Gen Z and millennials continue to dominate online activity.

With over 250 million Gen Zers, more than half of whom live in relatively affluent metros and tier 1 cities, these young shoppers are driving a new wave of digital commerce in India. They are combining traditional and new digitally driven requirements, such as the desire for native language support and interactive shopping experiences, to drive new expectations in the digital marketplace.

Regional differences
While median incomes are rising across India, regional differences in household wages—and their impact on online consumption—cannot be ignored. Rural areas not only pose challenges to last-mile distribution, but also unique shopping habits.

While shoppers in metropolitan cities in India are commonly described as “loyal”, trusting established brands and valuing trust, rural shoppers have become “explorers”, preferring to discover new products rather than sticking to trusted brands.

Changing consumer paths
The smartphone has become the backbone of Indian commerce, with over 80% of Indian shoppers making online purchases on their mobile devices. And while browsing products on a phone was equivalent to surfing a migrated website on a computer a decade ago, the latest technologies have now enabled a unique, smartphone-led consumer journey.

Starting with the inspiration phase, the integration of social media and e-commerce, often through influencers or sponsored content, has revolutionized the way users discover products. Gone are the days of targeted search – consumers now “fall” upon products while exploring social media and marketplaces.

At the same time, the ubiquity of reviews has enabled instant comparisons of products, with shoppers gravitating toward the highest-rated products on marketplaces or brand apps. This journey continues after purchase, where consumers are guided by social media ads, loyalty programs, and personalized recommendations designed to encourage repeat purchases.

Solving the e-commerce puzzle in India

To meet the changing needs of consumers, three business models dominate the Indian e-commerce market.

Markets
With over two-thirds of Indians preferring marketplaces over brand websites and multi-brand stores for large purchases, these platforms offer unparalleled brand access, convenience, and competitive pricing. For brands, marketplaces provide expanded consumer reach, lower barriers to entry by (partly) owning marketing and operational costs, and access to valuable consumer data to make strategic decisions.

Direct to Consumer (D2C)
D2C is expected to contribute $20 billion to e-commerce revenue in India by 2030, and D2C companies face a completely different set of benefits and challenges. Higher profit margins are achieved by cutting out the middleman, while direct access to shopper data enables personalized offers and greater responsiveness to consumer needs. However, D2C companies often struggle with significant marketing expenses, high customer acquisition costs, intense competition, and limited brand visibility.

Multi-channel models
By seamlessly integrating online and offline experiences, omnichannel models create a frictionless journey that increases satisfaction and loyalty. Brands can leverage increased engagement and retention to provide more cross-selling and upselling opportunities. Operationally, omnichannel benefits, such as improved inventory visibility, not only benefit shoppers, but also help brands increase sales while reducing inventory management costs.

Other pieces of the puzzle
Choosing the right business model is just one piece of the puzzle – staying up-to-date with innovative trends and technologies is equally important to staying ahead of trends. If there is one lesson that companies can learn from the past few years, it is that innovative trends and technologies have a unique ability to shape consumer-brand interactions. While these trends have the potential to be transformative, they are just a fraction of the innovations shaping the e-commerce landscape in India.

Other noteworthy developments, whether it is the increasingly engaging apps from brands or advanced analytics tools, continue to offer unique opportunities for growth in the ever-evolving Indian market.

Completing the eCommerce Puzzle

Choosing the right business model is just one piece of the puzzle – staying up to date with innovative trends and technologies is equally important to staying ahead of the curve. If there’s one lesson that companies can learn from recent years, it’s that innovative trends and technologies have a unique ability to shape consumer-brand interactions.

Cooperative Trade
Collaborative commerce has blurred the lines between consumers, brands, and social media influencers. On platforms like Myntra, these entities come together to create immersive experiences where consumers engage with co-created content, on-platform shopping, and live interactions. For brands, this engagement drives traffic and sales through increased visibility, targeted marketing, and personalization opportunities, and generates valuable insights to further refine marketing strategies.

Streamlined supply chains
India’s warehousing and logistics sector has played a key role in the country’s post-pandemic recovery, steadily growing to a projected $35 billion by 2027. This growth is being driven by growth in e-commerce activity, rising disposable incomes and industrial expansion, but excessive costs due to factors such as high supply chain complexity, inefficient operations and India’s challenging geography continue to hamper further progress.

One of the key cost-cutting measures is the emergence of regional warehouses in tier-2 and tier-3 cities in India. Compared to tier-1 cities, commercial real estate and labor are typically more affordable, and space is also more plentiful. Located further inland, these regional warehouses increase connectivity, unlocking previously inaccessible regions and supporting economic growth.

Strategic placement of distribution centres across these regions has enabled industry giants like Amazon and Flipkart to deliver same-day delivery to over 27,000 zip codes, proving the effectiveness of this approach.

Further reading:Better B2B structures are crucial for the Indian retail sector.

Cash on delivery
Part of companies’ never-ending quest to improve consumer satisfaction, cash on delivery further enhances convenience for shoppers, especially those who may not have access to digital payment methods. For businesses, it helps build trust in their customer relationships as well as expand their customer base. Especially for consumers looking to try out new brands and online shopping platforms, cash on delivery strikes the perfect balance between the convenience of shopping at home and the security of a transaction on-site.

Meta-driven customer acquisition
Further up the customer journey, and strongly linked to India’s appetite for collaborative commerce, more and more companies are embracing the potential of meta-driven customer acquisition. Especially in fashion, where shoppers increasingly prefer to look to social media for inspiration and product discovery, meta-driven customer acquisition has become an essential part of the marketing toolkit.

When seamlessly integrated with other eCommerce sales channels, businesses typically see an increase in web traffic while reducing customer acquisition costs. Later in the consumer journey, it enables even more targeted marketing and personalization opportunities, driving conversions.

While these trends have transformative potential, they are just a fraction of the innovations shaping the e-commerce landscape in India. Other noteworthy developments, whether it’s the increasingly engaging brand apps or advanced analytics, continue to offer unique opportunities for growth in India’s ever-evolving marketplace.

Navigating the Indian Landscape

India’s evolving e-commerce landscape presents both unprecedented opportunities and challenges. Shaped by a young demographic, a tech-savvy customer base, and regional differences, the country’s unique business climate underscores the need for tailored e-commerce strategies.

While the rise of marketplaces, D2C, and omnichannel models signal a shift toward digital transformation, success depends on strategic planning and execution. Focused integration of technologies and trends that enhance the shopping experience is essential for brands to succeed in the face of intense market competition.

About the Authors
This article was written by Keshav Chawla, Ashish Dang, Tarini Barat, Akshat Srivastava, Douwe Ordelman and Bawer Betasi, all based in Metyis India and Europe.