E-commerce impacts Indian jobs and consumer welfare

A recent report by Pahle India Foundation (PIF) in collaboration with People Research on India’s Consumer Economy (PRICE) provides insight into these effects, based on a study of consumers, online retailers and traditional retailers in urban India.

The study, conducted across 35 cities across 21 states and union territories, surveyed over 12,000 people — 8,209 online consumers, 2,031 offline retailers and 2,062 online retailers.

One key finding is the widespread adoption of e-commerce in urban areas, with over 90% of respondents spending more than an hour a week online, and 40% spending more than 10 hours.

This engagement is driving e-commerce activity, with 85% of users shopping online every week. In addition, 67% of respondents reported making purchases on e-commerce platforms in the last 30 days, underscoring the growing reliance on online shopping for everyday needs.

These platforms meet a wide range of consumer needs, from electronics to everyday items, and offer the convenience of online shopping.

The study shows that when it comes to payment preferences, cash on delivery (COD) remains the most popular method, chosen by 90% of respondents, followed by UPI (81%). While other digital methods such as credit and debit cards are available, they account for less than 10% of the preferred payment options.

The reliance on cash on delivery and UPI reflects existing trust issues with other forms of digital transactions, indicating the need to take action to build trust in such payments.

The study also assesses the broader impact of e-commerce on consumer well-being, focusing on six indicators: convenience, competition, consumer trust, access and integration, value for money, and complaint resolution.

Convenience has emerged as the most important factor influencing consumer well-being, enabling them to easily shop without leaving their homes.

Competition, offering consumers more choice and increased consumer trust are also positive factors. However, cost efficiency and complaint handling scored lower, indicating that consumers still struggle to resolve issues and find the best prices.

While the growth of e-commerce has benefited consumers, it has posed significant challenges to traditional offline retailers. Only 10% of offline retailers have listed their products on e-commerce platforms, with Flipkart, Amazon, and Meesho being the most popular.

The low adoption rate highlights the barriers small, traditional retailers face in moving online, including technological challenges, a lack of digital skills, and concerns about rising costs and competition.

The study found that 27% of offline sellers who previously listed their products online eventually withdrew, citing these challenges.

Despite these obstacles, adoption of digital payment methods is growing among offline merchants, with 54% using point-of-sale (POS) systems. However, a significant portion—30%—still do not use digital technologies, potentially putting them at a disadvantage.

This resistance underscores the need for policies that make digital tools more accessible and user-friendly for small businesses.

In terms of employment, the e-commerce sector has seen a marked increase in job opportunities. The study shows a 42% net increase in management positions among online retailers, reflecting the growing complexity of e-commerce operations.

Other roles, including marketing, sales and customer service, have also seen significant growth, all critical to staying competitive in the digital marketplace. However, this growth has led to workforce turnover, with traditional roles being replaced by technology-focused positions, underscoring the need for retraining.

The study also found that online retailers are increasingly adopting digital technologies to streamline their operations, with some 58% using digital marketing tools and 54% using retail operations management software.

This contributed to increased sales and profitability – 50% of retailers reported an increase in sales and 42% reported an increase in profits thanks to the implementation of digital tools.

The results of this study have important policy implications. The difference in digital adoption between online and offline retailers suggests the need for government intervention to support traditional retailers.

Policies that promote the uptake of digital solutions through subsidized training programs and improved access to digital infrastructure could help overcome this divide.

Financial incentives to encourage small retailers to list their products on e-commerce platforms could also increase their participation in the digital economy.

Addressing trust issues in digital payments is key. Strengthening consumer protection laws, especially for digital transactions, and launching awareness campaigns on the security of online payments can reduce reliance on cash on delivery and increase trust in digital transactions without UPI.

To sustain the positive impact of e-commerce on employment, addressing the skills gap is essential. Investing in job training programs focused on digital skills, such as social media management and data analysis, can help workers adapt to the changing job market.

Furthermore, as e-commerce continues to grow, improving logistics infrastructure and delivery services will be crucial.

While e-commerce offers significant opportunities for growth and innovation, it also creates challenges, particularly for traditional offline retailers. The results underscore the need for targeted support and policy interventions to ensure that the benefits of e-commerce are shared broadly across the economy.

As e-commerce continues to grow, addressing these challenges will be critical to ensuring that the digital revolution benefits all sections of society.

The author is Managing Director and President, People Research on India’s Consumer Economy.