Indian e-commerce industry set to grow by 141% to $111.4 billion

With the COVID-19 pandemic denting consumer sentiment due to the imposed travel restrictions and lockdowns in India, the retail industry has been at the forefront of the economic disruption.

As business operations ceased completely, consumers increasingly moved to e-commerce to purchase goods and services.

Consequently, the Indian e-commerce industry is expected to grow steadily by 141% from $46.2 billion in 2020 to $111.4 billion in 2025, says GlobalData.

A Q1 consumer survey* (February 2021) in India reveals that 84% of the consumers are still extremely/quite concerned about the impact of the COVID-19 pandemic.

Reportedly, India recorded a 11-year high wholesale price index (WPI) in April 2021, as India continues to reel under the second wave of the COVID-19 pandemic.

The unemployment rate in retail shot up by 8% in April (up by 1.5 ppts from March) causing 3.4 million salaried employees to lose their jobs.

“The retail industry is the second largest employer in India. Small and medium-sized firms alone employ about 400-450 million people,” explains Suresh Sunkara, Retail Analyst at GlobalData. “However, the heightened inflation rate along with an equally high unemployment rate is weakening the consumer sentiment and affecting their purchasing power.

On the other hand, the liquidity in the retail businesses is driven by seasonal sales and collections. However, high fixed expenditures and the absence of seasonal inflow of cash are threatening the existence of retailers.”

Against this backdrop, the impact of inflation (retail goods) and the COVID-19 pandemic on the trading of retailers in India, shows itself in various ways including store closures, the rise of independent retailer strength, polarisation of store sizes and targeting of marketing efforts.

“To trim down the expenses, some retailers are resorting to salary cuts,” continues Sunkara. “In addition, with customers fearing contracting the airborne virus, retail stores and malls continue to witness a precarious drop in physical footfall. Hence, more retailers are contemplating layoffs and downsizing.”

In the post pandemic scenario, Indian retailers across sizes are set to understand the power of omnichannel digital transformation. The most resilient ones surviving this crisis are the omnichannel retailers. As a result, retailers with such an approach have a better chances of survival due to the convenience and customer experience that they offer.

The long-term outlook for the Indian retail industry looks optimistic, supported by rising income, favourable demographics, the entry of foreign players and increasing urbanisation.

Meanwhile, Indian retailers should look up to their peers in China, Singapore and South Korea to chart a quick road to recovery.

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