India's e-commerce story: Growth and opportunities

With a population of over 1.41 billion people, 2.6 million registered companies, and 64 million small businesses, India is a highly attractive market for e-commerce brands. Additionally, with the majority (65%) of the population under the age of 35, India presents a tech-savvy demographic, signalling the significant potential for digital brands to tap into this market.

Presently, India is witnessing a significant surge in e-commerce, driven by increasing internet access, widespread smartphone usage, and the growing popularity of digital payments. India boasts the second-largest internet user population, with over 1.2 billion users in 2023. This widespread digital presence has led to the integration of e-commerce into the daily lives of millions, making online shopping accessible even in the country's most remote areas.

A deep dive into e-commerce buyers of India
"At Shiprocket, we're witnessing first-hand how MSMEs (Micro, Small, and Medium Enterprises), the powerhouses of India's e-commerce landscape, are propelling the market towards its inevitable $300 billion future. This growth isn't just confined to urban centres but resonates deeply across Bharat, highlighting the heart and resilience of our nation," said Saahil Goel, MD & CEO of Shiprocket in an official statement.

According to the Shiprocket report titled "How MSMEs of Bharat Sell Online," which was launched at Shivir 2024 at New Delhi, the distribution of orders in India shows a consistent upward trend in order volumes across different regions. The report highlights that North India has witnessed a significant increase, with its share rising from 26% in 2021 to 29% in 2023.

West India has maintained a steady share, showing a slight increase from 20% to 21% over the same period. In contrast, South India experienced a decline from 27% to 25%, indicating a potential shift in regional dynamics. The overall growth trajectory has been strong, with total orders increasing from eight crores in 2021 to 16 crores in 2023, reflecting India's rapidly expanding e-commerce landscape.

The majority of e-commerce sellers are concentrated in key metropolitan areas. Maharashtra is leading with a significant share of e-commerce sellers, followed by Karnataka and Uttar Pradesh. Even though Maharashtra consistently has the largest share of buyers, followed by Uttar Pradesh and Karnataka, the majority (71%) of orders originate from non-metro areas, and only 29% of orders originate from metro cities. This indicates the transformation of shopping in remote villages and tier 2 and 3 cities by e-commerce.

During the opening remarks at Shivir, Shiprocket's Goel said, "There is a very, very large opportunity in e-commerce in India." This is despite the fact that the e-commerce penetration of retail in India is only 8%, while that of the US is 24% and China is 45%. By 2040, India's GDP per capita income is projected to be $30,000. Think of it this way—India will be worth a new United States."

Goel stated, "This indicates an upcoming increase in demand. More and more people will relocate to larger cities, leading to increased demand from metro and Tier I buyers." He also mentioned, "Additionally, there will be a trend towards premium and luxury products, with a significant influx of buyers from Tier 2, 3, and 4 cities." Furthermore, he noted that there is expected to be a twofold increase in the number of buyers over the next six years, reaching 50 crore shoppers by 2030.

Paving stones towards $300 billion future
MSMEs in India are increasingly embracing advanced technology solutions to remain competitive in the e-commerce space. They leverage marketing automation tools to optimise campaigns, personalise customer interactions, and enhance marketing efficiency. Social media marketing, particularly through WhatsApp, has gained popularity, with WhatsApp usage among Longtail sellers increasing from 35% to 40% and among SMBs from 25% to 30%. Data analytics tools provide MSMEs with insights into customer behaviour, helping them optimise product offerings and make informed business decisions.

Looking ahead, the Indian e-commerce market is expected to reach $300 billion. Inclusive growth is crucial, with women-led MSMEs playing a vital role, constituting 20.5% of registered businesses and generating 19% of employment. Sustainability is becoming a significant concern, prompting MSMEs to adopt eco-friendly practices such as sustainable packaging and electric vehicles. There is also a growing demand for ethically sourced products, including vegan beauty items, organic wellness products, and sustainable pet care goods.

The study by Shiprocket revealed that 27% of orders are from the personal care category, making it the top product category. Most buyers prefer placing orders on weekends, and the majority of customers are satisfied with the e-commerce process. Despite the growing popularity of digital payments, 58% of buyers still prefer non-prepaid modes, indicating a cautious approach towards online transactions. Over half of the buyers seek discounts, with order values ranging between Rs. 500 and Rs. 1500, but they also strongly prefer quality.

Opportunities beyond the national borders
The Indian e-commerce industry is expected to surpass the US by 2034, making it the second largest globally, according to a report. During the event, Akshay Ghulati, CEO of International Shipping at Shiprocket, mentioned that global cross-border e-commerce is currently around $800 billion and is projected to reach $8 trillion by 2030. He also stated that global cross-border e-commerce is expected to grow at a faster rate than domestic retail e-commerce worldwide.

While talking about the opportunity for Indian products abroad, Ghulati mentioned that India has a very large domestic consumption story and this continues to grow. But today, if we talk about the global consumer base, the demand for products made in India is higher than ever before. This is mainly for certain categories. There are going to be more and more categories. And, this will sell not because the products made in India are cheap but because there is a demand for these products."

The report highlighted that textiles, handicrafts, and jewellery are the top categories driving growth. While talking to Indian Transport & Logistics News, Somil Agrawal, Senior VP and Head of Marketing at Shiprocket, said the company is facilitating e-commerce sellers in India to ship to over 220 countries. The United States, the United Kingdom, Canada, and the Middle East are the regions where Indian products are in the highest demand. Shiprocket has deeper partnerships in these countries to ensure the timely delivery of orders.

In the context of US-bound orders, Shiprocket collaborates with USPS and Royal Mail for UK shipments. According to Agrawal, one of the major hurdles is the lack of understanding among MSMEs about the shipping process, which Shiprocket aims to address through education. The company has partners who can provide assistance with paperwork, customs, and related processes.

Agrawal also mentioned that there haven't been any complaints about Indian products being counterfeit so far. This absence of issues is attributed to the fact that the popular Indian products being exported are genuine handicrafts from regions like Uttar Pradesh and Rajasthan.

In terms of e-commerce exports, artificial and imitation jewellery is a top-performing category, making up approximately 40% of exports. Shiprocket highlights that traditional Indian earrings and necklaces, known for their intricate designs and vibrant colours, are highly sought after in markets such as the US and Europe.

Supported by the Indian government, which has prioritised cross-border trade, MSMEs are growing. Government initiatives powered $417 billion in export revenue in FY22, with notable contributions from Gujarat, Rajasthan, and Delhi.

The Indian government has also launched several initiatives to bolster MSME exports and streamline cross-border trade, enhancing global competitiveness and supporting international expansion. Government initiatives include Directorate General of Foreign Trade (DGFT), National Logistics Policy, and Unified Logistics Interface Platform that enhances transparency, reduces bottlenecks, and improves supply-chain efficiency with features like real-time shipment tracking and a single window for logistics documentation. The government has also taken initiatives like simplifying regulations, providing financial assistance, and offering training programs.

Measures include e-commerce export hubs, digital trade platforms, and schemes like Merchandise Exports from India Scheme (MEIS) that provides financial incentives to MSMEs to enhance their export capabilities.

According to Shiprocket, international buyers prefer products that blend traditional Indian elements with contemporary designs, such as jewellery, and decor items, and products like Indian sarees with contemporary patterns. Additionally, they prefer attractive yet eco-friendly packaging. Moreover, products emphasising quality and authenticity, especially in the healthcare and beauty category, tend to perform better. Highlighting certifications and tags showcasing adherence to international standards is necessary to capture the attention of international buyers.

Trade agreements are another important factor that plays a crucial role in boosting international trade. For instance, the India-UAE Comprehensive Economic Partnership Agreement (CEPA) has provided significant tariff reductions on jewellery, allowing Indian jewellers to export their products more competitively to the UAE market. Reduced tariffs and streamlined customs procedures in countries like the US, the UK, Australia, Germany, Canada, France, Italy, and South Korea create favourable conditions for Indian products.

How can MSMEs address export challenges?
The report states that MSMEs need to understand foreign market shopping trends, payment methods, and cultural differences. They need to secure partnerships with reliable shipping partners and be aware of customs procedures. They need to update their websites for international pricing, including languages and currency converters. They should also consider international marketing expenses. They can invest in digital marketing and collaborate with international influencers, obtain necessary certifications, and streamline compliance processes to ease the burden of customs costs and navigate international regulations.

The report highlights that industries found that businesses using WMS (Warehouse Management System) experience up to a 20% improvement in order picking and accuracy and a 30% reduction in order fulfilment times. Moreover, to provide MSMEs with more accessible insights on the e-commerce ecosystem, along with the trends report, Shiprocket also launched a dedicated trends section on their website where sellers can gather real-time shopping trends and analytics to understand how India is shopping.

"With SHIVIR, Shiprocket aims to bring together MSMEs, emerging startups, and established e-commerce brands under one roof and enable knowledge-sharing and networking, paving the way for the next wave of growth for Indian MSMEs," stated Shiprocket in an official release at the event.