Why are so few Indians shopping online despite 850 million Internet users?

India’s e-commerce sector is gearing up for major expansion, according to a new report by global consultancy McKinsey & Company. But despite its rapid growth in recent years, there’s still a long way to go before it catches up with global peers.

How many Indians shop online?

India currently has around 850 million internet users, but only 20 to 25 percent of them shop online, the McKinsey report noted. This is a stark contrast to countries like the United States and China, where over 85 percent of internet users make online purchases.

“Out of the country’s 850 million internet users, only about 20 to 25 percent shop online,” the report said.

How fast is e-commerce growing in India?

The report highlighted that India has witnessed a strong rise in e-commerce activity in recent years. While initially a fast adopter, the country is now also becoming an innovator in the space. One clear example is the rapid growth of quick commerce platforms, which promise ultra-fast delivery services.

What share does e-commerce hold in India’s total retail sales?

As of fiscal year 2023, e-commerce contributes only 7 to 9 percent to India’s total retail sales. However, McKinsey expects this to more than double by 2030, reaching between 15 and 17 percent, indicating a huge opportunity for further growth.

What are the new trends shaping the industry?

New business models are playing a key role in transforming the sector. According to the report, quick commerce and social commerce together make up over 15 percent of the e-commerce market today. Their combined share is projected to exceed 25 percent by 2030.

E-commerce companies are also expanding their offerings beyond traditional categories. Now, users can access services like instant bookings for domestic help, professional services, and even medical aid through online platforms.

Where will the next wave of growth come from?

McKinsey points to two main drivers for the next phase of growth:

• Entry into new segments such as B2B (business-to-business) commerce and building materials.
• Rising demand from tier-two and tier-three cities.

These smaller cities are showing faster income growth than metros and tier-one cities. Between 2023 and 2024, monthly incomes in tier-two cities grew by 18 percent, surpassing the income growth in larger urban areas.

What does this mean for the future?

The report concluded that India’s e-commerce sector is not just disrupting traditional retail, it is on track to reshape the entire retail ecosystem, especially in areas like last-mile delivery and logistics.

ANI inputs