E-Commerce and Quick Commerce Fuel Retail Expansion

India is witnessing one of the world’s fastest digital adoption drives, fueled by rising smartphone penetration, the availability of affordable data, and widespread UPI usage. These aspects have drastically impacted the growth of the retail sector and D2C brands, as the seismic shift in consumer behaviour in the last few years has directly translated into comfort with online purchases, digital payments and omnichannel experiences. The growth of the retail sector in the country is also visible in projections, with the current sectoral valuation of $1.4 trillion projected to reach $2 trillion by 2030, at a growth rate of 9%-10%.

The foundation of this growth remains the changing behaviour of Indian consumers, whose digital spending habits, coupled with increasing household income, are uniquely positioning the retail sector for sustained upward movement. Furthermore, the role of E-commerce facilitators in the form of several features like Buy Now Pay Later, an increase in consumer confidence and spending power, and technological developments are also turning out to be significant contributors of this growth. At present, Indian organized retail is estimated to reach a valuation of $230 billion by 2030, a sector that is already employing 8% of the total national workforce, approximately 40 million individuals. This showcases the sheer might and contribution of the sector, and paints a picture of how Indians’ digital spending habits have become the primary catalyst in sectoral growth.

Role of digital payments, e-commerce & quick commerce

The vision of Digital India began with scaling digital payments to create an organizational model. With UPI, India set the benchmarks, making it a critical catalyst in enabling seamless and cashless transactions. As a result, Indians showcased considerably increased trust in online payments, leading to higher ticket purchases. During the pandemic, when the world remained behind closed doors, Indians were able to complete secure payments from the comfort of their homes, with only a few touches on their mobile screens. Merchants, irrespective of size and volumes, adopted digital payments, essentially expanding the retail economy severalfold.

This was also the time when e-commerce and quick commerce emerged, which integrated convenience-based shopping habits. This led Indians to shop from groceries and apparel to beauty products, electronics, and others using digital payments. This was essentially the time when Indians’ digital spending habits began to change rapidly, leading them to also incorporate high-ticket purchases, along with volume, aspects that directly contributed to the growth of the retail sector. E-commerce aggregators, facilitators, and hyperlocal delivery platforms expanded at an unprecedented rate beyond the urban centres, increasing digital retail consumption. With D2C brands, consumers were able to explore niche categories, where customised offerings and social media further changed the purchase behaviour.

Technology development and consumer confidence

A major factor behind Indians’ changing digital spending habits has been the unprecedented technological development. The sector has integrated a brand new approach in this, offering customised recommendations to consumers that are powered by data analytics. Furthermore, new-age technologies such as Artificial Intelligence and Machine Learning are transforming demand forecasting, improving stock management for brands while also reducing wastage. Features such as Buy Now Pay Later, along with subscriptions and auto pay models, are also leading to more encouragement for consumers who are making more purchases.

However, at the foundational level, the population is also witnessing a rise in their spending power. As the Indian economy becomes larger than ever, brands are increasingly investing on consumer confidence, while the rising spending power of consumers are leading to more spending on food, lifestyle, fashion, electronics goods. With digital spending on the rise, digital finance tools and microcredit making purchases have also become benchmarks for a large part of the Indian population, directly contributing towards more spending and thus, a visible growth in the retail sector.