While there’s no denying the fact that retail is a growth engine of the Indian economy, the recent surge in the growth of ecommerce has sent shockwaves within the industry. With a projected compound annual growth rate (CAGR) of 27 per cent between 2018 and 2030, the ecommerce landscape in the country is almost set to shift the narrative in the coming years. As the union Minister of Commerce Piyush Goyal raised concerns over the growth of ecommerce and claimed that these online platforms are eating into retail, it became crucial to assess the factors leading the debate.
Minister Raises The Alarm
On 21 August 2024, Union Minister Piyush Goyal expressed his viewpoint on the growth of ecommerce in the country at the unveiling of a report titled ‘Assessing the net impact of ecommerce on employment and consumer welfare in India’. The minister stated, “Are we going to cause huge social disruption with this massive growth of ecommerce? I don’t see it as a matter of pride that half of our market could become a part of the ecommerce network ten years from now; it’s a matter of concern.” Goyal accused the ecommerce giants of predatory pricing.
The Current Status Of Ecommerce
As per GlobalData, a data and analytics company, the value of the country’s ecommerce market is projected to rise from Rs 12.2 trillion in 2024 to Rs 24.1 trillion by 2028. India’s ecommerce payments are expected to witness a surge of 23.8 per cent in 2024. As per the report by the Pahle India Foundation, more than 30 per cent of the respondents in Tier 1 and 2 cities and 40 per cent in Tier 3 cities are now spending more than Rs 1,000 per month on online shopping. This clearly shows that ecommerce is now making a mark.
What’s Causing The Shift?
The declining trend of inflation and the predictions of a healthier monsoon do play a role in consumer spending. The surge in online sales in the past few years has primarily been attributed to the changing consumer behaviours along with accessibility, convenience and discounts.
“A significant shift in consumer purchasing behaviour is the growing preference for convenience and accessibility. Although the in-store experience remains vital for purchasing feature-rich products, the trend of researching offline and buying online is driven by price differences and the wider range of products and brands available online compared to physical stores,” stated Soumya Chatterjee, Director of Customer Success, India, GfK, an NIQ company.
The experts have attributed the shift to Generation Z (GenZ) who have now entered the workforce with dispensable income and are seeking a premium lifestyle.
Chirag Taneja, Co-founder and Chief Executive Officer (CEO), GoKwik pointed out the trend, “The shoppers are increasingly valuing the convenience and flexibility of online shopping, particularly with the growth of secure payment options like Buy Now, Pay Later (BNPL) and EMIs- this is primarily being used by GenZ who have now entered the workforce with dispensable income, seeking a premium lifestyle.”
Concerns Over Predatory Pricing Policies
When Piyush Goyal pointed out that ecommerce platforms are using predatory pricing policies to grab the market share in their race to increase revenue, it sparked debates over the issue. As the quick commerce platforms now have made their mark in a territory which used to be the arena for ecommerce platforms, the experts have noted the same.
“Predatory pricing has been in the spotlight for a long time now, while it attracts a large chunk of the audience, it does impact traditional shops as mentioned. We believe in balancing digital growth with support for small retailers. Competitive pricing is an often-seen in e-commerce but it is also important to ensure that the competition is not hurting anybody,” stated Sampad Swain, the Co-founder and CEO of Instamojo.
There are also concerns regarding the monopolistic practices that might be in play to win the competition. “While many offline retailers may have benefited due to e-commerce, worries over monopolistic practices in a rapidly growing commerce space cannot be completely discounted,” Swain highlighted.
Is Ecommerce Growing At The Cost Of Retail?
While on the surface level, it may seem that ecommerce is growing at the cost of retail but the data paints a different picture. The Pahle Foundation survey has stated that the retail apocalypse narrative has been rejected by the offline vendors themselves.
As per the report, only 20 per cent of the offline vendors have reported a physical store closure in their neighbourhood since 2020, the year of the ecommerce boom in the country. Only 6 per cent of the offline vendors cited the consumer shift to online shopping as the reason for shop closures.
In addition, ecommerce growth seems to be complimentary as around 70 per cent of the offline vendors have adopted some form of technology while one in every fourth offline is planning to expand, as per the survey by the same foundation which was conducted among 2062 online vendors, 2031 offline vendors.
What’s In Store for the Future?
While it may be immature to say that ecommerce is going to wipe out retail or vice-versa, it is important to understand the key areas where these two segments need to work hard to stay relevant. The experts have advised the retailers to become more proactive.
“For retailers and manufacturers, it is a call to action to deliver innovative, and sustainable products along with the next level of omni-channel experience that consumers are demanding facilitating similar buying experience in either of retail channels,” Chatterjee highlighted.
As the future of online shopping hinges on skilled professionals who can craft a personalised and engaging virtual shopping experience for consumers. The experts pointed out a few issues that might hamper the segment’s growth in future. Challenges such as delivery delays and concerns about personal data security may pose potential drawbacks
“To ensure that e-commerce is a level playing field, this requires concurrent attention from governments and private sector players to empower micro, small and medium enterprises (MSMEs),” as per Swain.
The growth of ecommerce has put the brick-and-mortar shops on alert. While these segments fight it out among themselves, the consumers are the king, as always and it’s in their hands to decide the fate of these two giants.
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