Deloitte India projects online retail boom to outpace offline growth by 2030

National, 27 June 2023: Online retail penetration is projected to grow at an extraordinary rate, outpacing offline retail by 2.5 times in the next decade. As India ascends to become the world's third-largest consumer market during this period, Deloitte Touche Tohmatsu India LLP’s (Deloitte India’s) ‘Future of Retail’ report foresees the online retail sector, which stood at US$70 billion in 2022, to surge to US$325 billion by 2030.

Deloitte India's report attributes these projections to the rapid growth of e-commerce in tier-2 and tier-3 cities, which have surpassed tier-1 markets in terms of total orders. In 2022, these cities accounted for over 60 percent of all orders, with tier-3 cities experiencing a remarkable 65 percent growth in order
volume and tier-2 cities witnessing a substantial 50 percent growth. Meanwhile, tier-1 cities observed a modest 10 percent growth.

The surge in online retail can be attributed to various factors. The convenience of ordering and returns, bolstered by a robust logistics infrastructure spanning over 19,000 pin-codes, has played a pivotal role. Additionally, India boasts a
digitally savvy consumer base of 220 million online shoppers, further driving
the growth of e-commerce. Furthermore, the sector has witnessed significant
investments from private equity and venture capital firms, totaling US$23
billion over the past five years.

Consequently, online sales are poised to surpass organised retail, with a growing emphasis on omnichannel retail strategies where retailers seamlessly integrate their offline and online channels to provide consumers with the best of both worlds.

"Accelerated technology investments are vital to meeting the demands of tech-savvy consumers," stated Anand Ramanathan, Partner, and Consumer Industry Leader - Consulting, Deloitte India. "I am optimistic about the exponential growth potential of India's retail sector, driven by rising incomes, the expanding middle-class, and rapid digitalisation. By harnessing the power of technology, sustainability, and forward-thinking strategies, retailers can create an ecosystem that not only meets evolving consumer demands but also sets new benchmarks for value, engagement, and unforgettable shopping experiences."

Deloitte's report identifies several key forces that are expected to reshape the retail landscape in India. These include changing consumer patterns, societal and cultural influences, the scale of exponential technology, industry disruptions, climate considerations, and the impact of economics, policy, and power dynamics. The report also highlights that establishing consumer confidence through sustainability initiatives is crucial in the era of conscious consumerism.

Based on these forces, Deloitte recommends six future scenarios for Indian retailers to strategise around:

1.  Rise of new commerce: The growing internet user base, smartphone adoption, and e-commerce penetration are reshaping commerce. New commerce channels driven by factors such as increased internet use in tier 2 cities, ease of starting online businesses, government support, convenience, personalisation, easy discovery and payment, and trust in influencers are set to redefine the retail landscape.

2. Technology to drive retail towards immersive, frictionless, intelligent experiences: Augmented reality (AR), virtual reality (VR), the Metaverse, and experiential retail are transforming customer interactions. Retailers can enhance customer engagement, satisfaction, and sales by creating captivating and interactive shopping environments.

3. Kirana tech: Kirana tech start-ups offer solutions to empower traditional kirana stores and compete with online giants. Integrating kiranas into the larger retail ecosystem opens up new markets, expands product range, and strengthens their business presence.

4. Rise of luxury market: Following the pandemic, luxury brands are entering the Indian market through online luxury retailers and partnerships with Indian conglomerates. The report indicates that millennials are driving the luxury market, with 60 percent of them making luxury purchases.

5. Private labels to self-sustain and intensify competition: Private labels are gaining prominence, offering higher profit margins for retailers compared to traditional brands. With the growing consumer consciousness around well-being and demand for healthier options, private label brands offering quality, affordable, and differentiated products are well-positioned to thrive.

6. Experiential retail: Experiential retail goes beyond transactional experiences, transforming physical and online shopping environments. Retailers are prioritising immersive and unforgettable experiences to create lasting impressions and strengthen brand perception.

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Notes to the editor for reference purposes only

This press release has been issued by Deloitte Touche Tohmatsu India LLP.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.