E-commerce drives job growth and consumer welfare in India

26 August 2024, Mumbai

E-commerce has experienced phenomenal growth in India in recent years, especially after the pandemic. This boom has had a significant impact on Indian economy, creating jobs, boosting consumer welfare, and opening new opportunities for businesses of all sizes. However, it also poses challenges, including competition, a level playing field, and concerns about the impact on traditional retail.

E-commerce growth story

The e-commerce sector in India is projected to grow at a CAGR of 27 per cent from 2018 to 2030. A recent report by the Pahle India Foundation highlighted even though it accounted for just 7.8 per cent of total retail sales in 2022, its rapid growth is a testament to its increasing popularity.

This growth is being driven by several factors. Foremost is the increased internet penetration. The number of internet users in India has grown rapidly, making it easier for people to access e-commerce platforms. This coupled with the widespread use of smartphones has further facilitated online shopping, allowing consumers to browse and purchase products on the go.

E-commerce also offers the convenience of shopping from home and accessing a wide range of products, attracting consumers, especially in Tier III cities where physical retail options may be limited. In fact, recent reports indicate that consumers in Tier III cities are leading the e-commerce charge, spending more time and money on online platforms compared to their Tier I and II counterparts. This highlights the vast untapped potential in smaller cities, driven by factors like increased internet penetration and changing consumer behavior. COVID-19 pandemic too gave a boost to the adoption of e-commerce, with categories like footwear and apparel seeing high adoption rates among new online shoppers.

Moreover what adds to e-commerce attraction is that online platforms often offer competitive prices and discounts, further incentivizing online shopping. And enhancements in logistics and delivery networks have made it possible for e-commerce platforms to reach even remote areas, expanding their customer base.

Impact on the Indian economy

The growth of e-commerce has had a positive impact on the Indian economy in several ways.

Job creation: The Pahle India Foundation survey revealed that e-commerce vendors generate approximately 15.8 million jobs, including 3.5 million jobs for women. Online retailers employ 54 per cent more individuals on average and nearly twice as many women compared to offline sellers.

Boost to consumer welfare: E-commerce has enhanced consumer welfare by offering a wider variety of products, competitive prices, and increased convenience.

Increased exports: E-commerce has enabled Indian businesses to reach a global audience, contributing to an increase in exports. Amazon, for instance, plans to enable $20 billion in exports from India by 2025.

Growth of related industries: The rise of e-commerce has spurred the growth of related industries such as logistics, warehousing, packaging, and digital payments.

MSME growth: E-commerce provides a platform for micro, small, and medium enterprises (MSMEs) to reach a wider audience and expand their businesses, fostering economic growth and entrepreneurship.

Opportunities and threats

The growth of e-commerce presents both opportunities and threats to businesses in India. Indeed e-commerce platforms provide businesses with access to a larger customer base, including those in remote areas. And online businesses can often operate with lower overhead costs compared to traditional brick-and-mortar stores. E-commerce can streamline various business processes, such as inventory management and order fulfilment.

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