Only 20-25% of India's 850 mn internet users shop online, shows untapped potential: McKinsey Report
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India's e-commerce sector is set for significant growth in the coming years, according to a report by McKinsey & Company.The report noted that only 20-25 per cent of India's 850 million internet users shop online. This is much lower as compared with mature markets like the United States and China, where over 85 per cent of internet users make purchases online.The report said, "Out of the country's 850 million internet users, only about 20 to 25 per cent shop online".The report also highlighted that India has seen a strong rise in e-commerce activity over the past few years.The country is not just catching up as a fast adopter of online shopping but is also emerging as an innovator in the field. This is especially visible in the rapid growth of quick commerce platforms that deliver goods in a very short time.However, e-commerce still accounts for only 7 to 9 per cent of India's total retail sales as of fiscal year 2023. This share is expected to more than double to between 15 and 17 per cent by 2030, showing the huge potential for expansion.New business models are changing the shape of the e-commerce industry in India. Quick commerce and social commerce together make up more than 15 per cent of the e-commerce market today. Their share is expected to exceed 25 per cent by 2030.E-commerce companies are also finding new ways to serve consumers. They are expanding into new categories such as instant bookings for domestic services, professional help, and even medical aid.The next wave of growth in Indian e-commerce is likely to come from two main factors. One is the increasing entry into new segments like B2B (business-to-business) commerce and building materials. The other is the rising demand from tier-two and tier-three cities.These cities are seeing faster income growth than metro and tier-one cities. Monthly incomes in tier-two cities grew by 18 per cent between 2023 and 2024, which is higher than the growth seen in bigger cities.The report suggested that e-commerce in India will go beyond simply disrupting traditional retail. It is expected to reshape the entire retail system, including areas like last-mile delivery and logistics.
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