The e-commerce market in India has been witnessing high growth during the past few years. It continued to grow even during the COVID-19 pandemic as wary consumers preferred online channel for purchases. Against this backdrop, e-commerce sales are forecasted to rise at a compound annual growth rate (CAGR) of 18.2% between 2021 and 2025, to reach INR8.8 trillion (US$120.1bn) in 2025, according to GlobalData, a leading data and analytics company.
According to GlobalData’s E-Commerce Analytics, e-commerce payments in India grew by 12.2% in 2020 and is estimated to register a growth of 16.8% to reach INR4.5 trillion (US$61.5bn) in 2021.
Ravi Sharma, Banking and Payments Lead Analyst at GlobalData, comments: “The COVID-19 pandemic has fast-tracked consumers’ transition to digital payments in most markets, a trend also seen in India. With social distancing rules and closure of many brick and mortar stores, shoppers embraced online channels even for their day-to-day purchases.”
E-commerce has transformed the way consumers shop in India, supported by increase in Internet and smartphone penetration, rise in digital literacy among consumers and government’s digital push. Over the past one year, despite a decline in consumer spending, economic slowdown and uncertainty caused by COVID-19, e-commerce sales continued to surge.
While sectors such as travel and accommodation were affected due to lockdown and travel restrictions, a strong growth was seen in online purchases of retail goods such as grocery, electronics, and healthcare products.
Leading e-commerce retailers Flipkart, Amazon and BigBasket have seen an increase in orders each month since the outbreak of the virus. To support non-cash payments, e-commerce companies are offering multiple digital payment options. For instance, in June 2021, Flipkart introduced quick response (QR) code-based payment for pay-on-delivery shipments, enabling consumers to switch from cash on delivery to UPI-enabled digital payment.
Buy now, pay later solutions are also gaining popularity in India amid COVID-19. In April 2020, global e-commerce giant Amazon launched Amazon Pay Later, enabling consumers to purchase in three to 12 monthly installments. A growing number of companies such as LazyPay, Simpl, and ePayLater are also offering similar payment services. Customers can register their preferred payment tool with buy now, pay later solution and the amount gets debited automatically on due date.
Mr. Sharma concludes: “The COVID-19 crisis has accelerated digital payments shift in India and opened e-commerce to a whole new set of consumers and merchants who were not using online channel earlier. Rising consumer preference for online shopping, proliferation of e-retailers and emergence of new payment methods will continue to drive e-commerce growth in India.”