The Indian e-commerce market, which continues to have a minuscule share in the retail sector, is likely to surpass modern trade by the financial year (FY) 2024-25, according to Flipkart’s Kalyan Krishnamurthy. The e-commerce market size is expected to grow from $29 billion in FY20 to $100-105 billion by FY25 in comparison to modern trade’s $50-billion size that may increase to $85-90 billion during the said period. “In next few years, we believe the Indian e-commerce ecosystem will be bigger than what we term as modern trade today. The pre-Covid growth rates of e-commerce were roughly 26-27 per cent but if you look at post-Covid estimates, it has gone closer to 30 per cent. We do believe the Kirana ecosystem will continue to see a huge spike and e-commerce will see an increased adoption slightly at the cost of modern retail,” Krishnamurthy said sharing the data on e-commerce growth in his address at the TiEcon event on Wednesday. The modern trade is likely to grow at a post-Covid compound annual growth rate (CAGR) of 12-13 per cent during FY20-25 period.
The shift of brands and customers to the online channel, structural weaknesses in the ‘mall’ ecosystem, explosion of new online-first brands, and product innovation in e-commerce bringing in new customers are factors leading the sector’s growth over modern trade, according to Krishnamurthy. The market share of the e-commerce sector is also likely to grow from 3.45 per cent of around $840 billion retail market in FY20 to 8.75 per cent of around $1.2 trillion retail market by FY25. On the other hand, the e-commerce market excluding the grocery vertical may further penetrate from 10.5 per cent post-Covid in FY20 to 24-25 per cent by FY25. Meanwhile, the Kirana ecosystem, which has become the catalyst to the rise of e-commerce marketplaces including Amazon, Flipkart, and others, is expected to see 5-6 per cent growth during FY20-25.
“Indian small businesses and kiranas will disproportionately benefit. We are very cognizant of what Kirana ecosystem wants including a one-stop-shop for inventory across categories, access to working capital, low cost and easy credit solutions, reliable delivery of merchandise at their doorsteps, and technology that gives product and selection intelligence,” said Krishnamurthy.
Flipkart had said in December 2020, that the customer base for its business-to-business (B2B) marketplace for MSMEs and kiranas — Flipkart Wholesale grew 75 per cent month-on-month while monthly transactions increased 90 per cent since its launch in September 2020. Flipkart had launched the marketplace with the acquisition of the wholesale business of its parent company Walmart in India that operated 28 Best Price cash-and-carry wholesale stores offering nearly 5,000 items.
“Innovation to reach the next 300 million Indians are across two verticals – access and affordability including voice-enabled commerce and vernacular which is not just a theoretical trend. At Flipkart, we have launched multiple languages and we see huge adoption especially among new e-commerce users. Video content continues to grow disproportionately in Tier-II cities especially,” Krishnamurthy added. Flipkart’s wholesale arm Flipkart India Private Limited had reported a 12 per cent increase in its FY20 revenues to Rs 34,610 crore even as losses had declined 18 per cent to Rs 3,150 crore.