Tier II Cities To Drive Next Wave Of E-Retail Growth In India

New Delhi, Sept 12 (KNN) India’s retail industry is expected to touch USD 1,225 billion by FY 26 from USD 830.5 billion in FY20, according to a report by Wazir Advisors.

According to a report titled 'The Future of E-commerce', the Indian retail industry will be growing at 10 per cent CAGR from FY23 to FY26 with food and grocery taking the lead like previous years.

At present, tier II cities and beyond contribute to almost 40 per cent of the Indian e-commerce market and owing to reasons such as increasing smartphone penetration, low data tariffs and social media influence, the next wave of e-retail growth in India is expected to come from cities other than the major metros.

"During Covid, we saw some muted growth of the retail sector. However, the traditional and the modern retail segments seeded contribution share to the online sector to take it to 8 per cent contribution share of retail, which was until a few years ago at 2-3 per cent. By 2026, it is expected to grow at a 30 per cent CAGR," stated Pakhi Saxena, Practice Head - Retail CPG, Wazir Advisors.

Similarly, the share of online retail market is also expected to grow at a CAGR of 30 per cent during the similar period with online mobile shopping taking the lead by 60 per cent, followed by apparel and food and grocery.

The Indian D2C segment, currently valued at USD 15 billion and contributing 20 per cent to the overall e-commerce segment, is poised to grow at a CAGR of 45 per cent by FY 26 to reach USD 45 billion led by increasing online spending, emergence of niche categories and technological interventions.

The D2C landscape of India is led by the food and grocery segment which includes leading sub-categories such as packaged food as well as emerging and niche categories like fresh meat delivery and cloud kitchens. Fashion and lifestyle is the second largest category followed by beauty and personal care.

In the last 3 years, conglomerates and incumbents have acquired several D2C and internet-first brands to strengthen their existing category portfolio as well as to enter new categories to target internet-first consumers.  (KNN Bureau)