India's consumption economy will be third-largest by 2030: Flipkart CEO

Flipkart Chief Executive Officer Kalyan Krishnamurthy
India’s consumption economy will be the third-largest globally by 2030, and it would scale to about $5 trillion, said Kalyan Krishnamurthy, chief executive officer at e-commerce giant Flipkart Group. He expects that 75 per cent of this consumption will be led by the middle-income segment.

“The estimated size of the retail commerce economy in India will be more than $1 trillion in the next 3-4 years,” said Krishnamurthy, at Resurgence TiEcon Delhi - NCR event.

In this context, Krishnamurthy said India's e-commerce journey has democratized shopping. In 2006, less than 3 per cent of people were shopping online. In 2019, about half of the population (about 500 million) was online and more than 10 per cent were shopping online. He said now close to 100 per cent pin codes in the country has seen the adoption of e-commerce. This includes categories like fashion, appliances and furniture. Flipkart is witnessing more than 60 per cent of transactions and orders in India are coming from small cities and towns.

“We still believe that we are scratching the surface when it comes to e-commerce penetration and adoption in India,” said Krishnamurthy, whose company competes with players such as US retail giant Amazon and Reliance’s JioMart.

He mentioned that only 3.5 per cent of Indian commerce is online as compared to more than 25 per cent e-commerce adoption in China, and other developed economies that have witnessed 10 per cent to 25 per cent adoption rates.

This growth will be driven by many technology and demographic trends. This includes India being home to a billion internet users by 2030. The prices of mobile data have fallen drastically by about 95 per cent in the last 5 years. About 75 per cent of India's population in the next five to six years will comprise of millennials and Gen Z.

“We are (also) very clear that voice and vernacular technologies will enable digital access in India, in an accelerated fashion,” said Krishnamurthy.

The coronavirus pandemic has accelerated the adoption of e-commerce in many countries across the world including the US, China and the UK He is seeing a deceleration in the traditional retail economy of China, and the acceleration of e-commerce first companies. Big brands such as Nike, Adidas and Lululemon have seen a massive surge in terms of e-commerce.

India has actually seen a very similar trend. Most of the consumers in the country are looking for value across income levels. Krishnamurthy said that Covid-induced spike in e-commerce has actually changed several categories. The meaning of essential categories has also completely changed. It includes ‘at home economy’ which is spread across different categories.

“We believe the Indian e-commerce economy has seen a permanent shift for the positive,” said Krishnamurthy. He expects that over the next few years, the Indian e-commerce economy will be bigger than modern retail today. For instance, the pre-Covid growth rates of e-commerce were roughly 26 per cent to 27 per cent but as per the post-Covid estimates, it has gone closer to 30 per cent. “We (also) do believe the Kirana ecosystem will continue to see a huge spike,” said Krishnamurthy.

Krishnamurthy mentioned that in the next 3-4 years, it was estimated that the e-commerce market size would be roughly in the range of about $50 billion to $60 billion. “Today, the same numbers are actually close to $90 billion to $100 billion.”

He said the innovations to reach the next 300 million Indians revolve around verticals such as access and affordability. For instance, voice and vernacular language enabled commerce and the use of videos and affordability are playing an important role in the growth of e-commerce in the country.

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