Small towns are powering e-commerce’s fastest-growing market, dominated by Amazon, Walmart unit

Hello, I am Priyanka Salve, writing to you from Singapore.

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Amazon and Walmart’s Flipkart dominate India’s e-commerce market. This week, I explain why US giants are keen to expand in the South Asian country where only 30% of the population shops online.

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When last December Amazon He promised a huge investment of $35 billion in India To digitize more than 12 million small businesses and due to improving logistics infrastructure, the scale of the commitment appeared disproportionate to the size of the market.

Only 30% of Indians shop online According to Bain & Co.’s report from earlier this month, we are far behind China (92%) and the United States (74%) in 2025. Bain added that e-commerce accounts for just 1.6% of India’s GDP, compared to 4-4.5% in Indonesia and 13-14% in China.

However, with the rapid spread of online shopping from major metropolises to smaller cities and towns, India has become the fastest growing e-commerce market in the world.

Take Evelyn Nazareth, a teacher in her 30s who lives in Jaipur and is among the avid online shoppers who grew up outside India’s largest cities. She shops on major e-commerce platforms three to four times a month and orders from ultra-fast delivery apps almost every day.

He once ordered a smartphone online and received a feature phone, but was billed for the first one. But this unpleasant experience did not turn Nazareth away from online shopping. It just changed platforms.

Online shopping has now become a habit. “I can shop whenever I want, without being distracted from what I’m doing,” he said, noting that online options are wider, especially when it comes to fashion. “When I buy something that others around me don’t have, it makes me feel different.”

Praveen Govindu, partner at Deloitte India, told CNBC that Jaipur is not a metropolis and these relatively small cities currently account for over 60% of online shoppers in India. He said they were generating a similar rate of e-commerce orders, indicating a “decisive shift in audience dynamics.”

India’s e-commerce market is experiencing a CAGR of 23% between 2020 and 2025, driven by both increasing number of users and higher spend per shopper, Govindu said. In a report published earlier this month, Deloitte said the industry It will be a 250 billion dollar market By 2030.

Walmart-owned Flipkart Group, which includes Flipkart Minutes, Myntra and Shopsy, is “widely viewed as the market leader in India’s e-retail space,” said Manan Bhasin, partner at Bain & Company.

In June last year, a report by market analytics firm MerchantSpring reported that Flipkart India holds 48% of the e-commerce marketAmazon has 30%-35%.

Both Bain and Deloitte estimate that around 300 million Indians shopped online last year, with most new users expected to come from smaller cities.

“Consumers in smaller cities have always been as keen as those in big cities,” said Yash Dholakia, partner at New Delhi-based venture capital firm Sauce.vc. “What they lacked was access, and online retail fills that gap.”

Dholakia, whose firm supports several online-first consumer brands, said the expansion of e-commerce is also exposing consumers in smaller cities to premium brands and niche products.

A decade ago, poor internet access, nascent digital payments and underdeveloped road infrastructure limited e-commerce in small cities.

But over time, the rollout of low-cost 5G, rapid adoption of Unified Payments Interface (UPI)-based digital payments and improved road connectivity have made small towns and cities accessible to large e-commerce companies, experts said.

“A consumer in a small city sees the same social media content as someone in the subway, whether it’s travel, fitness or beauty influencers,” Dholakia said. This exposure is driving demand for products like protein supplements, Korean skin care, and high-end sneakers.

Industry experts say the most effective way to meet this demand is through express commerce, a model defined in India by delivery times of under 20 minutes. Forever And Fast pioneered the format and pushed larger players like Flipkart and Amazon to follow suit.

For example, Flipkart has expanded its scope Ultra-fast delivery services to 30 cities.

In big cities, flash trading apps are often used for basic needs. They are increasingly functioning as “premium stores” in smaller cities, Dholakia said. Both Amazon and Flipkart are investing heavily in their delivery networks to support ultra-fast delivery.

Addressing shareholders last week, Amazon CEO Andy Jassy said the company: rapidly expanding express commercial delivery serviceAmazon Now in India.

“Orders on Amazon Now are growing 25% month over month, and Prime members are tripling their shopping frequency once they start using it,” he said.

Deloitte predicts that by 2030, the number of online shoppers in smaller cities will be nearly double that in major metros, and average monthly spending per user will rise from $25 to $45 by 2025.

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