E-commerce is making significant inroads into Tier III cities in India, with consumers in these regions showing higher levels of engagement compared to their counterparts in larger cities, according to the Net Impact of E-Commerce on Employment and Consumer Welfare in India report.
According to the report, nearly 50% of consumers in Tier III cities spend approximately three hours per week on online shopping—an hour more than those in larger urban centers. Further, 40% of respondents in Tier III cities report spending over Rs 1,000 per month on online purchases, compared to 30% of consumers in Tier I and II cities.
This trend underscores the growing importance of smaller cities in the ecommerce landscape, driven by increased accessibility and a rising appetite for online shopping.
The Delhi-based policy research institute, Pahle India Foundation (PIF), conducted a study on ecommerce’s transformative role in the Indian economy, examining its impact on job creation and consumer benefits among 12,000 vendors.
Pandemic-driven shift
The COVID-19 pandemic catalysed a significant shift toward ecommerce in India, with around 30% of consumers starting to shop online during this period. Footwear and apparel segments saw the highest adoption rates, with 60% of new shoppers in these categories.
Remarkably, 93% of these consumers have continued to purchase clothes and footwear online even after the pandemic, and 74% have maintained their overall online shopping habits. This enduring shift highlights the lasting impact of the pandemic on consumer behavior, particularly in categories where convenience and variety are highly valued.
Convenience
Convenience remains the key factor driving consumers to ecommerce platforms. The ease of shopping from home, along with the accessibility of a wide range of products, continues to attract users. In addition to convenience, healthy competition among ecommerce platforms—emphasised by product quality, innovation, and variety—has significantly contributed to consumer welfare.
However, the impact of cost-effectiveness and grievance redressal on consumer satisfaction is comparatively lower. Despite the rise in associated costs like shipping, exchange, and subscription fees, consumers appreciate the increased discounts, product variety, and expanded language options provided by ecommerce platforms.
Better consumer experience
In response to the growing competition and consumer expectations, online and offline vendors are making efforts to improve the shopping experience. Online vendors have focused on providing better product information and offering discounts, with 59% enhancing product descriptions and customer testimonials, and 54% offering price reductions.
Offline vendors, on the other hand, have implemented relationship retailing strategies such as loyalty programmes and membership offers, with 66% adopting these measures. Additionally, 60% of offline vendors have optimised their store layouts to enhance product visibility and improve the overall shopping experience for customers.
The growth of ecommerce has not led to widespread closures of traditional stores, with less than 20% of offline vendors reporting such closures in their neighborhoods since the ecommerce boom of 2020.
Only 6% of these closures were attributed to online shopping, while 8% cited the expansion of large organised retail as a more significant factor. Interestingly, 14.4% of vendors are now prioritising skills in packaging and delivery, reflecting an adaptation to the evolving retail environment.
