Report Indicates E-commerce Growth Fueled by Low-Income Consumers and Small Cities

The intricate world of e-commerce has become a canvas for the vibrant hues of consumerism, where the brush strokes of economic status delineate distinct patterns of buying behavior. A profound report by the Pahle India Foundation, titled “Assessing the Net Impact of E-commerce on Employment and Consumer Welfare in India,” meticulously sheds light on this phenomenon through the lens of various income segments.

Delving deep into the spectrum of e-commerce platforms, it’s intriguing to discover that their allure seems to resonate the most with those who find themselves on the lower rungs of the income ladder. Particularly, individuals earning below Rs 3 lakh per annum have been identified as the most fervent patrons of these digital marketplaces. This piece of information emerges from an extensive pan-India survey, which canvassed the opinions and shopping habits of 2,031 offline vendors, 2,062 online vendors, and 8,209 e-commerce consumers sprinkled across 35 cities in 20 states and union territories.

In the arena of virtual shopping, Flipkart has ascended as the colossus, captivating the attention and wallets of consumers across most income groups. Its contender, Amazon, navigates the waters with comparable grace among certain demographics. However, when the spotlight turns to the most economically modest strata, Flipkart secures its footing with 22% of the cohort relying on it for their essentials, especially apparel and personal care products. The chase pack features Amazon (20%), followed by homegrown platforms like Meesho (16%), Myntra (10%), and Nykaa (2%), each catering to specific wants and needs (chart 1).

The narrative takes an interesting turn as we scale the income ladder. In the bracket between Rs 6 lakh and Rs 9 lakh per annum, the dedication to Flipkart and Amazon dwindles to a mere 8%. The trend of forsaking e-commerce platforms becomes even more pronounced among the higher echelons of income. Individuals earning between Rs 12 lakh to Rs 15 lakh, and those surpassing the Rs 15 lakh mark, report a scant 1% usage rate for Amazon, Flipkart, and Meesho, with an absolute abstinence from platforms like Myntra, Snapdeal, Nykaa, Ajio, Reliance Digital, and various social media marketplaces.

One might ponder the reasons for this digital detachment among the affluent. Speculation hints at a possible reluctance to disclose personal income details in surveys, a phenomenon observed by the researchers at the think tank behind the study. This same hesitance could be skewing the perceived popularity of e-commerce platforms among different income brackets.

Geography too plays a pivotal role in the e-commerce narrative. Tier 2 cities emerge as the unexpected champions driving sales, with a staggering 83% of residents favoring Flipkart, contrasting with 77% in tier 1 cities. Despite these geographical variations, Flipkart and Amazon reign supreme across the urban divide.

The economic reverberations of e-commerce extend beyond mere consumerism, knitting a complex tapestry of employment opportunities. The report illuminates that the e-commerce sector has been a fertile ground for job creation, boasting the inception of 15.8 million jobs. An average online vendor becomes a source of livelihood for nine individuals, in stark contrast to the six employed by their offline counterparts. Notably, the inclusion of women in the workforce is significantly higher among online vendors, championing gender diversity and economic inclusivity.

However, the journey of e-commerce is not without its hurdles. A dip into the financial insights reveals that funding for business-to-consumer (B2C) e-commerce platforms has witnessed a downward trend. From a lofty $2.39 billion in 2019, the investment plummeted to a meager $0.29 billion in 2023. Though there was a slight uptick in 2024, with funding inching up to $0.39 billion, it still lingers far below the zenith of 2019 (chart 3).