India’s e-commerce sector is on a rapid growth trajectory, with market size expected to reach ₹47,64,650 crore (US$ 550 billion) by 2035, according to a joint report by ANAROCK and ETRetail. The sector, currently valued at ₹10,82,875 crore (US$ 125 billion) in 2024, is projected to expand to ₹29,88,735 crore (US$ 345 billion) by 2030, marking a compound annual growth rate (CAGR) of 15%.

Rise of Tier II and III Cities in E-Commerce Growth

A major driver of this e-commerce boom is the increasing participation of shoppers from Tier II and Tier III cities. Their share in total online shopping transactions has surged from 46% in FY20 to 56% in FY24, and it is expected to reach 64% by FY30. This growth highlights a shift in consumer behavior, as smaller cities increasingly embrace digital commerce for convenience, variety, and affordability.

E-commerce companies are expanding their logistics and delivery infrastructure in these regions to cater to rising demand. With improved internet penetration, widespread smartphone adoption, and affordable data plans, shoppers from non-metro cities are driving the next phase of India’s digital commerce revolution.

India’s Retail Market on a Strong Growth Path

Beyond e-commerce, India’s overall retail market is also set for substantial expansion. The report highlights that the retail industry is expected to triple from its 2019 levels, reaching ₹2,16,57,500 crore (US$ 2.50 trillion) by 2035. This transformation is fueled by the rise of organized retail, the expansion of international brands, and the evolution of experiential shopping destinations that blend offline and online shopping experiences.

Physical Retail Continues to Thrive

Despite the rapid expansion of e-commerce, traditional brick-and-mortar retail continues to perform strongly. The mall vacancy rate has declined significantly, dropping from 15.4% in 2019 to 8.1% in 2024, indicating a higher demand for physical shopping spaces.

The supply of new mall space in India's top seven cities was relatively limited, with only one million square feet added in 2024. However, absorption outpaced supply, with six million square feet leased, showing strong retail leasing momentum. Over 26 million square feet of new mall space is expected to come up across India by 2030, largely in Tier II and III cities, where organized retail is rapidly growing.

Experiential Retail Driving Footfall

One of the biggest trends shaping India’s retail landscape is the rise of experiential retail. Categories like fashion and food & beverage (F&B) have emerged as the biggest crowd-pullers, accounting for nearly 45% of total retail demand. Consumers today seek immersive shopping experiences that go beyond transactions, with luxury brands, interactive store formats, and entertainment zones becoming common in modern shopping malls.

Growing Share of Organized Retail

India’s organized retail sector is also witnessing steady growth, increasing from 12% market share in 2019 to 17% by 2035. This shift reflects the gradual formalization of retail, with big brands expanding their presence, more shopping malls being built, and increasing preference for structured retail experiences. The integration of offline and online shopping models, such as omnichannel strategies and click-and-collect services, is further enhancing the retail experience for Indian consumers.

Logistics and Supply Chain Development

With the rise of e-commerce and organized retail, logistics and supply chain infrastructure are also evolving rapidly. Companies are investing in last-mile delivery solutions, warehousing, and fulfillment centers to meet the demands of a growing online consumer base. Same-day and next-day delivery options, along with hyperlocal fulfillment models, are becoming standard across the industry.

Future Outlook: A Blended Retail Ecosystem

India’s e-commerce market and physical retail sector are evolving towards a more integrated retail ecosystem, where online and offline experiences coexist. While digital shopping is set for exponential growth, the demand for physical retail spaces, experiential shopping, and organized store formats continues to expand.

With rapid urbanization, higher disposable incomes, and increasing digital penetration, India’s retail sector is poised for robust long-term growth. The expansion into smaller cities, the rise of organized retail, and the evolution of consumer preferences will shape the future of India’s retail landscape in the years to come.

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