Low income groups and small cities drive e-commerce, says report

The lowest income segment forms a significant buyer base for e-commerce platforms, according to a recent report.
 

E-commerce platforms are more popular among income groups below Rs 3 lakh per annum, with this segment using them more than other classes, according to a report titled "Assessing the Net Impact of E-commerce on Employment and Consumer Welfare in India" by the Pahle India Foundation.

The report is based on a pan-India survey of 2,031 offline vendors, 2,062 online vendors, and 8,209 e-commerce consumers across 35 cities in 20 states and union territories.

Flipkart has emerged as the most popular e-commerce platform among most income groups, while Amazon is on par with it in some classes.

As far as the lowest income group is concerned, 22 per cent of users utilised Flipkart for their shopping needs, particularly in apparel and personal care. The other preferred platforms for this income category include Amazon at 20 per cent, followed by Meesho at 16 per cent, Myntra at 10 per cent, and Nykaa at 2 per cent (chart 1).

In a slightly higher income group—between Rs 6 lakh and Rs 9 lakh per annum—only 8 per cent of those surveyed used Flipkart and Amazon.

The higher income categories also do not seem to use websites such as Myntra, Snapdeal, Nykaa, Ajio, Reliance Digital, and social media platforms.

The percentage declines as we move up the ladder. Among individuals earning between Rs 12 lakh and Rs 15 lakh per annum, as well as those earning Rs 15 lakh and above, only 1 per cent reported using Amazon, Flipkart, and Meesho, while none indicated using any of the other mentioned platforms.

A reason for this low share could be that many were unwilling to report their income in the survey conducted by the not-for-profit think tank.

Tier 2 cities seem to be driving a bulk of the sales for the top five platforms (chart 2). Among respondents within tier 2 cities, 83 per cent used Flipkart, while it was 77 per cent for tier 1 cities.

Flipkart and Amazon continue to remain the most popular across all city categories.

E-commerce generated 15.8 million jobs, according to the report. On average, e-commerce created nine jobs per vendor, while each offline vendor employed around six people.

Online vendors employed almost twice the number of female employees in comparison to offline vendors.

The report offered a comprehensive analysis of how e-commerce is transforming India's economy and its implications for employment and consumer welfare.

However, funding for business-to-consumer (B2C) e-commerce has declined in recent years. It went down from $2.39 billion in 2019 to $0.29 billion in 2023, according to data from market intelligence platform Tracxn. Although it picked up moderately in 2024 to $0.39 billion, it was still significantly lower than the 2019 level (chart 3).