According to a study by Bain & Company and Flipkart, India’s e-retail sector is undergoing significant changes due to three emerging business models: trend-first commerce, hyper-value commerce, and quick commerce. These developments are fueled by a younger, tech-savvy population and varying consumer behaviors across regions, leading to unprecedented growth opportunities in India’s e-retail sector.
Trend-First Commerce
Trend-first shopping is gaining popularity, focusing on frequently launching trendy collections at affordable prices. By 2028, this segment is expected to grow four times, reaching $8 to $10 billion, with more than half of this amount likely spent online. While fashion remains the main focus, this model is quickly expanding into related areas.
India is an ideal market for trend-first commerce, with a large population of young, budget-conscious consumers active on social media. Retailers like Flipkart Spoyl, Myntra Fwd, and Shein, along with new brands like Urbanic and Snitch, are targeting Gen Z and trend-conscious millennials. Meanwhile, established brands like Zudio, H&M, and Zara have developed strong trend-first offerings.
The global success of trend-first commerce can be linked to effective social media marketing aimed at Gen Z, quick trend identification through algorithms, and personalized user experiences that emphasize new products.
Hyper-Value Commerce
Simultaneously, hyper-value commerce is on the rise, appealing to India’s lower-middle-income shoppers, especially in Tier-2 and smaller towns. This model showcases the power of affordability, as demonstrated by Temu in the US, which boasted around 55-60 million monthly active users and a Gross Merchandise Value (GMV) of $14-$16 billion by the end of 2024.
In India, hyper-value shopping grew from making up just 5% of e-retail GMV in 2021 to over 12% by 2024. These platforms not only offer competitive prices but also simplify entry for sellers through zero-commission models and funding support.
The Role of Gen Z
Gen Z, born between 1997 and 2012, is the driving force behind this digital transformation, representing nearly 40% of India’s online shoppers. They are more likely to explore new brands, shop across multiple platforms, and prefer fashion brands that challenge conventional norms.
About 70% of Gen Z shoppers discover brands online, make swift purchasing decisions, and primarily use UPI for transactions. Heavily influenced by social media, this generation will continue to shape the market as they enter the workforce and increase their earning potential.
Regional Consumer Behavior
Consumer behavior varies significantly across India’s regions. In the North, fashion choices like boot-cut jeans serve as status symbols, while Southern shoppers prioritize brand quality. Northeast consumers often seek better-fitting clothing due to generally smaller sizes.
These differences can even occur within the same city, driven by factors such as population growth, wealth, and local culture. For instance, students in eastern Rajasthan often prefer sports shoes, while casual shoes are favored in the South. In Bengaluru, snacking preferences differ, with different areas gravitating toward various types of snacks.
Interestingly, Tier-2 and smaller towns are developing online shopping habits that mirror those in metropolitan areas. In some categories, prices are only slightly lower on average. Consumers in these areas are increasingly interested in premium features and brands, often viewing sponsored listings as indicators of quality.
Shoppers in cities like Coimbatore and Vadodara spend 40% more than those in less developed regions like Prayagraj and Warangal. Residents in established urban areas also show a clear preference for high-end products, leading to prices that are 10 to 25 percent higher across all categories.
The Rise of Quick Commerce
Additionally, quick commerce (q-commerce) has emerged as a significant trend. In 2024, q-commerce platforms accounted for more than two-thirds of all online grocery orders and one-tenth of total online retail spending. This market is projected to grow at over 40% annually until 2030, with Flipkart Minutes, Myntra’s M-now, and Amazon’s Tez leading the way.
India’s experience with online shopping illustrates a market of “many Indias.” The study suggests that for brands and sellers to succeed, they should tailor product offerings to local preferences, release items aligned with current trends, utilize targeted advertising, and invest in fast shipping and quality catalogs.
