Study Debunks Myth of E-commerce's Impact on Traditional Retail in India

A Pahle India Foundation report reveals that the surge in e-commerce since 2020 has not adversely affected India's traditional retail sector. Less than 20% of offline vendors reported store closures, and many are adapting by integrating technology and expanding their businesses.

A recent study by the Pahle India Foundation (PIF) counters claims that e-commerce giants are harming India's offline retail shops. The research, released last week, highlights that the e-commerce boom since 2020 has not significantly impacted the traditional retail sector.

The report finds that fewer than 20 percent of offline vendors experienced store closures in their neighborhoods since 2020. Only 6 percent of these vendors attribute the closures to shifting consumer behavior toward online shopping.

E-commerce, comprising 7.8 percent of India's trade, is positively contributing to employment and consumer interests. About 8 percent of vendors link store closures to organized retail growth. Interestingly, 86 percent disagree that e-commerce negatively affects the employment they generate.

The study reveals that approximately 14.4 percent of vendors are focusing on 'Packaging & Delivery' skills, prompting local shops to hire for delivery roles. This adaptation helps traditional stores remain competitive.

Contrary to popular belief, the report indicates that e-commerce is not significantly penetrating India, allowing brick-and-mortar shops to thrive. Seventy percent of vendors have adopted technology, with 54 percent enabling digital payments and 22 percent using software like Logic ERP and Tally.

One-fourth of offline vendors plan expansions by purchasing new stores, renovating existing ones, diversifying products, adopting more technology, or listing on e-commerce platforms. E-commerce is expanding into Tier 3 cities, not replacing physical markets.

Highlighting the integration benefits, the report notes that 71 percent of Tier 3 city vendors have increased sales since moving online. E-commerce's share in retail remains 7.8 percent but is growing at a 27 percent CAGR between 2018 and 2030.

Currently, India's e-commerce market share is 7.8 percent, much lower than 46 percent in China and 16 percent in the United States.

(With inputs from agencies.)