From Bazaars, Into Browsers

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E-commerce in India’s Tier-II and III cities is booming, driven by internet access, smartphones, and government initiatives. These cities now lead in order volumes and contribute significantly to platforms like GeM and ONDC. While the sector empowers MSMEs and women entrepreneurs, challenges like logistics infrastructure and consumer trust remain. How are cities balancing digital growth with the needs of traditional businesses and ensure a future that benefits all?

Source: Qode Maker

The e-commerce sector is witnessing growth in Tier-II and III Indian cities due to increased internet usage, smartphone adoption, and digital payment innovations. With a market share of 61.3% in FY22, Tier-II and III cities have surpassed Tier-I, with order volumes multiplying.

The Government e-Marketplace (GeM) has witnessed significant growth, with a substantial annual order volume of ₹1 lakh crore originating from Tier-II and III cities. The Open Network for Digital Commerce (ONDC) has democratised digital payments, reducing transaction costs. The Economic Survey 2022-23 projected annual growth of 18% for the sector.

MSMEs have benefitted from digital solutions in e-commerce, outperforming offline MSMEs by accessing a larger marketplace at lower costs. Tier-II and III cities hold a larger market share, with nearly 63% of total orders originating from them. E-commerce has also empowered women sellers and entrepreneurs, facilitated by Digital India, Skill India, and Make in India initiatives.

E-commerce has become more inclusive, affordable, and accessible, driving social development, economic growth, and entrepreneurship in Tier-II and III cities.

However, e-commerce companies in these cities are challenged with limited logistics infrastructure and a need for more traditional payment methods, hindering online shopping. Improvements in transportation networks, warehousing facilities, and last-mile delivery services are crucial to enhancing the e-commerce experience for sellers and customers in these cities. Additionally, consumers also face trust issues in e-commerce transactions due to factors such as a lack of familiarity with online shopping, concerns about the authenticity of products, and the security of online transactions.

Source: Nāgrika

While the e-commerce sector in India’s Tier-II and III cities is experiencing remarkable growth and holds immense potential, it must address these challenges, including the impact on the local brick-and-mortar stores serving local consumers for decades.

Cities need a balance that supports the growth of e-commerce while preserving local businesses that may not have a technology-based competitive advantage.

Has e-commerce changed the way people in small cities buy?

• Yes
• No
• Maybe