India’s e-commerce sector is poised for substantial growth, with its market size projected to reach $550 billion by 2035, according to a joint report by ANAROCK and ETRetail. The sector, valued at $125 billion in 2024, is expected to grow at a compound annual growth rate (CAGR) of 15%, surging to $345 billion by 2030.
The report attributes this expansion to rapid digital adoption, evolving consumer preferences, and a growing appetite for online shopping, particularly in smaller cities. Meanwhile, India’s physical retail landscape is also witnessing a transformation, as mall vacancy rates have dropped to 8.1% in 2024, signaling strong demand for retail spaces.
Small-Town India Fuels E-Commerce Boom
A key factor driving e-commerce growth is the increasing participation of consumers from Tier II and III cities. The share of online shoppers in these regions has grown from 46% in the financial year 2019-20 (FY20) to 56% in FY24 and is expected to climb to 64% by 2030.
E-commerce firms are capitalizing on this trend by strengthening their logistics and delivery networks to cater to smaller towns. Retailers are recognizing the potential of these regions beyond metro cities, said Anuj Kejriwal, CEO and MD of ANAROCK Retail, noting that this shift is significantly reshaping India’s retail landscape. By 2035, the country’s overall retail sector is anticipated to reach $2,500 billion, nearly three times its 2019 size.
Mall Space Demand Outpaces Supply Amid Retail Revival
Despite the rise in online shopping, demand for physical retail spaces remains robust. The report highlights that in 2024, only one million sq ft of new mall space was added across India’s top seven cities, whereas six million sq ft was absorbed, leading to a sharp decline in vacancy rates from 15.4% in 2019 to 8.1% in 2024.
This growing demand is fueled by the revival of leasing activity, particularly in experiential retail sectors such as fashion and food & beverage (F&B), which account for nearly 45% of total footfall in malls, Kejriwal pointed out. Retailers, both domestic and international, are expanding their presence beyond major urban centers. By 2030, over 26 million sq ft of mall space is expected to be developed in Tier II and III cities, aligning with the shift toward organized retail.
The share of organized retail in India is projected to rise from 12% to 17% by 2035, as digital commerce and in-store experiences increasingly merge to cater to the evolving preferences of Indian consumers.
