India E-Commerce Report 2026: Innovation in the Merchandise Space

CSEP | Laveesh Bhandari, Janak Raj, Aashi Gupta and Indramani Tiwari

India’s e-commerce market has grown from USD 14 billion in 2014 to about USD 120–130 billion by 2024, with projections suggesting USD 300–350 billion by 2030. A CSEP report argues that the sector is becoming core economic infrastructure, linking buyers and sellers across India’s dispersed geography and lowering search and access costs. Growth rests on wider internet access, digital payments and changing consumption. The direction is clear.

Amazon and Flipkart, including Myntra and Shopsy, hold about 55–65% market share and 87% of monthly web traffic. Yet profitability remains difficult: average revenue per user is roughly USD 107, against USD 1,330 in China, while cash-on-delivery accounts for almost 50% of orders. Last-mile delivery represents about 60% of logistics cost per parcel, and return rates range from 25 to 40%. The report calls for better measurement, enforcement against specific anti-competitive conduct and attention to gig workers.

Comment

The report’s most consequential finding concerns logistics rather than market power. India’s dispersed population, lower order values in Tier-2 and Tier-3 cities, and near-50% reliance on cash-on-delivery make each transaction costlier to complete than in more concentrated urban markets. Last-mile delivery, at roughly 60% of logistics cost per parcel, is where geography most directly enters the commercial model.

The mechanism is straightforward: a lower-value order still requires a delivery attempt, payment collection and often a return journey. When return rates reach 25–40%, reverse logistics, restocking and product devaluation multiply the original delivery cost. This explains why Amazon and Flipkart can command 55–65% of the market yet still face weak net margins, while smaller firms survive by serving differentiated demand rather than competing across the whole country.

The implication is that scale in Indian e-commerce is partly a response to distance and fragmented demand. Platforms such as Flipkart and Amazon concentrate volume because dense order flows are the main way to make warehousing, transport and last-mile networks economically viable across a geographically dispersed market.

Strategic Question for Discussion

If last-mile delivery continues to account for about 60% of logistics cost per parcel, which will matter more for Indian e-commerce profitability: wider digital payments or denser physical fulfilment networks?

The pattern suggests that digital payments can reduce cash-handling and failed-delivery costs, but they do not remove the physical burden of serving dispersed demand. Denser fulfilment networks address the larger cost centre, particularly where return rates remain between 25 and 40%. My assessment is that payment adoption will improve margins at the margin, while fulfilment density will determine whether platforms such as Flipkart and Amazon can profitably serve Tier-2 and Tier-3 markets.

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