In June 2026, government officials, representatives from ONDC, and digital commerce stakeholders gathered for a roundtable on DigiDukaan. ONDC, the Open Network for Digital Commerce, is the government's open protocol that allows buyers and sellers to transact across platforms without being tied to a single marketplace.
DigiDukaan is one of the programmes running on this network, helping small retailers establish a digital presence and reach customers beyond their immediate neighbourhood. What stood out during the discussion was that the conversation was not about replacing offline retail. It was about helping small businesses compete in a market where consumers increasingly move between physical and digital channels.
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E-commerce accounts for 6-7% of total consumer spending in India today. Even if e-commerce reaches Rs 25 lakh crore by 2030, it will still represent only 7-8% of total spending. Offline retail grew at 13-14% CAGR between 2021 and 2025 and is expected to account for more than 90% of consumer spending a decade from now.
These are not merely market statistics. They are directly relevant to how Indian retail is regulated. The Competition Commission of India (CCI) and the proposed Digital Competition Bill (DCB) both begin with a definition of the relevant market. Get that definition wrong, and every intervention that follows starts from the wrong premise.
What The Data Shows
India's e-retail penetration is 6-7% of total retail spending. The UK is at 27-29%, the US at 15-17%, and China at 31-33%. India's digital commerce story remains one of rapid growth from a relatively small base. Forrester projects that physical stores will still account for roughly 71% of US retail sales in 2030. Even in China, which has the world's highest online retail penetration at over 30% of the total retail sales, physical retail remains the dominant retail channel.
Multiple independent studies point in the same direction. BCG's February 2026 Connected Commerce survey of more than 12,000 Indian shoppers found that nine in ten online shoppers still make purchases offline. Close to half of all offline shoppers research products digitally before buying. Consumers are not choosing between channels. They move between them, often within the same purchase journey.
ICRIER's MSME Survey 2025, covering 2,365 firms, reinforces the point. Small businesses with an online presence grew annual turnover by 16% from FY23 to FY24. Those operating offline only grew at 7%. Digital access is amplifying offline businesses, not replacing them.
The Channel Distinction Has Collapsed
An equally important development is the convergence of online and offline retail. While digital-first brands are expanding into physical stores, traditional retailers are simultaneously strengthening their digital presence. For consumers and businesses alike, retail is increasingly becoming a single, integrated ecosystem.
Mamaearth, which began as a digital-first brand, has expanded rapidly into physical retail with products now available across a wide range of retail touchpoints, while continuing to leverage digital channels and consumer insights to drive demand. Sugar Cosmetics has also paired its influencer-led online presence with a growing offline retail network. Conversely, kiranas now take orders over WhatsApp, accept UPI payments and arrange deliveries through chat, while traditional grocery chains increasingly sell directly to consumers through their own apps and websites.
The point is not simply that retailers now operate both online and offline. It is that the two are becoming increasingly difficult to separate. A customer may discover a product online, buy it through an app, collect it from a store and return it there a week later. Behind the scenes, each of these interactions is supported by the same inventory, warehouses, pricing systems, customer database, loyalty programme and logistics network. The website and the storefront are no longer separate businesses. They are different doors into the same one.
Once retail works this way, the distinction between "online retail" and "offline retail" begins to look less like an economic reality and more like a regulatory construct. Businesses no longer organise themselves around that divide, and consumers increasingly do not shop that way either. The more relevant question is not whether these are different markets, but whether the distinction between them remains meaningful at all.
Why The Kirana Isn't Going Anywhere
India has approximately 12 million kirana stores. They are not competing with e-commerce on e-commerce's terms. Proximity, personal trust, informal credit, and the ability to fulfil an order at six in the morning are not things a marketplace can easily replicate.
Few developments in Indian retail have attracted as much attention in recent years as quick commerce. The segment grew at an estimated 110-130% CAGR between 2022 and 2025 and is now a $7-8 billion market. Yet its success reflects a specific consumer need: impulse purchases and emergency restocking in dense urban markets where ultra-fast delivery is economically viable.
At roughly 6% of total e-commerce spending, it is significant, but it does not amount to a structural displacement of neighbourhood retail.
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The kirana's digital adoption complicates the picture further. Social and chat commerce - a $6-7 billion market growing at 40-45% CAGR, is enabling neighborhood stores to digitize without giving up the advantages that make them competitive. Customers increasingly browse catalogues, place orders and make payments over WhatsApp, while continuing to buy from the same trusted local retailer.
At the same time, e-B2B platforms allow kiranas digital procurement, inventory management and access to formal credit. Rather than replacing the kirana, digital tools are making it more competitive.
This transformation is particularly visible outside India's largest cities. Around 45% of this 'social and chat commerce' spending comes from Tier 2 and Tier 3 cities, where the kirana relationship is the strongest. More broadly, Tier 2 to Tier 4 cities are projected to contribute over 30% of incremental retail growth over the next decade, and their share of e-commerce spending has increased from 25% to 34% between 2021 and 2025.
The kirana is not resisting digital commerce; it is increasingly participating in it. Any regulatory analysis built primarily on metropolitan e-commerce dynamics risks overlooking how retail competition functions across much of the country.
The Channel-Agnostic Consumer
Across metros and smaller cities alike, consumers move seamlessly between online and offline retail. A smartphone is ordered on a marketplace during the Diwali sale, vegetables bought from the neighborhood kirana on monthly credit, milk arrives at six in the morning, and a kurta first discovered on Instagram before being purchased from a nearby store after feeling the fabric.
Consumers do not think of themselves as online or offline shoppers. They simply choose the channel that best serves a particular need. Retailers that recognise this reality increasingly outperform those that do not. Analysis of listed retail companies shows that brands with a strong omnichannel presence consistently deliver higher total shareholder returns than those relying on a single channel.
Competition law asks a simple question: do consumers view different options as substitutes? A consumer who cannot get same-day delivery on a marketplace and switches to the kirana two streets away is making precisely that substitution . This substitutability is not theoretical; it is reflected in everyday purchasing decisions and supported by the data.
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The same behaviour also explains why e-commerce has not displaced offline retail despite its rapid growth. Its expansion is constrained by economics as much as by consumer preference. High customer acquisition costs, elevated return rates and last-mile delivery economics make profitability difficult outside densely populated urban markets.
By FY25, only six major online retailers had reached profitability or breakeven. Even nationwide coverage figures can be misleading. A platform may technically serve a rural pincode in Jharkhand and a neighbourhood like Koramangala, but consumer penetration, basket sizes and unit economics differ dramatically between the two. Scale, in other words, is not the same as market-wide competitive reach.
If the CCI defines the relevant market as online retail alone, it draws a boundary that neither consumers nor retailers recognise. It also risks overstating market power by excluding the competitive constraints imposed by kiranas, modern retail chains, brand websites quick commerce platforms, and other offline alternatives. The result is a market definition that reflects channels of distribution rather than how retail competition in India actually works.
Evidence Before Intervention
The DCB proposes ex-ante obligations for Systematically Significant Digital Enterprises. The Parliamentary Standing Committee on Finance sent it back for review in August 2025, creating an opportunity to revisit some of the assumptions underlying the proposal.
Ex-ante regulation presupposes a settled market definition. This is not to suggest that concerns around platform conduct, self-preferencing or exclusive arrangements are irrelevant; the question is whether those concerns justify defining the relevant market as online retail alone.
The evidence does not support a definition confined to online retail. E-commerce accounts for 6-7% of consumer spending. Offline retail continues to grow. Digital tools are amplifying offline businesses. Government UPI transaction data shows digital payments expanding overall retail activity rather than merely redistributing existing share.
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A narrow online retail market definition would treat a 6-7% segment of retail spending as a standalone market and potentially infer market power without fully accounting for competitive constraints from offline alternatives. It would also leave the broader integrated retail ecosystem largely outside the analysis, even though that is where most Indian consumers continue to shop.
Indian consumers do not shop in channels. They shop everywhere, using each format for what it does best. The competition law question is not simply which firms are large within online retail. It is whether the market itself is being defined in a way that reflects how consumers actually shop. Until that question is resolved, calls for ex-ante regulation risk getting ahead of the evidence.
Toshit Shandilya is a Partner at AZB & Partners, and Ritika Sundrani is an Associate at AZB & Partners. The views expressed are personal and should not be attributed to the firm.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
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