Indian online marketplaces predicted to reach $350 billion in GMV by 2027

Arpan Sheth, Partner at Bain & Company

With a large addressable market, growing online shopper base, and increasingly digitised MSMEs, online marketplaces in India contribute more than $100 billion in gross merchandise value (GMV), with business-to-customer (B2C) e-commerce marketplaces being the single largest segment, contributing $50 billion. Over the next five years, the marketplaces sector is expected to more than triple, to reach $350 billion in gross merchandise value (GMV).

What were the findings of the research?

These marketplaces will be creating $400–$500bn in enterprise value, contributing over 5% to India’s GDP, enabling over 15 million micro, small, and medium enterprises (MSMEs) to grow their businesses online, and creating 7 million jobs by 2027. These are among the findings of “The Rise of Digital Bazaars in India,” by Bain & Company and Accel. Marketplaces have created tremendous value for individual buyers, for businesses, and for the economy.

India’s vibrant marketplace landscape

India has cultivated a vibrant and successful marketplace landscape, demonstrated by the sheer breadth of more than 300 funded marketplaces across multiple categories like retail, education, healthcare, travel, financial services, etc. Almost 20 marketplaces reached more than $1 billion in gross merchandise value (GMV) and many players are turning profitable.

While online marketplaces will continue to be dominated by B2C e-commerce with 40% of the total gross merchandise value in 2027, the B2B e-commerce marketplaces gross merchandise value is slated to grow by five times its current size to reach $55bn, followed closely by online food delivery which will almost triple in size to reach nearly $22 billion.

Not just for buyers and sellers, marketplaces have also seen traction with investors in recent years, having received cumulative funding of $30bn between 2018 and October 2022.

Business-to-customer (B2C) e-commerce, B2B e-commerce, and online food delivery were among the highest- funded marketplaces sectors, together accounting for close to 60% of total funding received in the last 5 years. From B2C e-commerce marketplaces leading the share of deal volumes in 2018, B2B e-commerce marketplaces emerged as the frontrunner in 2022, with deal volumes growing to 31% of the total deals in the year so far.

Increased funding in marketplaces

2021 was a landmark year, which saw funding in marketplaces reaching $16bn, growing four times compared to 2018 and deal volumes doubling in the same period. But in 2022 year-to-date (YTD) marketplace funding activity has been moderate at $4.5bn, given the tempering of 2021 highs, valuation corrections, and muted sentiments in global public markets.

Upstream B2B presents as a $1 trillion+ opportunity and a high margin potential; with fragmented supply, need for disintermediation, and govt initiatives being key growth drivers.

In addition, Fintech marketplaces have also grown owing to the low penetration of financial/insurance products, digitisation of user base, and availability of easy-to-use digital platforms. An approximately $200 billion addressable market and supply chain inefficiencies have resulted in a surge of tech-based shipping and logistics marketplaces.

The report highlights that the next wave of scale marketplaces has the potential to emerge in two additional major categories— (1)‘Bharat-first’ models driven by participation from tier- 3+ cities, and (2) global cross-border models addressing the export potential India has.

Gaming, caregiver services, creative content, Web 3.0, have large-scale marketplaces in mature markets, but are currently nascent in India. They represent future trends in the Indian marketplace landscape, and are a precursor for these segments to grow large in India given proof of scale in US and China, where multiple unicorns are present in these areas.

What do the findings mean for India’s economy?

Arpan Sheth, Partner at Bain & Company and co-author of the report said “Marketplaces have contributed to India’s growth story by offering greater access to innovative financing solutions for underserved segments; enabled MSMEs to transact online, with an increased pan-India reach; and have provided employment opportunities to over 3 million gig workers.”

Prabhav Kashyap, Partner at Bain & Company and the report co-author said, “Dealmaking in the short to medium term is likely to be more measured and valuation multiples will see some degree of rationalisation. The future of marketplaces, on the other hand, is robust and with strong growth in their gross merchandise value and continued interest from investors, we expect the segment to see ample opportunities and a strong pick up.”

“While the marketplace model is popular across multiple categories, upstream B2B, fintech, and shipping and logistics are some of the exciting areas. These sectors show evidence of successful marketplaces and significant headroom for growth of new or emerging players.”

Anand Daniel, Partner at Accel

Anand Daniel, Partner at Accel and co-author of the report said, “India is one of the fastest growing and most dynamic emerging markets. Our report on the country’s digital bazaars reveals the extent to which marketplaces have grown in this market across both business-to-consumer and business-to-business segments. Over 1/3rd of large outcomes in our start-up ecosystem have been marketplaces and contribute to more than $100 billion in GMV.”

“Accel India is fortunate to have partnered with many of these marketplaces from seed to scale. We have invested over $700m in these companies, and seek similar opportunities.”