Transforming manufacturing: Key implications for ecommerce industry in India

India is steadily transforming its manufacturing space to achieve global competitiveness and economic resilience. With initiatives such as the National Manufacturing Policy aiming to increase the sector’s GDP share from 17% to 25% by 2025, as per a report by IBEF, and the 2022 Production Linked Incentive (PLI) scheme focusing on enhancing manufacturing capabilities to meet global standards, the ripple effects are profound.

Today, the manufacturing sector employs over 27.3 million workers, forming a robust supply chain backbone. This is poised to power the next wave of innovation and efficiency in ecommerce—a seamless integration between production and digital retail.

Embracing the online shift

For every innovation to succeed, embracing change is crucial. Enhanced digital infrastructure has propelled manufacturing into the spotlight, largely driven by the shift in consumer behaviour toward online shopping and digital-first experiences.

The numbers reflect this trend. According to IBEF, by the start of 2024, India had 751.5 million internet users, with ecommerce market penetration reaching 16.9%, according to Statista. This evolution is pushing manufacturers to adopt advanced technologies, moving away from traditional methods to meet the speed, flexibility, and precision required by the growing demands of ecommerce.

Not just this, but sustainability and eco-friendly manufacturing practices are also becoming critical as ecommerce consumers increasingly prioritise green products and responsible sourcing. These advancements are revolutionising the supply chain, enabling ecommerce businesses to deliver smarter, faster, and more sustainable solutions, aligning with the expectations of today’s environmentally-conscious shoppers.

Trends lead to ecommerce boom

The rise of online shopping, driven by both urban and rural populations and fuelled by increasing disposable incomes, has created an opportunity for ecommerce to connect brands with consumers more effectively. As demand continues to expand—particularly in Tier II and Tier III cities—manufacturers are scaling their operations and streamlining production processes to keep up with this growth.

According to a report by ICRIER, currently, around 1.5 to 2.5 million MSMEs are already selling online, which is expected to double by 2027. As ecommerce continues to gain momentum in smaller cities, this mass scaling ensures that MSMEs can meet the varied needs of customers by offering a wide range of products. 

This is impactful as consumers increasingly seek products that reflect their unique preferences. The success is still pending as ecommerce in these regions relies on a responsive and efficient supply chain. This requires manufacturing innovations, such as automation, improved inventory management, and faster production cycles, to enhance logistics and delivery. Hence, the symbiotic relationship is essential for propelling India’s digital economy and achieving its broader objective, such as the $2 trillion export target by 2030.

Already, ecommerce exports are contributing to this, with projections indicating an increase from $1 billion to $400 billion annually by 2030, according to IBEF.

Some of the new business models in the market supporting this vision are:

• Direct-to-Consumer (D2C): D2C eliminates intermediaries, allowing brands to sell directly to consumers, offering personalised experiences and better control over pricing and customer relationships.
• Quick Commerce (q-commerce): Q-commerce focuses on ultra-fast delivery, often within 10–30 minutes, leveraging hyper-local supply chains and advanced logistics to meet instant consumer needs.
• Subscription-based services: This model offers recurring delivery of products or services, providing consumers convenience and businesses a stable revenue stream.
• Hyperlocal Logistics: Hyper-local logistics optimize delivery within small geographic areas, ensuring faster and cost-effective fulfillment of local demands.
• Premiumisation: Premiumisation caters to consumers seeking superior quality or unique features, driving profitability and brand prestige.

Tech is taking the ecommerce world

Technology is one of the major things that connects manufacturing and ecommerce to greater benefits. Technology like artificial intelligence (AI) and machine learning (ML) enable predictive analytics, demand forecasting, and inventory optimisation, ensuring manufacturers can align production with ecommerce demand.

For example, AI empowers ecommerce and manufacturers by enabling demand forecasting through historical sales data, market trends, and social insights, ensuring accurate inventory planning. It aids in seasonality predictions, such as anticipating spikes during events like Black Friday, where online sales are much higher.

Additionally, AI optimises dynamic pricing in the manufacturing and ecommerce sectors by adjusting prices based on real-time supply and demand, ensuring competitive discounts while maximising profitability. AI and ML also excel in processing large volumes of B2C and B2B transactions, allowing businesses to detect and respond to suspicious trends quickly. This helps secure transaction data, automate compliance with payment regulations, and enables enterprises to adapt swiftly to evolving financial laws while conducting continuous audits of their payment processes.

All set for the future

As India looks to become a global manufacturing hub by 2030, coupled with the projection of its ecommerce industry reaching $325 billion, the country is poised for substantial economic growth.

Government initiatives, technological integration, and focus on expanding exports collectively lay the foundation for a dynamic and sustainable future. With these strategic efforts, India is positioning itself to meet domestic demand and emerge as a strong player in the international market.

(Sachin Jain is the Chief Financial and Strategy Officer at ProcMart, a B2B marketplace specialising in supply chain solutions.)