India’s retail landscape is deeply fragmented, shaped by decades of traditional distribution networks, regional supply chains, and a political economy that reinforces support for micro, small, and medium-size enterprises (MSMEs) as an important driver of employment. Nearly 60 million MSMEs form the backbone of this ecosystem, collectively contributing close to $1 trillion in value to the economy every year, which is roughly 30 percent of national GDP.1 These MSMEs operate across multiple subsegments defined by category, geography, scale, and formality. Fragmentation is structural and likely to persist, creating a unique environment where small sellers and local traders coexist alongside large national and international retailers.
We therefore believe this large, fragmented, and growing group of sellers will seek services and digital solutions that are fit-for-purpose: unbundled, flexible, lower-cost and more “consumer direct” relative to offerings provided by today’s dominant marketplaces.
Within this complex landscape, MSMEs are fueling a new wave of e-commerce growth. Our analysis indicates that India’s share of e-commerce as a percentage of overall retail could increase from around 6 percent to up to 11 percent by 2030. MSMEs will likely account for around half of this growth. Remarkably, around half of India’s registered small enterprises are located in Tier-2 and Tier-3 cities.2 These regions are experiencing a surge in economic activity, fueled by increasing internet penetration, government policies, rising disposable incomes, and the rapid expansion of small and medium enterprises.
At the ecosystem level, government-led initiatives, including the Open Network for Digital Commerce (ONDC), are further lowering entry barriers and expanding market access for all.
Indian MSMEs can reach consumers through three online channels: traditional, large e-commerce marketplaces that offer scale and discovery; quick commerce platforms that emphasize speed and convenience; and the direct-to-consumer channel including websites, social media, and apps.
Typically, the D2C channel can give smaller brands greater control over branding, distribution, and pricing and provide small businesses the ability to selectively adopt the fit-for-purpose tools and services needed at different stages of their growth. These businesses, despite their aggregate scale, remain underserved due to high commissions on marketplaces, limited access to customer data, constrained brand visibility, high marketing or fulfilment charge backs, and concerns about less control over consumer experience.
As a result, MSMEs are increasingly seeking more flexible, direct, and lower-cost pathways to reach consumers. We observe that D2C adoption is accelerating nearly three times faster than e-commerce marketplace growth. The D2C channel accounts for $10 billion to $12 billion in e-commerce sales in India today.3 This could reach $60 billion by 2030.
Our recent survey of more than 1,000 Indian MSMEs shows that these businesses are almost evenly split in their channel preferences, with 53 percent favoring D2C routes and 47 percent relying on marketplaces.4
Rapid D2C channel growth does not mean that the traditional e-commerce marketplace will lose appeal. Large e-commerce marketplaces such as Amazon, Flipkart, Meesho, and Myntra will likely remain popular choices, with sales expected to reach up to $100 billion in 2030.5 Their scale, discovery engines, and fulfilment networks make them foundational to India’s digital ecosystem and could continue to fulfill a large proportion of the demand.
What this does mean is that MSMEs are on the rise and seeking new ways to engage. For value-added logistics and payment platform providers, this gap represents a clear opportunity. Solutions that combine affordability with intuitive design, offer comprehensive features, leverage AI for insight-driven decision-making, ensure strong data governance, and support seamless omnichannel integration are likely to be the ones that gain the most traction among MSMEs. We estimate the potential market for such services to be between $25 billion and $30 billion, representing roughly 50 percent of the projected D2C channel size in 2030.
Critically, platforms that embed capabilities such as reliable fulfillment, transparent pricing, secure payments, verified identities, and consistent customer support will play a central role in helping MSMEs convert first-time buyers into repeat customers. Platforms that build on these foundations and address persistent MSME pain points could find themselves best positioned to unlock the next wave of India’s e-commerce growth.
