India's local commerce landscape is at an inflection point. With 920 million internet users and 16.4 billion monthly UPI transactions, India has built the digital rails. But the businesses that power its economy — 63 million MSMEs — have barely boarded the train. This report presents the data behind the gap, and the massive opportunity it represents.
About This Report
The India Local Market Digitalisation Report 2025 is a 22-page deep-dive into the state of digital adoption among India's local businesses. It is one of the most comprehensive ground-level studies of its kind, designed to move beyond headline numbers and into the lived reality of India's shopkeepers, service providers, and small manufacturers.
The research methodology spans:
- 4,200+ business owners surveyed — across kirana stores, fashion retailers, jewellers, salons, hardware shops, food outlets, and service providers
- 9,500+ consumers surveyed — on discovery behaviour, preferences, and expectations from local businesses
- 18 states covered — from metro cities to Tier 3 towns and rural market clusters
- Cross-referenced with institutional data — from NASSCOM, RBI, MeitY, BCG India, IBEF, and the Udyam Registration Portal
The report was compiled by VDOlocal's research team in collaboration with independent analysts, with the goal of mapping where India's local market digitalisation truly stands — and where it needs to go.
Key Statistics at a Glance
- Rs 65 Lakh Crore — estimated size of India's local retail and services market
- 63M+ MSMEs — registered and unregistered micro, small, and medium enterprises
- Only 29% digitally present — with any form of online identity (listing, website, or social page)
- 920 million internet users — and growing at 40M+ annually
- 16.4 billion UPI transactions/month — digital payments have already been normalised
- $400 billion opportunity by 2030 — the projected value of digitally-enabled local commerce
The disconnect is stark: India's consumers have gone digital, India's payment infrastructure has gone digital, but the vast majority of India's businesses have not.
The Video Discovery Gap
Perhaps the most striking finding in the report is what we call the Video Discovery Gap — the chasm between consumer demand for video content from local businesses and the actual supply of it.
The video discovery gap: 74% of consumers want video, but only 6% of local businesses provide it.
The numbers tell a compelling story:
- 74% of consumers said they would be more likely to visit a local store if they could watch a short video of the shop, products, or services beforehand
- Only 6% of local businesses currently have any form of video content available online
- 2.8x more walk-in traffic was reported by businesses that had adopted video storefronts compared to those relying solely on static listings or social media posts
Consumers are not asking for e-commerce. They are asking for visibility. They want to see what a shop looks like, what it carries, and whether it feels right — before they step out the door.
This gap represents one of the largest untapped opportunities in Indian commerce. The demand exists. The infrastructure exists. What is missing is a simple way for local businesses to bridge the two.
Digital Adoption by City Tier
Digital adoption is not uniform across India. The report maps adoption rates across four tiers, revealing a clear gradient that mirrors infrastructure access, digital literacy, and exposure to digital-native platforms.
- Tier 1 cities (Mumbai, Delhi, Bengaluru, etc.): 61% of local businesses have some digital presence
- Tier 2 cities (Jaipur, Lucknow, Coimbatore, etc.): 38% digital adoption
- Tier 3 towns (Ujjain, Siliguri, Warangal, etc.): 21% digital adoption
- Rural market clusters: 14% digital adoption
Even in Tier 1 cities, nearly 4 out of 10 local businesses remain invisible online. In Tier 3 and rural areas, the gap is enormous — and yet these are the very markets where digital discovery could have the most transformative impact, connecting consumers with businesses they may never have found otherwise.
The report identifies Tier 2 and Tier 3 cities as the greatest near-term opportunity, where smartphone penetration and UPI adoption have already created the conditions for digital storefront adoption — but where simple, vernacular-friendly tools are still missing.
Barriers to Digital Adoption
Understanding why businesses have not gone digital is just as important as knowing that they haven't. The report surveyed business owners on their primary obstacles:
- 61% — "I don't know how to start" — The single largest barrier is not resistance but confusion. Most business owners want to be online but have no idea where to begin.
- 54% — "I don't have time" — Running a local business is all-consuming. Owners work 10-14 hour days and cannot afford to spend hours learning new platforms.
- 49% — "It seems too expensive" — The perception of cost is often worse than the reality. Many assume digital tools require lakhs of investment.
- 44% — "Tools are not in my language" — Language remains a fundamental barrier. Most digital tools are English-first, alienating the majority of India's business owners who operate in Hindi, Marathi, Tamil, Telugu, Gujarati, and dozens of other languages.
Confusion, not resistance, is the primary barrier to digital adoption.
The problem is not that India's shopkeepers are resistant to technology. The problem is that technology has not yet been built for them.
UPI as the Gateway Drug to Digital
One of the most encouraging findings in the report is the role UPI is playing as a gateway to broader digital adoption. The numbers are striking:
- 78% of surveyed businesses now accept UPI payments — up from roughly 40% just three years ago
- Businesses that accept UPI are 3.7x more likely to adopt other digital tools (digital catalogues, WhatsApp Business, social media pages, or digital storefronts)
UPI has done something no government programme or tech platform managed before it: it normalised digital interaction for India's small business owners. Once a shopkeeper prints a QR code and starts receiving digital payments, the psychological barrier to other digital tools drops dramatically.
The report argues that UPI adoption is the single best predictor of a local business's readiness for digital storefront adoption. The infrastructure — both physical and psychological — is already in place for tens of millions of businesses. What is needed now is the next simple step.
View the Full Report
This article covers only the headline findings. The full 22-page report includes detailed methodology, state-wise breakdowns, sector-specific analysis (retail, food, fashion, services, jewellery), consumer preference data, and a forward-looking framework for local market digitalisation through 2030.
Read the complete India Local Market Digitalisation Report 2025 — 22 pages of data, analysis, and insights.
View Full Report →
About VDOlocal
VDOlocal is India's video-first storefront platform for physical store owners. It enables any local business — from a kirana shop to a bridal boutique — to create a branded digital storefront with video product listings in under two minutes, with zero technical skills required.
VDOlocal was built from the ground up for the reality of Indian local commerce: vernacular-friendly, mobile-first, zero-commission, and designed so that a business owner can go from invisible to discoverable in the time it takes to make a cup of chai.
The India Local Market Digitalisation Report 2025 was produced by VDOlocal's research team as part of the company's commitment to understanding and serving the needs of India's local business ecosystem.
Create your free video-first digital storefront on studio.vdolocal.com — live in under 2 minutes.