Document Sets are “special” folders in Document Libraries that allow you to associate metadata to it and pass on this metadata to documents inside a Document Set. This has been one of the features that have not been widely popular among SharePoint Users. That could have been the reason that Document Sets capability was not available in Modern SharePoint Libraries until late 2019.
Earlier on, even though the Document Sets were available in SharePoint Online, it used to take the user into a Classic SharePoint Experience instead of the Modern SharePoint Experience. However, now you will see that the Modern Experience is retained for Document Sets as well.

Enabling Document Sets in a Modern SharePoint Site

The steps to enable the Document Sets in Modern SharePoint Sites are the same as what we used to do in Classic SharePoint Site.
Step 1
Activate the Document Set Feature – Go to Site Information > View all site settings > Site Collection Administration (group) > Site collection features. Activate the “Document Sets” feature on the site collection.
Step 2
Enable Document Set Content Type in Library – Go to Library settings > Advanced Settings > Allow management of content types? > Yes. Add the Document Set Content Type from the list of Existing Content Types.
If you have used document sets before, you would find that almost all the capabilities from a Classic Experience are carried over to the Modern Experience.
  1. Users can select the Shared Columns, these are the columns that will sync the metadata properties from Document Set to the documents inside it
  2. Users can select the columns to be displayed in Welcome Page View. This capability specifically differs from the folders. While folders will follow the same view, document sets give users an option to have a separate view that can have columns different from the parent view
  3. Users can run Workflows on Document Sets. This capability is especially helpful in scenarios where you have multiple documents under a project or agreement that needs to be approved together. If you approve the document set, it can then be applied to all the documents inside it
However, there are still some features that are missing when compared to Document Sets in Classic Experience. I don’t think this has any huge impact on the usability of document sets in Modern Experience but they are worth mentioning.
  1. No welcome page in Modern Document Sets. Technically, you still have the Welcome Page option in Document Set settings, but when the Welcome Page is customized, it changes the experience to Classic Mode.
  2. No versioning on Modern Document Sets. Since document sets have metadata associated with it, it would have been better if we could see the versions to identify the property changes. Versioning would still work on the documents inside the Document Sets though.
I am glad that finally, we have another powerful feature now available in Modern SharePoint.