Aug 20, 2018
Potential to unlock $50bn in Indian e-commerce says report
Aug 20, 2018
There is potential to unlock over $50 billion in e-commerce in India by driving awareness, usage and transactions among the current and next set of internet users and shoppers, according to a recent report by Bain & Company, Google, and Omidyar Network.
This will be driven by over 500 million Indians who will constitute the next wave of online consumers.
The report called ‘Unlocking Digital for Bharat: $50 Billion Opportunity’ captured the changes in India’s emerging internet landscape over the last few years. Its findings showed data usage on mobile is at par with developed markets (8 GB/month/subscriber).
With an average of 40 million new internet users added per year to online transactions, the report highlights that only 40 per cent of India’s 390 million internet users transact online.
Based on a survey of 3400 customers, the report revealed three key characteristics which affects India’s digital ambition: skewed user base and not equitable across socio-economic classes, small transaction base and large drop-out rate.
It said that of the 390 million users in India, 80 per cent are from affluent socioeconomic segments (NCCS A/B/C); and penetration amongst lower income segments (NCCS D/E) is only 13 per cent. Only 40 per cent of the internet users carry out digital transactions. The remaining 60 per cent do their research online but complete the transaction offline. Also, as many as 54 million users have not carried out a transaction after the first trial purchase.
“With the user growth and adoption story on a fast growing trajectory, there is a need to grow consumer confidence to make digital a medium of choice for services and transactions for users across the country. With this report, we outline the need for much focused intervention for different subsets of the users who are now online and grow consumer confidence to make the digital medium a viable platform for all,” said Vikas Agnihotri, industry director, Google India.
It takes three to four months for a typical internet user to make the first online transaction, which makes it very critical for companies to retain customers through content, added the report.
Meanwhile, the trust in the channel/s increased as users spend more time on the internet. Among users, who have been on the internet for two or more years, 61 per cent transact online. However, it also noted that a large number of users (54 million) stopped after the first online purchase due to issues with user experience.
Arpan Sheth, partner, Bain & Company and one of the authors of the report, said, “Digital India is at a very interesting point – a large internet user base with significant variations across demographics, and only a small portion actually transacting online. While online spends are still low given lower per capita incomes, there is huge potential to unlock value by addressing user concerns at various stages of the digital curve; however, the path won’t be easy for businesses and they will have to innovate and be patient to monetise this user base and generate value.”
The report also identified four key themes to drive awareness, usage and transactions among the current and next set of internet users and online shoppers: enabling new users through partnerships; user engagement through locally relevant solutions; create an ecosystem for MSMEs and self-employed; and strengthen trust across user touchpoints.
“We know that the key to building trust once a user is online is through engagement. Once engaged, the users that spend more time tend to transact more. The key is to build solutions aimed at those who are coming online over the next five years or the next half billion as we describe them. The report underlines our belief that entrepreneurs must focus on long-term, sustainable solutions that put trust and engagement front and centre.” added Siddharth Nautiyal, investment partner, Omidyar Network.
The report summarised that despite the growth of the internet user base in India, online spends will remain limited due to the relatively low per capita GDP in India.
Scale and profitability in the online space is likely to take time, and hence businesses should focus on exploring alternative options such as monetising the ecosystem and capturing larger shares across the transaction value chain.
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