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Next wave of online Indians consumers to generate $50Bn e-Commerce Opportunity

Over 500 million Indians in the next wave of internet users and online shoppers; a large opportunity in serving this cohort: Bain & Company, Google and Omidyar Network report

There is potential to unlock over US $50 billion in online commerce in India by driving awareness, usage and transactions among the current and next set of internet users and shoppers. This will be driven by more than 500 million Indians who will constitute the next wave of online consumers, according to a report, ‘Unlocking Digital for Bharat: $50 Billion Opportunity’, released by Bain & Company, Google and Omidyar Network.

The report captures the changes in India’s emerging Internet landscape over the last few years. Its findings show 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 percent of India’s 390 million internet users transact online. To bring more people online and drive growth of users to unlock their economic potential, the report highlights the barriers which need to be overcome and identifies key themes relevant to the next half billion internet users and online shoppers.

Vikas Agnihotri, Industry Director, Google India said, “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.”

According to the report, 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. The trust in the channel(s) increases as users spend more time on the internet. Among users, who have been on the internet for two or more years, 61 percent transact online. However, it also notes that a large number of users (54 million) stop 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 monetize this user base and generate value.”

The report summarizes 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 monetizing the ecosystem and capturing larger shares across the transaction value chain.

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