New Delhi: This could be the year that marks a decisive shift in the online purchasing habits of the Indian consumer. The number of online buyers has seen a 70% jump—from 10 million to 17 million—while that of active Internet users has risen 28% in 2011 over 2010, according to a study by JuxtConsult, a market research firm.
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With Indian buyers turning on their computers and logging on to sales sites, investors are getting increasingly interested in the companies at the forefront of the change. For instance, Flipkart Online Services Pvt. Ltd may get an investment of $150 million (Rs 660 crore) from private equity firm General Atlantic Partners, valuing the business at $1 billion, according to deals-news website VCCircle. The deal, if it happens, would be the biggest such investment in an Indian Internet company, according to VCCircle.
The increase in Internet sales is sharpest in the non-travel category, and has made shopping the second most popular online activity among Indians after emailing. According to the study, there are 13.5 million shoppers ordering non-travel products online compared with 8.6 million buyers of travel products (train and air tickets) on the Internet.
In the last six to eight months, consumer purchases on the Internet have accelerated, said Sanjay Tiwari, chief executive officer of JuxtConsult.
“Group buying and best deals sites have become popular selling mobiles phones, computer hardware, consumer electronics, movie tickets and even apparel,” he said.
No new travel portal has been launched in the last two years, Tiwari added.
The Internet has a base of 50 million consumers in India who either search or buy products online. The base of daily users of the Internet, which reaches 29 million households in the country, grew 33%.
The research for the study, which covered 302,876 households in 104 cities and 15,889 households in 766 villages, was conducted between April and mid-June.
E-commerce is attracting private equity investors such as SAIF Partners, Helion Venture Partners and Canaan Partners, among others.
A 70% spurt in online consumers is plausible as the base is very small, said Jehil Thakkar, executive director (media and entertainment) at KPMG India.
“Also, this time, the dot-com companies are bigger, better and well funded,” he said. “Besides they have created awareness through advertising.”
This has been most apparent in the number of dot-coms advertising between overs in the broadcast of the ongoing India-England cricket series.
Also propelling growth in online consumer numbers is the introduction of cash-on-delivery services by shopping sites since it addresses consumers without credit cards as well as those shy of using them online. Flipkart is among those sites that offers such a service.
E-commerce will grow even faster if infrastructure bottlenecks such as broadband access are improved, Thakkar said. The imposition of a uniform goods and services tax throughout the country will also help, he added.
Besides, “if FDI (foreign direct investment) in multi-brand retail is cleared, the online stores of major offline retailers will set foot in India”, Thakkar said.
The 51% FDI proposal is currently under the consideration of the government.
JuxtConsult’s Tiwari sees the lack of language options on the Internet as the biggest stumbling block in the way of its growth. “All the utility services—job search, shopping and banking—are in the English language, making the case for very slow growth,” he said.
If the industry wants Internet usage to multiply, companies should make the medium available in different Indian languages. “We don’t see any effort in that direction,” he added.
Graphic by Yogesh Kumar/Mint