Home >Industry >Banking >Digital spending by Indians to hit $100 billion by 2020: Report

New Delhi: Indian consumers, especially women and new internet users from smaller cities, are going to drive digital consumer spending, which is expected to more than double to $100 billion by 2020, said a joint report released by Google India and The Boston Consulting Group (BCG).

While internet users have grown nearly doubled in the past four years to reach 430 million today, the adoption of online transactions among them still lags markets like the US and China. For instance, only one in five internet users in India buy products online compared to four in five for US and three in five for China. The report stated that nearly half of online transactors in India spend only 5% to 10% of their monthly purchase basket online. They typically buy movie and/or travel tickets online and sometimes apparel or accessories, therefore, highlighting a huge window of opportunity for brands.

In the report titled Digital Consumer Spending in India: A $100 bn Opportunity, sectors such as e-commerce, travel and hotels, financial services and digital media are identified as the key drivers of next phase of digital spending.

With the availability of cheaper data and deeper penetration of mobile phones, the number of online spenders will not only increase over the next few years but there will be a dramatic change in the users’ profile. The report estimates that by 2020, women shoppers will increase 2.5 times and older shoppers (aged above 35 years) will increase more than three times. With the improvement of infrastructure, online shopping will take off in India from cities beyond the metros and together it is expected to comprise more than 50% of the total online shopper base by 2020.

“There is a clear evolution as consumers move from awareness of online platforms to their first purchase and further down to become more frequent buyers—triggers and barriers to online purchase evolve with each stage. Very different actions are needed to unlock growth and move consumers from one stage to the next," said Nimisha Jain, partner and director, BCG, India.

The report highlights that 75-80% of Indian internet users do not spend online currently. This underscores the fact that even though digital media has gained ground over the last few years, the actual digital spending is still in evolutionary stages in India. It urges brands to woo offline buyers through discounts and build their comfort and trust with digital while guiding them along the purchase pathway.

Among occasional shoppers, who comprise 75% to 85% of the total internet user base, value added services will be the key differentiator which include innovative delivery models, delivering a real value proposition (over and above deals/discounts) and ensuring hassle-free post-sale service. In the case of frequent shoppers, comprising 15% to 25% of total internet user base, it is imperative for brands to create unique propositions like loyalty programs and develop customised communications to drive stickiness.

“Digital spending in India are at a cusp of significant wave of change, while we have seen enthusiastic response to adopting newer forms of digital payments in the last few years, the base is still relatively small. The ecosystem needs to focus on creating a very targeted value proposition for different segment of users and across different categories to drive larger adoption. For example, in food and grocery category, convenience becomes a key trigger for frequent shoppers while discounts are important for occasional shoppers and quality is a key barrier among offline shoppers," said Nitin Bawankule, industry director, Google India.

The report highlighted that current key barriers in digital spending includes touch and feel in the fashion category, quality concern in the food and grocery and service and repair concerns in the consumer durables category which need to be addressed by brands.

“The BCG Google report has correctly attributed the increasing internet population to growing proportion of older age women, tier 3 and tier 4 users who are accessing internet and soon will transact online. Last 100 million customers are drastically different from first 100 million customers on various aspects—older, rural, more female, mobile led and vernacular.However, growth to come in months should also be attributed to burgeoning Generation Z population in India, who have grown up with five screens at their disposal and have no inhibition to technology and are digital enthusiasts. As per latest projections, India will have the largest population of Gen Z by 2020 to about 356 million," said Priyanka Bhargav, head (consumer research and insights), at Myntra, a Flipkart-owned fashion e-tailer.

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