Consumer spends on internet biz to grow to $250 bn by FY25

Consumer spending on internet-based businesses, including online grocery and food, edtech and e-healthcare, is expected to grow to $250 billion by 2024-2025, according to management consultancy RedSeer.

Consumer spending on online businesses stands at roughly $100 billion so far in 2020-21 compared to $65 billion in 2019-20.

The consumer internet business grew at a compound annual growth rate of about 30% in the last decade, resulting in a 13-fold growth for the sector, according to RedSeer.

“This rapid growth has led to higher foreign investments, increased employment opportunities and improved standards of living for people," said RedSeer.

The overall online retail industry has seen a growth of 51% in consumer spends in FY21 as compared to FY20. Only 7% of the consumers surveyed said that they will drop their overall spends on online retail platforms in the ongoing fiscal over the previous one.

About 63% of customers said they will increase their spends on online grocery, while 67% said they will increase spends on online healthcare.

“As new consumer habits are shaped by covid, the user-base of the Indian consumer internet sector has grown rapidly. Furthermore, as consumers get accustomed to the greater convenience offered by online platforms, they are also increasing their wallet share toward the latter. This, in turn, has accelerated growth for the consumer internet sector, which is now expected to grow 4X over FY20–FY25," RedSeer said.

This growth can be attributed to platforms witnessing a surge of first-time users, as well as internet platforms beefing up their use-cases.

“Post-covid, we have seen an accelerated rise in the number of first-time users, as well as higher repeat purchases in certain categories. The pandemic has created a faster adoption of digital channels by buyers, and with that we also saw a rapid rise of budget-conscious users, who are less focused on brands and still want good value in terms of quality and price," said a Snapdeal spokesperson.

As consumer spending increases, the customer acquisition cost for consumer internet platforms has seen an overall reduction of 20%-30%, according to data from the management consultancy. “As online platforms see more adoption and increase in new users, they are clocking better unit economics. This is adding on to their stability and making them set for IPO," said RedSeer.

According to edtech venture Mastree, the pandemic caused significant growth for the platform as users turned to online learning.

"The pandemic ensured faster discovery of our English communication focused courses as consumers were pushed to explore virtual mediums in order to gain new skills. New age creative learning formats like gamification, personalised practices and real-time forums to showcase the skills caught the fancy of the users. Last quarter, Mastreegrew 5X in terms of users," said Shrey Goyal, chief executive of Mastree, an online english learning platform for children.

While online healthcare platform, Mfine, said that ticket sizes have seen a growth as consumers look to even undertake chronic care management from the comfort of their homes.

"With consumers choosing to take consultations, chronic care management and speciality services like radiology from home, our ticket sizes have seen a 2.5x-3x growth. To add to that 40% of our customers using the platform are repeats, as Mfine continued to add more use-cases on its platform catering to wider audience," said Prasad Kompalli, chief executive and cofounder of online healthcare startup, MFine.