This post is by Emma Scotton, Director and Founder at independent ecommerce consultancy KnowGlobal.
As the world’s fastest growing ecommerce market, India is becoming a top destination for retailers looking to expand their online business. This year alone, the Indian ecommerce market is set to be worth a staggering $38 billion, demonstrating year-on-year growth rate of over 60%!
What’s more, Morgan Stanley predict that by 2020 this market will be worth $119 billion, so whilst growth rates in our domestic markets are expected to plateau, India offers a vast opportunity for retailers to grow their online revenues in a new and dynamic market.
With a population of over 1.3 billion, India has always had the potential to become the next ecommerce giant but it’s only now that the appropriate ecosystem has started to fall into place to enable ecommerce to really thrive.
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Why ecommerce in India is booming
A relentless increase in internet and mobile penetration has seen India add 3 internet users per second making it already the second-largest internet market in the world in terms of users. This is due, in part, to the government’s Digital India project bringing internet access to remote corners of the country and the rapid rise in the availability of 4G. By 2020 India is expected to be home to over 320 million online shoppers, says Morgan Stanley.
This growth in internet penetration is combined with a favourable demographic profile of internet users. 75% of Indian internet users are below the age of 35 and it’s this category who shop more than the remaining population, adding further testament to the great potential of the ecommerce market in India.
The ecosystem has been further nurtured by heavy investments from both the major home-grown players, Flipkart and Snapdeal, and also by America and China’s ecommerce titans, Amazon and Alibaba. As these companies jostle for market share they are spending on logistics, efficient warehousing and local outposts. Coupled with the modernization of India Post, this means that the infrastructure is now in place to support an efficient distribution network reaching even the most rural parts of India.
Increased interest in regulation has also served to alleviate some of the Indian ecommerce user concerns and led to the growing acceptability of online payments, although a strong preference for cash-on-delivery still remains.
Statistics also show an increase in per capita income, which is set to double by 2025, meaning the average consumer has more cash to spend and rising aspirations as to what they want to purchase, which cannot be met within their local market. Ecommerce is increasingly attracting customers from Tier 2 and Tier 3 cities where people have limited access to brands and so are looking online to fulfill their needs.
A further factor which lends India as the next stop for retailers is the fact that the ecommerce community is English-speaking and so there is no need for expensive translations.
India is home to over 22 different languages, written in 13 different scripts and 720 dialects. The result being that historically the language bringing the states together has been English, and in doing so it has become the language of choice for governance and business. India now boasts more English speakers than any other country in the world including the US.
Even the home-grown ecommerce players have their websites in English, making these marketplaces easily accessible for international merchants. However, with ever-increasing mobile and internet penetration providing access to a larger audience, the demand for local-language sites is also on the rise, as the typical web user is no longer a professional citizen based in Delhi or Mumbai.
Existing ecommerce trends and consumer profile
Before deciding to take your business into any new market it is essential to take the time to understand your new target customer and most importantly determine whether there is in fact the demand for your products in that market.
Current research tells us that in India the highest growth rates have been seen in the apparel sector, with more and more Indian consumers taking an interest in fashion and seeking out international brands. This sector is then closely followed by electricals, baby care products, beauty and home furnishings, which are also in popular demand.
The good news for marketplace sellers is that the three most popular retail platforms in India are all marketplaces; Flipkart, Snapdeal, and Amazon India, with consumers looking to these platforms for the variety of goods they’re after and as trusted places to purchase online.
Analysts predict 157% growth in female shoppers in urban areas.Statistics also give us a good indication of who the typical Indian online shopper is, with 38% of regular online shoppers being aged 18-25 years and 52% falling in the 26-35 year old category. 65% of these online shoppers are male. However we can expect the biggest growth rates going forward to be seen in the number of woman purchasing online, with rural areas experiencing 30% growth and urban areas a whopping 157% growth in female shoppers, according to a report from IAMAI-IMRB and Nielsen Informate. Thus a product catalogue which lends itself to this particular profile is almost guaranteed to be a hit.
Indian internet users are spending more time than their global peers using the internet, spending on average 5 hours per day online. Making use of social media accounts for more than half of that time, with 26% more time spent engaging with social media networks as opposed to watching television. Therefore for new entrants to this market it’s worth investing in a successful social media campaign to drive awareness and brand loyalty. There are currently 134 million active social media accounts, increasing on average one every second. The most popular social network in India is Facebook.
As is common in emerging ecommerce markets, Indian consumers show a strong preference for cash-on-delivery as opposed to other online payment methods. Over 45% of online shoppers in India currently opt for cash-on-delivery as their payment method of choice. This is due in part to the low levels of debit and credit card penetration and also to the preference of consumers to physically look, feel and touch something before paying for it.
This cultural nuance can be off-putting for e-retailers as cash-on-delivery orders see the highest rate of returns and rejected deliveries as the customer is not committed to the purchase, which can be costly for merchants. The good news is that as India’s largest ecommerce companies race to enlist more merchants they are pushing consumers to pay digitally and as confidence in ecommerce naturally grows this trend will decline.
