Next 500 million online consumers can create $50 billion of e-commerce value

Around $50 billion worth of online commerce transaction can potentially be unlocked in India with greater and more equitable access to the Internet and improved literacy about the benefits of the digital economy, a joint report by Bain and Co, Google and Omidyar Network, titled ‘Unlocking Digital for Bharat’, has found.

The report released on Thursday says: “There is potential to unlock over $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.”

There are two significant private sector initiatives that demonstrate the power of data in driving commerce and economic activity in India and how this promises to be a lucrative revenue stream for companies. The first is the rollout of 4G broadband wireless services by Reliance Jio, the telephony and digital services arm of the $63-billion Reliance Industries Ltd. With its cheap, high-speed data offerings, Jio has already notched up 215 million subscribers and reported a revenue of ₹9,567 crore for the quarter ended June 30.

It is hardly surprising then that the Bain-Google-Omidyar Network report states that data consumption in India, at 8GB per month per subscriber, is at par with other developed markets around the world.

The other material transaction that denotes the power of Indian e-commerce is U.S. retail giant Walmart’s $16-billion acquisition of India’s largest homegrown e-commerce platform, Flipkart. The deal, which is the largest cross-border M&A deal involving an Indian business received clearance from the Competition Commission of India on August 8.

However, the report, which is based on a survey of 3,400 customers, points out that only 40% of India’s 390 million Internet users transact online. This represents the vast opportunity that companies–be they data providers, online marketplaces, brick-and-mortar retailers with an online presence, and makers of various consumer durables and packaged goods–are presented with.

An impediment in the mass adoption of digital commerce appears to be the inequitable distribution of Internet users across the length and breadth of the country. Of the 390 million Internet users, 80% are from affluent socioeconomic classes; and only 13% of the population from the low income brackets use the Internet.

Further, of those who do use the Internet, only 40% actually make a transaction online, while the rest  buy offline after using the Internet to do product research and compare prices.

“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,” Vikas Agnihotri, industry director, Google India, says in the report.

Arpan Sheth, partner at Bain and Co, says that businesses need to be patient when it comes to monetising the digital user base that they enjoy and need to innovate (by also using relevant content) to keep users hooked on to their platforms even when they are not making a purchase.