Online retail may touch $50 billion over three years, shows report

NEW DELHI: India’s e-commerce market has the potential to more than double to $50 billion in sales over the next three years, capitalizing on half a billion new internet users expected to join an already fast-expanding base.

The country, which generated $20 billion in online sales in 2017, can attain the milestone by driving awareness, usage and transactions among the current and next set of internet users and shoppers, Bain and Co., Google and Omidyar Network said in a joint report.

India has the second-highest number of active internet users globally at 390 million. With an average of 40 million new internet users added per year to online transactions, the report highlights that only 40% of internet users transact online. The remaining 60% do their research online about products and services but complete the transaction offline. Ever since the launch of Reliance Industries Ltd’s Jio service at reduced data rates, individual mobile data usage at 8 GB per month has reached the levels of developed markets but most of it is towards content consumption, social media and browsing.

India’s online retail market has grown 70% over the past five years—the highest among major economies—albeit over a smaller base and due to discounts, improved delivery infrastructure and growth in smartphone penetration/data usage, the report said. But, online retail spending is much lower than other markets.

Indians currently spend $224 a year, almost 1/10th as compared with China ($1,862), leaving a large headroom for growth.

“While online spends are still low given lower per capita incomes, there is huge potential to unlock value by addressing user concerns at various stages of the digital curve; however, the path won’t be easy for businesses and they will have to innovate and be patient to monetize this user base,” said Arpan Sheth, partner at Bain and Co.