Potential to Unlock Over US $50 Billion in Online Commerce

Bain & Company, Google, and Omidyar Network announce a new report exploring the potential to unlock over US $50 billion in online commerce in India by driving awareness, usage, and transactions among the current and next set of internet users and shoppers.

New Delhi, August 09, 2018: There is potential to unlock over US $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, according to a report, “Unlocking Digital for Bharat: $50 Billion Opportunity”, released by Bain & Company, Google, and Omidyar Network.

The report captures the changes in India’s emerging Internet landscape over the last few years. Its findings show data usage on mobile is at par with developed markets (8 GB/month/subscriber). With an average of 40 million new internet users added per year to online transactions, the report highlights that only 40 percent of India’s 390 million internet users transact online. To bring more people online and drive growth of users to unlock their economic potential, the report highlights the barriers which need to be overcome and identifies key themes relevant to the next half billion internet users and online shoppers.

Based on a survey of 3400 customers, the report reveals three key characteristics which affects India’s digital ambition:

  • Skewed user base and not equitable across socio-economic classes: Of the 390M users, 80 percent are from affluent socioeconomic segments (NCCS A/B/C); and penetration amongst lower income segments (NCCS D/E) is only 13 percent.
  • Small transaction base: Only 40 percent of the internet users today carry out digital transactions. The remaining 60 percent do their research online but complete the transaction offline.
  • Large drop-out rate: As many as 54 million users today have not carried out a transaction after the first trial purchase.

Speaking about the untapped digital opportunities for commerce, Vikas Agnihotri, Industry Director, Google India said, “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. With this report, we outline the need for much focused intervention for different subsets of the users who are now online and grow consumer confidence to make the digital medium a viable platform for all.”

According to the report, it takes three to four months for a typical internet user to make the first online transaction, which makes it very critical for companies to retain customers through content. The trust in the channel(s) increases as users spend more time on the internet. Among users, who have been on the internet for two or more years, 61 percent transact online. However, it also notes that a large number of users (54 million) stop after the first online purchase due to issues with user experience.

Arpan Sheth, partner, Bain & Company and one of the authors of the report, said, “Digital India is at a very interesting point – a large internet user base with significant variations across demographics, and only a small portion actually transacting online. 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 and generate value.”

The report identifies four key themes to drive awareness, usage and transactions among the current and next set of internet users and online shoppers.

  • Enabling new users through partnerships: Government and private partnerships to create access, awareness and literacy to enable 370 million people in NCCS segments A, B and C and several more million users across NCCS segments D and E to get online. 
  • User engagement through locally relevant solutions: Build locally relevant solutions across content and use cases to drive user-engagement, which will be key to unlock 130 million new users and doubling Internet penetration in rural areas.
  • Create an ecosystem for MSMEs and self-employed: Ensure deeper user engagement to influence 40 percent of the Indian workforce across 46 million micro, small and medium enterprises leading to diversifying and augmenting their income streams.
  • Strengthen trust across user touchpoints: Through omni-channel presence, reinforcing product quality in brand messaging and assuaging concerns on product-returns, businesses can build trust through a superior pre and post-sales experience.

“We know that the key to building trust once a user is online is through engagement. Once engaged, the users that spend more time tend to transact more. The key is to build solutions aimed at those who are coming online over the next five years or the next half billion as we describe them. The report underlines our belief that entrepreneurs must focus on long-term, sustainable solutions that put trust and engagement front and centre.” added Siddharth Nautiyal, Investment Partner, Omidyar Network.   

The report summarizes that despite the growth of the internet user base in India, online spends will remain limited due to the relatively low per capita GDP in India. Scale and profitability in the online space is likely to take time, and hence businesses should focus on exploring alternative options such as monetizing the ecosystem and capturing larger shares across the transaction value chain.

Read the full report here


About Bain & Company
Bain & Company is the management consulting firm that the world’s business leaders come to when they want results. Bain advises clients on strategy, operations, information technology, organization, private equity, digital transformation and strategy, and mergers and acquisition, developing practical insights that clients act on and transferring skills that make change stick. The firm aligns its incentives with clients by linking its fees to their results. Bain clients have outperformed the stock market 4 to 1. Founded in 1973, Bain has 56 offices in 36 countries, and its deep expertise and client roster cross every industry and economic sector. For more information visit: www.bain.com. Follow us on Twitter @BainAlerts and @BainIndia

About Google India Private Limited:
Google India Private Limited (Google India) is a wholly owned subsidiary of Google LCC.  It is engaged in the business of marketing & selling advertisement space and rendering Information Technology (IT) and Information Technology Enabled Services (ITES).

About Omidyar Network:
Omidyar Network is a philanthropic investment firm. We create opportunity for people to improve their lives by investing in market-based efforts that catalyse economic and social change. In India, we focus our efforts on helping the 100s of millions of Indians in low-income and lower-middle-income populations, which we define as ranging from the poorest among us to the existing middle class.
Omidyar Network has committed more than $1 billion to for-profit companies and nonprofit organisations that foster economic advancement and encourage individual participation across multiple areas, including Digital Identity, Education, Emerging Tech, Financial Inclusion, Governance & Citizen Engagement, and Property Rights. 

For further information, please reach out to:
Shubham Mukherjee, Bain & Company, India | +91 9004320000, [email protected]
Nicholas Worley, Bain & Company, Hong Kong | +852 29788830, [email protected]
Rohan Vyavaharkar, Omidyar Network | +91 98209 22373, [email protected]
Gaurav Bhaskar, Google India | +91 99535 50008, [email protected]