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India to overtake US as ecommerce superpower

27 October 2016  |  12928 views  |  3 India, Bazaar

India is set to overtake the US as the world's second largest ecommerce market within the next 20 years thanks to a young, connected and growing middle class, according to research from Worldpay.

While India accounts for less than one per cent of the world’s ecommerce spend today, the country’s online retail market is set to grow by 28% per year over the next four years, making it worth US$63.7 billion by 2020.

And by 2034, India's digital shoppers will be spending $2,039 billion, making the country the world's second biggest market, behind China.

This growth will be driven by a combination of technological change, rising income levels and favourable demographics. Around 730 million Indians will be internet users by 2020 - 250 million higher than today.

Many of these new users will be mobile-first, with India both the world’s fastest growing smartphone market and one of the cheapest places to access the mobile internet with data plans two times cheaper than in China.

Meanwhile, with wages in India rising by 10% in 2016, the average person's spending power will increase significantly in the coming decade. These new, richer, internet enabled consumers will also be ripe to participate in the online economy as, with almost 70% of its population under the age of 35, India has the largest youth population in the world.

Merchants looking to tap into the enormous market need to take cultural expectations into consideration. Indian online shoppers behave very differently from their counterparts in the US and China, says Worldpay. For example, by 2020, 39% of Indian online shoppers will be paying for goods and services online using direct bank transfers, while in the US and China 28% and 46% of shoppers respectively will be paying using e-wallets such as PayPal or Alipay.

One currently popular payment method is on the way out, though. Cash on delivery accounts for 22% of online purchases in India this year, but this is set to fall to nine per cent by 2020.

Ron Kalifa, vice chairman, Worldpay, says: "The world of Indian eCommerce may look small today, but all the data indicates we will see explosive growth in the coming years. With hundreds of millions of ‘mobile first’ shoppers poised to come online - particularly in rural communities - the opportunity is enormous, but the lesson to merchants is clear.

"Everything about this market - from its preferred payment methods to its unique demographic mix - demands that merchants that should enter it with a tailored strategy, that meets the needs of today and tomorrow. And that should start with paying attention to the way consumers want to pay."

Comments: (3)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 27 October, 2016, 11:54

As an Indian who stands to benefit from rapid growth of ecommerce in India, this was music to my ears. Until I read that COD is 22% - then it all turned to cacaphony. The actual COD % in ecommerce in India was 60% in 2015. In the first 6 months of 2016, it has actually gone up to 70% (Source). But, of course, this shouldn't stop a company that benefits from digital payments from singing the tune about COD falling to 9% by 2020.

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Russell Bell
Russell Bell - Fastbase Ltd - Wellington | 28 October, 2016, 03:40

Why do you think COD is so prevalent in India?  Surely that must be a nightmare for online retailers, returns must be through the roof.

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 28 October, 2016, 09:37

Online payments in India are subject to 2FA / 3DS. While that has made them more secure, they've also made online payments very rare because they increase friction and multiply risk of failed payments. Ergo COD is very popular. This is a frequent topic of many of my blog posts:  

Why I Went From Card To COD

Mobile OTP: Cyanide Or Caffeine For Online Payments?

Yes, COD indeed has increased cost of operations for etailers and has resulted in their returns going thru' the roof. But, then, COD has created the ecommerce industry in India. Even Amazon and Uber have had to offer it here India (unlike in any other market AFAIK).

So, I'd call COD a "nightmare embedded in a very sweet dream" for etailers in India!

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