India to overtake US as ecommerce superpower
27 October 2016 | 12655 views | 3
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."