DIGITAL | E-commerce: Rapid growth rate should accelerate
Travel dominates categories purchased online
With accelerated growth, e-commerce in India is expected to reach $34.2 billion by December 2017, according to Kantar IMRB in its Digital Commerce 2016 report. Indian e-commerce expanded at a compounded annual growth rate of 30 percent to $26.2 billion between 2010 and 2016.
Travel dominates categories purchased online, with 56 percent share. Tickets for domestic flights account for 40 percent of online travel purchases, but hotel bookings increased 60 percent year-on-year. Travel grew more slowly than other categories year-on-year, however, 29 percent compared with 49 percent.
The next major online sector, retail, commands around 36 percent share. Driven by sales of smartphones and accessories, which make up 41 percent of online retail sales, online retail grew 59 percent year-on-year. Other online categories include: public utilities, where people pay their bills; matrimonial services and classifieds; and other services, such as entertainment booking and food delivery.
Rising internet and smart phone use primarily drive e-commerce growth. Monthly Active internet users totaled 313 million in June 2016, according to IMRB I-Cube, which estimates that the total internet population (including people who may not use the internet monthly) could reach 450 to 465 million by mid-2017.
The implementation of the goods and services tax (GST), in July 2017, also is expected to stimulate growth on online sales because it simplifies the process of online buying by replacing myriad local and state levies with one national tax. Demonetization, intended to incentivize people to shift their spending from cash to digital, should also facilitate online purchasing.
Online shoppers come from throughout India, but are predominately urban, 63 percent male and age 25 to 34, although young adults and people 35 to 44 also actively shop online. For now, 69 percent of online purchasers prefer to pay Cash on Delivery (COD), compared with 29 percent who prefer debit or credit cards. The preference for COD reflects the continued dependence on cash and desire to pay for goods only after inspecting them. The need to inspect a product before purchasing also influences the number of people who search online but buy offline.