Google-BCG study: Digital consumer spending to jump 2.5X, touch $100 Bn by 2020

New Internet users from smaller cities are going to drive next phase of digital consumer spending in India. The digital spending is expected to grow 2.5 times from $40 billion to $100 billion by 2020, said a joint report released by Google India and The Boston Consulting Group (BCG).

This growth will be inclusive of sectors such as e-commerce ($18-45 billion), travel & hotel ($11-20 billion), financial services ($12-30 billion) and digital media ($200-570 million).

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With a deeper penetration of mobile phone and affordable data plans, the number of online spenders will increase in next few years. In last four years, Internet users have grown nearly doubled to reach 430 million.

Though India is still behind the markets like the US and China in the adoption of online transactions. According to an estimate, only one in five Internet users in India buy products online compared to four in five for the US and three in five for China.

The report also added that women shoppers will increase 2.5 times and older shoppers (aged above 35 years) will increase more than three times. With the improvement of infrastructure, online shopping will take off in India from cities beyond the metros and together it is expected to comprise more than 50% of the total online shopper base by 2020.

Speaking about the findings of the report, Nitin Bawankule, Industry Director, Google India, said that India still has to adapt to newer forms of payments. The ecosystem needs to focus on creating a very targeted value proposition for a different segment of users and across different categories to drive larger adoption, he said.

Meanwhile, Google-BCG report laid out specific actionable insights for different sectors to drive adoption among the non-buyers. The existing key barriers in digital spending includes touch and feel in the fashion category, quality concern in the food and grocery and service and repair concerns in the consumer durables category which need to be addressed by brands.

Value-added services including innovative delivery models are driving a real value proposition and ensuring hassle-free post-sale service, will play a key role. At present, around 75-80 per cent Internet users do not spend online.

Whereas for frequent shoppers, who are around 15-25 per cent, making unique proposition like loyalty programmes and develop customized communications will help in driving them.

"The future of the internet is in the hands of the next billion users—the latest generation of internet users to come online on smartphones in places like Brazil, China, India, Indonesia, and Nigeria," said Caesar Sengupta, VP, Next Billion Users Team.

The findings in the report are based on qualitative and quantitative research conducted by BCG’s Centre of Customer Insight (CCI) combined with the qualitative and quantitative studies conducted by Nielsen and Third Eye Research.

A fortnight ago Forrester in its report marked online retail growth over 100 per cent during 2013-15 but it remained flat in past two years. In 2017, the share of online retail climbed 2 per cent, while brick & mortar has 7 per cent penetration of the overall retail market. The report predicts 2018 as the year of offline retailers.