Only 40 per cent of India's 390 Mn internet users transact online

In spite of having the second-highest number of active Internet users in the world, India has only 160 Mn (40 per cent of 390 Mn active users) who transact online.

On average, India adds 40 million new internet users per year.

There is potential to unlock over $50 billion in online commerce in India by driving awareness, usage, and transactions among the current and next set of internet users and shoppers said a joint study by Bain & Company, Google and Omidyar Network titled ‘Unlocking Digital for Bharat: $50 Billion Opportunity’. This will be driven by more than 500 Mn Indians who will constitute the next wave of online consumers.

According to the report, it takes three to four months for a typical internet user to make the first online transaction, however, a large number of users (54 million) stop after the first online purchase due to issues with the user experience.

The average online spending of $224 per online buyer much lower than other markets. The US and China online spending are almost 9 to 10 times ahead of India.

In terms of penetration, India is far behind China and Brazil with only 28% penetration as compared to 64% in Brazil and 53% in China.

There is a need to grow consumer confidence to make digital a medium of choice for services and transactions for users across the country, said Vikas Agnihotri, industry director, Google India.

It will take anywhere between three to five years to reach the target (next 500 Mn), the report further added given overriding of its many challenges.

Besides, the user base in India is not parallel compared with other countries; rural areas and women have less access. Last year rural internet penetration had merely 15 percent. Consumers experience is also a major barrier to accessing the internet.

Among things that will lead to rising in usage and transactions, the report suggested the need to create an ecosystem for the self-employed to diversify and augment income through digital. Government and private partnership to create access, awareness and literacy. They should build locally-relevant solutions across content and use cases to drive user-engagement to double Internet penetration in rural areas and to increase participation in women.

For the tech-enabled business to achieve profitability, the report said they need to devise alternate monetisation strategies.