Why India will be the world’s second largest eCommerce market and how to act early
The aptly named James Cash Penney, founder of America’s JC Penney stores, once said “Growth is never by mere chance; it is the result of forces working together.”
Penney was no doubt referring to the drivers behind business growth, but the same holds true for a country’s economic growth. A number of factors need to align for an emerging nation to become a commerce superpower, including widespread Internet penetration, access to technology, and enough wealth to drive spending.
This is precisely what’s happening in India, where rapid technological change and rising income levels are combining to create one of the world’s great untapped eCommerce opportunities.
Despite currently accounting for just one percent of the world’s eCommerce spend Worldpay has predicted http://worldpay.globalpaymentsreport.com/ that India’s online payments market will be worth $2,039bn by 2034. That will bring it ahead of the US and make it the world’s second largest eCommerce market behind China.
In the shorter term, Worldpay expects India’s online retail market to grow by an astounding 28% per year over the next four years, reaching US$63.7bn by 2020.
What’s driving this growth?
There are a few forces converging and contributing to India’s eCommerce boom.
Internet access is on a rapid rise. There will be 730 million Indians online by 2020, roughly 250 million more than today, many of whom will be mobile-first consumers. To add to this, India is the world’s fastest growing smartphone market and one of the cheapest places to use mobile internet. Data plans are often up to two times cheaper than they are in China.
Indian consumers are also earning more money. Wages rose 10% in 2016 alone and the average citizen’s spending power will continue to increase as this trend continues throughout the next decade.
Crucially, India has the largest youth population in the world. Almost 70% of its citizens are under 35 years old, and are therefore as familiar with mobile and digital technologies as they are keen to participate in the online economy.
What does it take to be successful?
Given the scale of India’s consumer-base, we will see more merchants begin to stake their claim on the country’s eCommerce market. However, they need to tailor their approach to local shopping habits and payment preferences to have any real success.
India is in the early stages of its eCommerce transformation, which means shoppers are not yet fully comfortable with online and mobile payment methods. Worldpay’s research predicts that 39% of the country’s consumers will still be paying for goods and services by direct bank transfer by 2020. By that time, 46% of Chinese shoppers will be making purchases using eWallets like PayPal and Alipay.
In this environment, a more nuanced approach to eCommerce is advisable. What follows are some guidelines for merchants to consider when developing their eCommerce strategy in India:
- Do your homework on Alternate Payment Methods (APMs): Every country has different preferences. For now, Indian consumers still prefer cash-on-delivery when it comes to online purchases, for instance[1], and merchants need to find the balance between tailoring to this preference and guiding shoppers towards more advanced payment models.
- Identify your local priorities: Even if Indian consumers prefer traditional APMs like cash on delivery today, a young mobile-first population still demands a convenient payments experience. Brands need to ensure their eCommerce offering is optimized for smartphone users regardless of how customers choose to pay online.
- Offer the right mix of payment methods: When it comes to APMs, the best approach is not to offer every option under the sun. A strategic offering is best, focussing on the methods most relevant to Indian consumers and aligning those with your brand’s selling model.
- Don’t forget desktop users: Mobile will be the driving force behind eCommerce growth in India, but the desktop market is also growing rapidly among the country’s higher spending urban population. The most successful eCommerce strategies will therefore be those that accommodate for both platforms.
- Draw on third party experience: Emerging markets evolve more quickly than established ones, and in unique ways. Working with a payments processor that has experience helping merchants enter India successfully will help merchants hit the ground running.
Kevin Dallas is chief product officer of global ecommerce at Worldpay, he can be found tweeting @kevinrecommends