India is en-route to overtake the US to become the world’s second largest e-commerce market, according to new research by leading payment company Worldpay.
Worldpay’s latest global overview of online consumer spending and payment habits, The Global Payments Report, has predicted that the value of India’s e-cmmerce market will be $2,039bn by 2034 – making it larger than that of the United States – and second only to China.
While India accounts for less than 1% of the world’s e-commerce spend today, the country’s online retail market is set to grow by an astounding 28% per year over the next four years, making it worth US$63.7bn by 2020.
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 2 x cheaper than in China.
Furthermore, with wages in India rising by 10% in 2016, according to research by Korn Ferry, the average Indian consumer’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.
All of these factors add up to make south Asia the next centre of explosive e-commerce growth after China, whose share of the world online retailing market will reach its peak in 2034, accounting for 50% of global spend, according to Worldpay’s projections.
Merchants seeking to capitalise on the huge opportunities offered by this market will, however, need to pursue strategies that reflect the cultural expectations of the Indian consumer – particularly when it comes to their preferred payment methods. Worldpay’s research has revealed that Indian online shoppers behave very differently from their counterparts in the US and China. 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 eWallets such as PayPal or Alipay.
Another strong signal that the Indian e-commerce market is at a tipping point can be seen in the decline of cash on delivery as a form of payment for online purchases. According to the Worldpay Global Payments Report, cash on delivery accounts for just over a fifth (22%) of payments for online goods in 2016, but this will decline to 9% of purchases by 2020.
Ron Kalifa, vice chairman of Worldpay, explained: “Until now, many Indian shoppers have chosen to pay for online purchases on delivery because they felt this was the safest way of navigating what can still feel like a very unreliable system. The fact that we expect cash on delivery to halve in popularity in India between now and 2020 is therefore a clear signal that Indian e-commerce is maturing fast and winning consumers over.
“The world of Indian e-commerce 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.”
With emerging markets such as India coming of age, Worldpay has published a list of guidelines for merchants looking to capitalise on the global e-commerce opportunity:
- Do your homework. The world of alternative payment methods (APMs) is very fragmented – there’s no one size fits all in any region so you’ll need to understand the best options for your company.
- Identify the business needs for your priority market. For those looking to tap into the Indian opportunity, it will be vital to cater for the cash-on-delivery trend over the next five years. But as this method declines in popularity, your long-term strategy should focus on other methods.
- Offer the right mix of payment methods, tailored to the needs of Indian consumers – it’s not about offering every single option available. Focus on the ones that will complement your business model.
- Cater to desktop users and optimise for mobile. Whilst the desktop market is growing rapidly amongst India’s urban population, mobile internet and m-commerce is taking off in rural areas. Your strategy needs to accommodate for this transition.
- Work with an experienced payment provider who knows how to remove friction from the end to end payment process and can offer the largest range of APMs/widest global reach.