(with inputs from Nikhil Pahwa)
The gross merchandising value (GMV) of e-commerce industry will witness a four times increase and reach $60 billion by 2020, according to a study titled ‘Digital Retail 2020’, conducted by Google and A.T. Kearney. The report claims that online retail will contribute about 25% to the total organised retail sales by then.
Important: this report is based on research of just 3000 consumers across 20 cities, and thus should only be seen as indicative of trends. Google has a vested interest in projecting growth since ecommerce companies are key spenders for the company in India.
Some Highlights from the study:
– Increase in Online Shoppers: The total number of online shoppers is expected to grow 3.5 times to 175 million in 2020 from 50 million in 2015, and about one-third or 33% of customers will drive two-thirds of total shopping.
The growth in the e-commerce space is not just from metropolitan cities but 60% of the interest in online shopping came from non-metro cities.
– Top shoppers: Of the 175 million online shoppers in 2020, the top 60 million (“high value” customers) will contribute to 68% of the total spend and will contribute about $40 million to the total.
– People willing to pay for premium services? Strangely, in a country where people switch sites for a minor discount, this report claims that “over 90% of the online buyers will be willing to pay for premium services. About 46% online buyers who participated in the study said they will be willing to pay extra charges for faster delivery, 37% for hassle free return and 35% were willing to pay more for an extended warranty.”
– More women buyers: The report predicts that there will be five times growth in the number of women shoppers to more than 40% by 2020. They are expected to more than double their share of online spend, given the convenience of delivery and pick-up, access to multiple products and availability of latest designs. About 55% respondents said they will increase their spend across most categories if they are able to choose their delivery time and 40% were willing to pick-up their shipment to avoid divulging personal details. The report also said more women will start shopping if e-tailers also have an offline presence.
The top three categories purchased by women buyers include lifestyle and personal care products and consumer electronics.
– Lifestyle will be bigger than electronics: This is unlikely to happen, but the report claims that lifestyle as a category will overtake consumer electronics to become the largest online category by 2020 at 35% of the total online spends. And though both categories will continue to dominate spend, the consumer electronics category will be at 20% by 2020. Google’s Rajan Anandan also said that every second Google search is related to fashion.
He also informed that niche categories like home furniture and furnishings and personal care will see high adoption due to assortment and convenience of purchase, especially in tier II and III cities.
– People will continue shopping if discounts are stopped: Over 90% of buyers claimed that they would not stop shopping online if discounts were discontinued. The report states that for the current online buyers, product assortment and convenience of ordering and delivery are the top reasons for non-discount purchase. These factors hold true for the new buyers also, though convenience will be the top purchase driver.
– Mobile wallet will reduce cash on delivery requirement: The share of Cash-on-Delivery (COD) transactions is expected to reduce from 57% in 2015 to 45% by 2020. According to the report, Mobile wallet share will double to reach 15% from current 8%. It also said that customers in age groups 25-36 and 36-45 years show 1.5 times more preference for cashless payment methods relative to age groups 18-25 and 45+ years.
– Omni-Channel presence: Customers will demand an omni-channel presence and not having one could cause players to lose out on 20-30% of potential buyers in categories like home & furnishings, lifestyle and consumer electronics.
According to the study, in home and furnishing over 60% buyers wanted physical stores to be able to see and test the product before buying. In lifestyle, 40% respondents said that offline stories will help in alterations of clothes and for consumer durables 60% buyers wanted salesman guidance for installing and using the product.
– More Online sellers: The base of online sellers will need to grow by more than 5 times to cater to the increase in demand from users across geographies and improve delivery capabilities, especially since product volumes will witness a 10 times growth by 2020.
– Barriers to buying online: The main impediments to non-buyers involve the lack of instant gratification and the inability to touch and feel the product, especially in the case of garments. Another major issue is the delivery time, which can be more for areas beyond the metros. He also said that the buyer lacks the trust in product delivery and quality, according to Anandan.