India: B2C e-commerce experiencing steady growth. A market to consider for 2021?

With a population of 1.39 billion, India is one of the most densely populated countries on the planet. In 2020, internet penetration was at 50% but has been climbing at a dizzying rate year on year. The same trend can be seen throughout the Asia Pacific region, with digital sales in the region projected to surpass 1.5 trillion USD in 2021. There’s little doubt that India is fertile ground for aspiring UK businesses looking to expand, but what can non-native businesses expect?

Around 530 million internet users in India are expected to buy goods and services online in 2021. As many as 80% of all e-commerce purchases were projected to be made via smartphone in 2020. Any businesses looking to expand their operations to India should take the rather unique makeup of the consumer market into account.

As recently as August 2019 India’s government eased foreign direct investment restrictions in several sectors in order to attract more business from overseas (base corporation tax is currently at 40% for international businesses). It’s something which Apple Inc and many other brands have been waiting for, and could be the perfect time to make inroads into the market.

Google and Facebook rule a divided market

Google is the number one search engine in India. In fact, Google gets a higher share of search traffic in India than anywhere else in the world at 95.47%.  Most Indians spend 2.3 hours per day on social media, primarily on Facebook. The social giant has 320 million registered users in India, with 99.4% of their userbase accessing Facebook via mobile in January 2020.

It’s also worth noting that India is still a very divided economy, and in some parts of the country it’s common to only earn the equivalent of $1 for a day’s work. It is therefore advisable for businesses not to think of the Indian market as a single entity, but rather a combination of very different markets.

Mobile wallet preferred method of digital payment

As of 2019, digital wallets accounted for a quarter of all online e-commerce payments in India. This means that businesses will have to consider accepting payments from popular digital wallets such as Airtel Money, Citi MasterPass and Citrus Pay. The sudden government withdrawal of 500 and 1,000 rupee notes from circulation (November 2016) encouraged a further increase in online transactions. Digital wallets are so popular in India that their use is expected to grow at a compound annual growth rate of 80% until 2021, whereupon it will become the most popular e-commerce payment method, with a 34.8% share of all online sales. Many experts think that India will become a cashless country within the next decade – excellent news for e-commerce retailers.

Tough barrier to entry for some

Several UK retailers have expressed keen interest in India lately, not least because of its rapid increase in spending and commerce. Companies like Tesco and Marks & Spencer have demonstrated a desire to partner up with businesses in India in order to gain some brand awareness, but they’re struggling to adapt to a different market. In the UK we’re used to the idea of ‘weekly food shops’, whereas Indians tend to visit fresh grocery stalls every day and cook fresh food. The challenge for retailers is to understand the demand for products and services, and how they can use cultural trends and behaviours to make their offer attractive.

UK fashion retailers are finding ways to make e-commerce work

However, British fashion brands are well perceived in India. Next has seen a great deal of success in Delhi in particular, where lots of consumers shop both in-store and online. In the UK, shopping online at Next means opening an account with a Next store card, but in India the brand has adapted to the market by dropping this requirement.

Amazon retails exclusively online and has seen great success in India by capitalising on events like Diwali. October 2016 saw Amazon’s first ‘Great Indian Festival’ – a period of 4 days where discounts and sales were offered in the build up to Diwali. In 2020, Amazon extended the Great Indian Festival sale to last for the duration of the month-long Dussehra to Diwali season.

“Diwali is a key celebration, with consumers spending approximately $4 billion USD online on home refurbishment, new clothes and gifts. Leading e-commerce sites target the holiday with their annual sales which are the biggest of their kind.” – Fatema, Oban Local In-Market Expert (LIME), India.

Key takeaways before going to market:

• Digital wallets are essential – Accept payments from the likes of Airtel Money and Citrus Pay.
• Think mobile – Almost half of all purchases are made from mobile devices.
• Diwali is huge – A great time to enter the market with deals and sales.

Contact us today to see how we can help your business explore new markets like India.

. . .

India stats

Disclaimer: This article was originally published in 15/12/2016 but has been updated in 19/03/2021