Digital spending expected to grow to $100 billion by 2020: Google and BCG report

Women, new users (non-tier 1 cities) and 35-year-plus shoppers will drive this growth, states the report.

Boston Consulting Group (BCG) and Google India has released a report, 'Digital Consumer Spending in India: A $100 billion Opportunity'. The report is based on a qualitative and quantitative research executed by Nielsen. Insights from this research were then combined with BCG's proprietary sizing model as well as Google and BCG's industry intelligence.

The report projects that the potential for digital spending is expected to grow 2.5 times from $40 billion to $100 billion by 2020 led by sectors such as e-comm ($18-45 billion), travel and hotel ($11-20 billion), financial services ($12-30 billion) and digital media ($200-570 million). The report also finds that women, new users from non-tier 1 cities and 35-year-plus shoppers will drive this growth.

The report states that with deeper penetration of mobile phones and affordable data plans, the number of online spenders will not only increase over the next few years but there will be a dramatic change in the users’ profile. It also estimates that by 2020, women shoppers will increase 2.5 times and older shoppers will increase more than 3 times compared to today. With the improvement of infrastructure, online shopping will take off in India from cities beyond metros and together it is expected to comprise more than 50% of the total online shopper base by 2020.

Speaking about the key findings of the report, Nimisha Jain, partner and director, The Boston Consulting Group, India, says in a press note, "There is a clear evolution as consumers move from awareness of online platforms to their first purchase and further down to become more frequent buyers – triggers and barriers to online purchase evolve with each stage. Very different actions are needed to unlock growth and move consumers from one stage to the next."

The report highlights that there are 75-80% internet users who do not spend online currently. This underscores that even though the digital media has gained ground over the last few years, the actual digital spending is still in evolutionary stages in India. The BCG-Google report also outlays the key triggers and barriers at each stage of online consumer evolution with an aim to help drive digital spending. The report draws out implications for companies across each stage, with nuances highlighted to give a category perspective of relevant implications.

Nitin Bawankule, industry director, Google India, adds, “Digital spending in India are at a cusp of significant wave of change, while we have seen enthusiastic response to adopting newer forms of digital payments in the last few years, the base is still relatively small. The ecosystem needs to focus on creating a very targeted value proposition for different segment of users and across different categories to drive larger adoption. For example, in Food & Grocery category, convenience becomes a key trigger for frequent shoppers while discounts are important for occasional shoppers and quality is a key barrier among offline shoppers.”

The report calls out specific actionable insights for different sectors to drive adoption among the non-buyers. For the price conscious Indian users, discounts can be a good trigger to drive trials and building comfort with digital and guiding them along the purchase pathway.

Among occasional shoppers, which comprise of 75-85%, value added services will be the key differentiator - innovative delivery models, delivering a real value proposition (over and above deals/discounts) and ensuring hassle-free post-sale service. And, for ‘Frequent Shoppers’ comprising of 15-25%, it is imperative to create unique propositions like loyalty programs and develop customized communications to drive stickiness.

The report also highlights nuances in implications across product categories (like fashion, durables etc.), service categories (like travel and hotel, financial services, etc.) and content and information categories (like OTT, real estate, job search, etc.).

To view the report, click here.