Online retail: Address high user dropouts or face $50 bn opportunity cost

Only 40% of 390 million internet users transact online, highlights a report

As many as 54 million Indian users stopped online transaction after their first purchase in the last 12 months, according to a research that also concludes that India's e-commerce will have to address some key issues to tap its potential and keep pace with internet expansion. According to a joint report by Bain and Company, Google and Omidyar Network, the country’s online retail market is a $50 billion opportunity waiting to be realised.

For online retail to grow and realise its potential $50 billion size, e-tailers and other stakeholders need to address a few key issues such as: High user drop-outs (54 million of the 140 million affluent shoppers have not made a second purchase online), get more women to use the Internet (33 per cent of men in India have access to the Internet, compared to 22 per cent women), and bring more people from rural areas online (55 per cent of urban India has access to the Internet versus 15 per cent of rural India).

The report captures the changes in India’s emerging Internet landscape over the last few years. The findings show data usage on mobile is at par with developed markets (8 GB/month/subscriber). With an average of 40 million new internet users added per year to online transactions, the report highlights that only 40 per cent of India’s 390 million internet users transact online. Of this, about 90 per cent (140 million) were from relatively affluent backgrounds.

Earlier Business Standard reported that Indian online shoppers spent an average of $224 in 2017, which was less than a tenth of what the average user spent online in the US at $2,237 in the same year.

Indian customers prefer offline to online transactions

The report listed out the prospective Indian customers who avoid making online transactions showing that the majority (56 per cent)  of non-transactors are males. 60 per cent of them are from urban areas out of which, 80 per cent are under the age of 34. 

Out of 160 million non-transactors or those who left after transacting online once and left, 30 million are categorised as online dropouts. Another 30 million from this lot are ones who come online to research but do not transact. 

Another survey showed details of the service transactors. Out of 60 million service transactors, 24 million have purchased a product online but then stopped. the remaining 36 million never moved to purchasing products online. 

Moreover, out of the 80 million product transactors, 40 million are customers whose first online purchase was a product. Usage to purchase wait time is 3-4 months.

What made customers prefer offline to online purchases?

The report stated some key points for non-reliance on online purchases.

• Lack of trust in getting the right products online: 18 per cent of respondents mentioned as a top concern
   
• No touch and feel for the product/service when brought online
   
• Offline channels more convenient—main point highlighted by 12 per cent of respondents 
   
• Grievance redressal (how to return a product, money refund, etc.) also a major concern with 10 per cent of respondents 

Who are the non-users?

The report stated that the majority crowd is from rural areas, which is around 65 per cent. For non-users from urban centres, 50 per cent are from urban small towns.   

Women form the majority of the non-users