Digital retail to drive 25 pc of the organised retail sales in India by 2020 at $60 billion

Online retail will reach $60 billion in gross merchandise value by 2020, finds the “Digital Retail 2020” report released on Tuesday by Google and A.T. Kearney, a global management consulting firm. At this number online retail will account for 25 percent of the total organised retail sales in India and non-metros will drive 60 percent of the overall growth of e-commerce.

The report also revealed that 90 percent of the online buyers will continue to pay for premium value added services, 46 percent of them will pay extra charges for faster delivery, 37 percent for hassle free return, and 35 percent for extended warranty. With the adoption barriers likely to overcome, the online digital industry will witness 125 million new shoppers by 2020.

Adoption barriers

Currently, the adoption barriers that are preventing buyers to come online include lack of touch and feel, long delivery time, and delayed gratification. Forty percent of the consumers in metro cities are still facing disappointment when it comes to delivery time. However, lack of touch and feel is a key deterrent for 40 percent of customers in Tier II and III cities.

Overcoming the touch and feel in the categories such as jewelry, personal care and furniture and furnishings is the need of the hour. In home and furnishing, over 60 percent of buyers still prefer to visit physical stores before buying products. In lifestyle, 40 percent said that offline stores help in alternation of clothes and for consumer durables, 60 per cent of buyers need salesman guidance for installing the product.

The total number of online shoppers will grow to 175 million and the top 60 million will contribute to 68 percent of total spending.

Rajan Anandan, VP and MD of Google SEA and India, said,

The next three to four years will be critical for the industry to get on the path of sustained profitability. Some of the areas that will accelerate and support profitability include following a focussed approach to drive deeper engagement with 60 million high value customers as they will drive two-third of the total spends on e-tailing. Innovative delivery models and creating omni-channel presence will help on board new online shoppers and help grow the overall share of e-tailing from the organised retail industry in India.”

Growth of online women shoppers

According to the findings of the report, online women shoppers will grow five times by 2020 driven by their spending behaviour in lifestyle categories such as apparel and accessories. Moreover, they will increase their spend if they are given the flexibility in terms of delivery time and more pick up locations.

Lifestyle will overtake consumer electronics and become the largest online category by 2020 at 35 percent of the total online spends. Consumer electronics will be at 20 percent. While niche categories like home (furniture and furnishing) and personal care will witness high adoption rate in Tier II cities owing to assortment and convenience of purchase. One out of four women expressed concern over e-tailors having offline presence.

Online sellers need to grow by 5X

Increased demand and the recent regulatory push will eventually fuel the number of online sellers across categories and geographies. With the recent regulatory guidelines on the 100 percent FDI on direct marketplaces, one seller can contribute 25 percent of the total sales. This will further drive the online retailers to diversify the seller base. The report stated that 50 percent of organised retail will be influenced by digital in 2020.

COD transactions will reduce

Cash on Delivery transaction, which is currently estimated at 50 to 60 percent, will reduce to 45 percent by 2020. Fifty-five percent of online volumes will be driven by cashless transactions as opposed to the current 40 percent. The share of mobile wallet is likely to increase from 8 to 15 per cent by 2020.

Ajay Gupta, Partner with A.T. Kearney, said,

As the internet continues to grow, digital presence is paramount for brands and organised retail. It will influence 50 percent of all purchase decisions, be it in discovery or comparison. Our data reveals that majority of buyers will continue to purchase online even if there are no discounts. With the right game plan and focussed efforts, the e-tailing industry will grow at a healthy CAGR of 40 percent.”