India has the potential to generate e-commerce value of over $50 billion by driving awareness, usage and transactions among the current and next set of Internet users and shoppers, said a report on Thursday.
More than 500 million Indians will constitute the next wave of online consumers, according to a report jointly released by Bain & Company, Google and investment firm Omidyar Network.
With an online buyer spending on an average $224 per year, e-commerce retail shopping in India is 10 per cent of what Chinese spend, according to the report.
Currently, only 40 percent of India's 390 million Internet users transact online, said the report titled "Unlocking Digital for Bharat: $50 Billion Opportunity".
India on an average adds 40 million new Internet users per year to online transactions, it added.
"While online spends are still low given lower per capita incomes, there is huge potential to unlock value by addressing user concerns at various stages of the digital curve; however, the path won't be easy for businesses and they will have to innovate and be patient to monetise this user base and generate value," Arpan Sheth, Partner, Bain & Company and one of the authors of the report said in a statement.
Based on a survey of 3,400 customers, the study found three key characteristics which affects India's digital ambition - inequitable distribution of users across socio-economic classes, small transaction base, and large drop-out rate.
Of the 390 million Internet users, 80 per cent are from affluent socioeconomic segments and penetration amongst lower income segments is only 13 per cent, the findings showed.
It also showed that only 40 percent of the Internet users today carry out digital transactions. The remaining 60 per cent do their research online but complete the transaction offline.
As many as 54 million users today have not carried out a transaction after the first trial purchase, the findings showed.
"With this report, we outline the need for much focused intervention for different subsets of the users who are now online and grow consumer confidence to make the digital medium a viable platform for all," Vikas Agnihotri, Industry Director, Google India, said.
According to the report, it takes three to four months for a typical Internet user to make the first online transaction.