Enhancing literacy and building locally relevant solutions can drive usage and transactions among Internet users in the country, helping unlock a $50 billion opportunity in the e-commerce space, a report said on Thursday.

The report by Google, Bain & Company, and Omidyar Network stated that average data usage on mobile phones in India at about 8 GB a month per subscriber is at par with developed markets.
However, only 40 per cent of India's 390 million internet users are estimated to be transacting online.


"There is potential to unlock over $50 billion in online commerce in India by driving awareness, usage and transactions among the current and next set of Internet users and shoppers," it said. The report is based on inputs from about 3,400 respondents.

It said 80 per cent of the 390 million Internet users in India are estimated to be from affluent socio-economic segments and the penetration amongst lower income segments is only 13 per cent.

Also, the drop-out rates remain high. As many as 54 million users today have not carried out a transaction after the first trial purchase, the report noted, adding that a significant number of people still complete their transactions offline after their research online.

"With the user growth and adoption story on a fast growing trajectory, there is a need to grow consumer confidence to make digital a medium of choice for services and transactions for users across the country," Google India Industry Director Vikas Agnihotri said.

He added that the report outlines 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.

The report said it takes 3-4 months for a typical Internet user to make the first online transaction and trust in the channel increases as users spend more time on the internet.

However, a large number of users (54 million) stop after the first online purchase due to issues with user experience, it pointed out.

"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," Bain & Company partner Arpan Sheth said.

The report said government and private partnerships will play an important role in creating access, awareness and literacy to enable more users to go online.

Also, building locally-relevant solutions across content and use cases will help drive user-engagement, which will be "key to unlock 130 million new users and doubling Internet penetration in rural areas".

The report also noted that through omni-channel presence, reinforcing product quality in brand messaging and assuaging concerns on product-returns, businesses can build trust through a superior pre- and post-sales experience.

"The key is to build solutions aimed at those who are coming online over the next five years or the next half billion as we describe them. The report underlines our belief that entrepreneurs must focus on long-term, sustainable solutions that put trust and engagement front and centre," Siddharth Nautiyal, Investment Partner at Omidyar Network, said.