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mCommerce in India: The Opportunity

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India's fast developing economy, coupled with a rise in the number of affluent middle class consumers, has led to a considerable appetite for eCommerce amongst the country's consumers. While fixed internet penetration remains lower than other developing markets, widespread smartphone ownership means that mobile commerce is accelerating faster than in Western markets. Here I explain how merchants can take advantage of the growing mCommerce opportunity...

According to World Bank statistics, India's vast population currently stands at 1.25 billion, second only to China in size. With the population's average age standing at just 26, This Is Money reports that India's middle class is expected to swell to 250 million by 2015, rising from a modest 50 million in 2005. The biggest single factor attributed to this rise in the middle class stems from domestic migration; more and more workers from India's rural areas are moving to the big cities to take up jobs in the booming tech sector. Management consultancy firm McKinsey predict that, by 2025, India will be the fifth largest consumer market in the world.

The country's economy is expected to grow by more than 6% in the next few years as Indian businesses and industries begin to cement their place as global leaders. Such a growth rate has even begun to usurp the other big emerging BRIC economies that India has traditionally competed with. Even more notable from an eCommerce perspective, however, is the expected Compound Annual Growth Rate of India's online economy by as much as 40% by 2015 (WorldPay's Alternative Payments report) . Alongside fellow BRIC nations China (estimated CAGR of 22%) and Brazil (estimated CAGR of 18%), India's appetite for eCommerce is set to explode from an already elevated position.

According to Flipkart, India's largest online store, the company aims to hit $1 billion in sales by 2015. Further afield, the Internet and Mobile Association of India (IAMAI) reports that the total value of eCommerce transactions is expected to reach a minimum of $70 billion by 2024-25 - a massive market for merchants to engage with.

What is the source of Indian eCommerce power?

With 65% of India's population sitting below the country's average age of just 26, purchasing products and services online is becoming second nature for a significant proportion of younger Indian consumers. Furthermore, despite the fact that only 10% of Indian consumers have a fixed Internet connection (WorldPay Global Online Shopper report), the GSMA reports that 3G connections in India are expected to grow by more than 100 million by 2014, while it will be the second largest global mobile broadband market by 2016. eCommerce in India is jumping ahead of the eCommerce adoption curve, embracing mobile devices to purchase goods and services instead of using desktops.

The mobile opportunity

Mobile usage in India is considerably higher than the global average, and it is arguably this channel that brings the biggest opportunity for retailers looking to sell to Indian consumers. 72% of Indian respondents in WorldPay's Global Online Shopper report are owners of a smartphone, while a further 40% have already purchased a product using their device - double the global average of 19%. This number looks set to grow further. 54% of Indian respondents have expressed an intention to purchase via smartphones over the next 12 months, and already have their phone loaded with an average 5.5 dedicated shopping apps each. The demand for digital goods is also expected to expand rapidly as consumers can make downloads in real time.

With so many Indian consumers looking to browse and purchase products through mobile devices, it is essential that merchants consider optimising their websites or offering bespoke platforms to accommodate this type of shopper. WorldPay's Global Online Shopper report found that 49% of Indian consumers would prefer to purchase goods from a mobile optimised website, while 37% would prefer to shop using an app. Merchants need to understand how their target consumer prefers to shop and create the optimum environment for them to do so to maximise revenue opportunity. Additionally, central to this process, is offering a hassle free payment function which allows consumers to pay using locally popular payment methods.

Is there an alternative?

While online payments in mature Western economies continue to be dominated by credit cards, alternative payments have already become embedded in the eCommerce culture of emerging economies. The long-established 'legacy systems' of plastic payments do not hold the same tradition in India (and they are mainly reserved for point-of-sale purchases), meaning that local payment types have been able to flourish and build popularity among Indian shoppers.

Real-time bank transfers are most widely used by Indian e-shoppers, and the number of users to continues to grow year-on-year. Merchants looking to sell to Indian consumers should ensure that the widest range of locally-recognised payment schemes are available. Payment service providers such as BillDesk are valuable here - offering a single point of access to a range of domestic payment services that merchants can access. Such choice means that trust is heightened amongst Indian consumers, reducing one of the most common barriers to completed check-outs.

Secure to ensure transactions

Consistent with other shoppers globally, payment security when buying online is an important consideration for 63% of Indian consumers (WorldPay Global Online Shopper report). Security assurances are needed to encourage spend, especially in the mobile commerce arena, where we would expect to see most activity from Indian consumers.

Different channels carry different fraud challenges and merchants need to understand how to apply the right strategy to the right channel to ensure the appropriate security measures are in place. Traditional industry security methods (such as VerifiedByVisa and MasterCard SecureCode) are very difficult to render on most mobile devices. Merchants are understandably keen to provide consumers with a seamless transaction; therefore careful consideration is needed of their fraud and security strategy. Risk screening tools can help bridge the gap, by using environmental factors to screen transactions. Additionally companies such as CellPoint and MoBank can offer solutions to enable authentication tools for mCommerce.

Think 'glocally'

The success of an eCommerce strategy is highly susceptible to local norms, rules and regulations. The cross-border opportunity is an attractive one and large global corporations may look to roll out their existing platforms to emerging markets, this however should be done with caution. Consumer preferences differ greatly by region and merchants need to understand these cultural nuances and localise and offer the most appropriate shopping channels to maximise the revenue opportunity.

India's fast growing economy, alongside its burgeoning middle class, presents an undoubtedly lucrative opportunity for merchants in the eCommerce space. While mobile commerce is very much an up-and-coming concept in many economies around the world, it is already established amongst Indian consumers. To make the most of the opportunity, merchants must look to offer Indian consumers bespoke mobile pages to browse and pay for products through their preferred shopping device. If this can be done securely and conveniently, and merchants can offer Indian shoppers locally recognised ways to pay, the reward could be huge.