Smaller cities will be the source of 58% of urban E-shoppers and 43% of such spending by 2030: BCG report

Alongside rapidly growing internet users, digitally influenced shoppers and online shoppers have more than doubled in recent years to reach 260-280 million and 210-230 million respectively in 2021, stated  Boston Consulting Group’s (BCG) latest report titled, “Ten Things You Should Know About E-Commerce in India”.

The report also stated that digitally influenced retail spending to surpass $1.5 tn by 2030 at ~80% of total retail spends.

With one of the world’s lowest data and smartphone costs, growing internet penetration, and a proliferation of new online shopping channels, India is experiencing a dramatic rise in e-commerce and digitally influenced spending as India becomes the 2^nd largest digital economy by the number of internet users.

The report reveals a number of intriguing trends that include changes in who is shopping, where they live, what they buy, and how they shop.

Over-45 age group, which now accounts for more than a third of new shoppers in India and is the fastest-growing segment; and the “next billion,” or middle-income population, which accounts for 38% of new online shoppers. In addition, Indian women are rapidly increasing their presence in the internet marketplace, where they already make up about 43% of the country’s new post-pandemic shoppers.

Moderate and heavy shoppers are almost as likely to be over 45, female, and (often) from smaller cities—as they are to be metropolitan millennial males, the more traditional online buyers.

The report also highlights how smaller cities are playing an outsize role in e-commerce growth, with 30 of the top 50 mature e-commerce markets already small towns (Tier 2 & below) and further being the source of ~60% of urban e-shoppers and nearly 45% of spending by 2030.

The report stated that 50% of online urban shoppers lived in tier 2 or tier 3 cities in 2021, a percentage that is projected to reach nearly 60% by 2030, as the number of smaller-city shoppers is increasing at nearly double the rate of those in large cities. While these smaller-city shoppers do not spend as much per capita, they were responsible for more than 36% of online spending in 2021 and will attain an approximate 43% share by 2030.

The report also mentions how rural areas too show enormous potential for future online spending, with more than half of online shoppers and a fourth of the spending coming from rural by 2030.

The BCG study reported that 54% of online shoppers in India will hail from rural areas by 2030, and that they will account for 24% of online retail spending. The main sources of this growth are the youngest adult cohort (ages 18 to 24) and the rural affluent cohort (incomes of at least $13,000). In fact, the level of e-commerce penetration achieved by the affluent rural population was already four times that of “strugglers” (incomes of less than $2,000) in 2021.

Dramatic changes are occurring in the fastest-growing online categories post the pandemic. While Mobiles, Electronics and travel once dominated, categories such as online Food orders, FMCG, and Beauty and personal care (BPC) items have seen sales grow by three to five times in recent years and are expected to be the fastest-growing sectors too, along with Fashion. As a result of this shift, food and groceries was the second-most-common category to enter consumers’ online purchase baskets in 2021, up from the fourth position in 2017.

In addition, many of the new e-commerce buyers are not digitally savvy, finding online markets difficult to navigate. A few emerging e-commerce models are beginning to address some of these issues. Some powerful examples involve social commerce to guide them through digital purchases—even responding to voice messages from local merchants, the use of live streaming and video shopping as well as group buying.

The report calls out how contrary to popular belief, e-commerce is not just about value plays. While discounts and low prices trigger new shoppers, premium shopping is also growing as shoppers mature.

The report findings have extensive implications for businesses, platforms, and channels catering to the evolving e-commerce buyer in India. Above all, e-tailers and brands should “think fresh”—looking for new and better ways of working—given the influx of new post-pandemic shoppers who have different needs and often prefer to buy from emerging channels

The report findings were corroborated and substantiated by extensive, real-time transaction data gathered and analysed on the purchase transactions of over 800,000 consumers (about 200,000 e-shoppers), along with multiple industry reports and expert interviews. The survey underlying this report was conducted with over 10,000 Indian consumers, across more than 40 metros to tier 4 cities and 50 rural towns/villages, and was overseen by BCG’s Center for Customer Insight.

Nimisha Jain, Managing Director and Senior Partner, BCG India, said, “We expect online shoppers to nearly triple over the next decade and online retail spending to grow nearly sixfold to reach $300 billion by 2030. Covid has further accelerated online shopper and spend growth by 3-4 years. The pandemic pushed new-to-online shoppers and existing shoppers to increase their online purchasing, as physical shopping channels closed or became difficult to access”.

Kanika Sanghi, Partner and Director, BCG India, said, “As e-retail evolves, we are seeing the emergence of trends that businesses need to embrace across the consumer purchase pathway. For instance, marketplaces are now the greatest source of digital influence, overtaking search and in fact, the fastest-growing online purchase channel is social media and chat – growing faster than marketplaces, Brand websites and C2C portals”

A copy of the report can be downloaded here:

https://www.bcg.com/en-in/electric-2-wheeler-new-market-sparks-disruption

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