India’s hinterland to outpace urban customers in online shopping

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Published: August 7, 2019 8:12:16 PM

The vernacular offering has been among key areas for digital shopping apps such as Amazon and Flipkart as they focus on Hindi language user base as well and social network platforms such as ShareChat etc., that caters to a vast non-English speaking population.

Almost 70 per cent of gross merchandise volume (GMV) in online retailing is likely to be contributed by these cities and rural areas by 2023 vis-a-vis 40 per cent in 2018.

As digital penetration expands into India’s tier-II cities and beyond including rural areas on the back of affordable data connectivity and smartphones, the number of customers coming online for shopping is expected to outpace urban internet shoppers. Almost 70 per cent of gross merchandise volume (GMV) in online retailing is likely to be contributed by these cities and rural areas by 2023 vis-a-vis 40 per cent in 2018 as user preference may evolve particularly with the younger population who are ready to explore better options for shopping that internet provides them, according to a report by management consulting firm RedSeer.

The unique number of annual online product shoppers in tier-II and beyond cities and rural areas stood at around 50 million in 2018 that is expected to grow to approximately 170 million in 2023 — 28 per cent of total (around 270 million) such shoppers even as 11 per cent (100 million) will come from tier-I cities in 2023. In terms of e-tailing GMV by customer type, the value from these cities and rural areas was $40 billion last year that will grow to $70 billion in 2023 while GMV value share from tier-I cities would decline from $60 billion last year to $30 billion in 2023 out of total value of $70-75 billion, the report titled ‘Vernacular is Now, Not the Future’ said.

This growth in semi-urban and rural shoppers would also be led by an increase in the number of vernacular users or users who consume content in a language other than English. The vernacular offering has been among key areas for digital shopping apps such as Amazon and Flipkart as they focus on Hindi language user base as well and social network platforms such as ShareChat etc., that caters to a vast non-English speaking population that is either already using the internet or would be coming up online for the first time from semi-urban or rural areas.

India’s active internet user base stood at 530 million in 2018 that included 260 million users that could be ‘monetized’. This unique user base is expected to grow to 400 million by 2023 as the overall number of internet users is likely to grow to 850 million by 2023. “Consumption of digital content in vernacular language is a preference for 80 per cent of all monetizable users, that is, 210 million users with an annual spending power of $300 billion,” the report said.

Interestingly, this rise in the number of such monetizable vernacular users will help vernacular digital ad spends by companies like Google or Facebook grow by around 10x, translating into a $3 billion opportunity in 2023.

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