6 minutos de lectura 1 jun. 2016
A mother and daughter shop online with a tablet.

Seven ways to turn growth in India into profit online

6 minutos de lectura 1 jun. 2016
Temas relacionados Industria de consumo y retail

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  • Now that India shops online, how do you turn growth into profit (pdf)

E-commerce in India is growing fast. Successful players must innovate to meet their customers’ evolving needs. 

In India, the e-commerce revolution has become a reality. With billions in daily sales and staggering discounts, online shopping is making headlines and attracting both consumers and retailers. Traditional offline retailers are also going digital.

To better understand consumers’ online buying behavior, EY polled 690 online respondents in six cities in India. The objective of the survey was to know:

  • Why consumers shop online
  • What the demographic profile of an online shopper is
  • How online shopping carts vary for different consumer segments
  • What, if any, the specific characteristics are of product categories sold online
  • What factors influence online buying decisions
  • What major challenges consumers face

The survey’s insights emphasize what e-commerce companies can do to drive the next wave of growth and sustain the momentum in a constantly evolving market of hyper-growth and hyper-competition.

Heavy discounting fueled e-commerce’s initial growth, as players with deep pockets used price cuts to bring new consumers online. However, this strategy is unsustainable: it dents profitability and results in disloyal buyers who merely seek the best bargains. A company’s lasting success will depend on its innovation in meeting its customers’ needs.

Going forward, companies will have to use data and analytics to develop consumer-centric strategies that address more latent individual needs — e.g., increased convenience, timely delivery — and anticipate future challenges to outperform rivals.

Seven key points to sustain e-commerce growth

1.  It’s all about consumers

Sustaining in a hyper-growing e-commerce market

E-commerce in India has caught on like wildfire recently, in contrast to a decade ago, when the prevalent opinion was that too many challenges — low internet penetration, limited payment infrastructure (i.e., restricted use of credit cards), consumer psychology and behavior, logistics and warehousing issues — would prevent online shopping’s emergence.

Despite the challenges, online retail has grown at breakneck speed. And continued growth is expected in the sector, driven by favorable demographics, increasing internet penetration and the growing use of smartphones and their impact on consumer preferences.

2.  Convenience is key

Indian consumers are adopting e-commerce because of its increased convenience and the access it offers to an expanded basket of goods. And cash on delivery, same-day delivery and one-day delivery have addressed many consumer inhibitions.

Top reasons why people buy online

  1. Convenience
  2. Discounts and cheaper prices
  3. Multiple product options
  4. Multiple payment modes
  5. Good return policy
  6. Preferred brand availability
  7. Timely delivery



of respondents said that convenience was the most important reason for shopping online.

Discounts have become ubiquitous on e-commerce sites, and buyers have become used to them. Most of the online buyers polled will choose an online portal offering the best discount. To improve consumer retention and encourage repeat purchases, players are partnering with mobile/online wallet providers, which offer cash back on purchases.



of respondents said they would stop buying online if there were no discounts.

3.  Focus on middle-aged consumers, not just younger buyers

With growing competition, e-commerce players will also have to fight harder to attract new consumers. Despite its robust growth and rising popularity, e-commerce still remains limited to a section of the population.

Capture older consumers and retain younger ones

The internet user base in India is tilted toward the younger population, with 75% below 35 years old. However, consumers over 35, who are more financially independent and have higher spending power, are emerging to be just as important.

According to our survey, consumers in the age group between 31 and 54 years old are the highest spenders, while consumers below 30 buy more frequently.

Attract small-town shoppers

Although the internet user base is still largely urban, the rural user base is growing, with rising internet and smartphone penetration rates.

For all the major e-commerce players, the majority of orders come from small cities. One leading e-commerce player gets more than 50% of its orders from non-metro cities. It has set up dedicated rural distribution centers to deliver products received from small towns, and has partnered with the India Post to facilitate delivery.

Target women

Online shopping has so far been skewed toward male buyers, but changing lifestyles and the rising number of women in the workforce are changing this. The survey showed that women who shop online buy marginally more frequently than men. But they influence buying decisions much more than men.

4.  Understand buying patterns to drive volume

Although different consumer segments often use the same e-commerce platform, differences in their buying behaviors continue to persist. And different product categories also display different characteristics, such as frequency of product purchases, ease of purchasing online and average purchase size.

Define targeted consumer segment

Online shopping carts for men and women tend to vary, as they prefer products in different categories, and consumers choices also vary across age groups.

Understand inherent characteristics of product offerings

Electronics, especially mobile phones and tablets, and lifestyle products (apparel, shoes and accessories) are among the most popular categories online. The popularity of electronic products can be attributed to factors such as attractive offers and discounts, plentiful options and low product differentiation. The popularity of lifestyle products can be attributed to their comparatively low price, the flexibility to use cash on delivery and the ease of returns.

In contrast, furniture and food are considered by both consumers and retailers as better categories for in-store purchasing, although this mindset seems to be changing.

5.  Cashless transactions are crucial for sustainable growth

Another crucial factor for consumers is multiple payment options. Cash on delivery (CoD) has been instrumental in making online shopping popular in India. CoD transactions account for around 60% of overall sales in the Indian e-commerce market, much higher than in, for example, China, Brazil or the US.

However, our survey showed that middle-aged shoppers (31-54 years old) prefer cashless transactions (credit or debit cards or net banking). These shoppers are more financially independent and comfortable with cashless transactions. CoD shopping is popular with younger shoppers, who typically don’t have credit cards, and those older than 55, who are hesitant because of cybersecurity concerns.

6.  Targeted media is needed for effective communication

Online retailers must customize communication and promotion strategies to fit targeted consumers’ patterns. An advertisement’s impact depends in part on the channel through which it is conveyed.

Top five influential modes of communication or promotion

  1. Television
  2. Family and friends
  3. Promotions and offers
  4. Social media
  5. Other (e.g., email, SMS)

Social media influences younger buyers


of consumers younger below the age of 21 said that social media influences their buying decisions.

7.  It’s not about discounting alone

India’s still-young e-commerce market has grown in part because of marketing strategies such as heavy discounts and free home delivery. However, this has often come at the expense of profitability.

The discount-based model is effective only in the early stages to attract consumers. As competition intensifies, e-commerce players will need to gradually reduce discounts and provide new value by addressing consumers’ needs.


India’s digital consumers are becoming smarter, better informed and more demanding. E-commerce companies must understand and respond to changing consumer demands and behaviors to remain relevant.

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Temas relacionados Industria de consumo y retail