Middle-aged consumers key for e-commerce growth

Mumbai, 13 March 2016

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Middle aged consumers in the age group of 31-54 spend the highest while making online purchases, according to recent report by EY titled ‘What will it take to sustain e-commerce growth?’, and will be key to sustain the next phase of growth in the country.

The report, developed basis a survey of about 700 online shoppers across 6 cities in India, consumers in the age group of 31–54 are the highest spenders and consumers below 30 years of age buy more frequently. Middle-aged shoppers also seem prefer a cashless transaction (using credit/debit cards or net banking), according to the survey.

Additionally, while the first wave of consumers to the online platform was driven by deep discounting, about 61% consumers said they will stop buying online in the absence of discounts, notes the report.

Thus it has become vital for e-commerce companies to understand consumers’ buying behaviour and gain superior insights for making better business decisions to ensure long term success. The 7 key areas companies need to focus on to sustain growth, as highlighted by the report, are:

  1. It’s all about consumers

    Indian consumers are becoming more digitally savvy, with over two-thirds of India’s population owning a mobile phone. The digital consumer is able to shop anytime anywhere, thereby, driving growth for e-commerce. Therefore, to succeed in the long term, both online and traditional retailers must fully embed omni-channel in their overall corporate strategy and organizational culture. Companies will have to reinvent themselves to keep pace with fast changing consumer preferences and develop sustainable business models keeping the consumer at the center.

  2. Fickle consumers – delivering on promise key to retention

    According to the survey, 40% of the consumers acknowledged convenience as the most important reason for online shopping, and about 30% mentioned timely delivery and good return policy as the reasons. It is therefore imperative to not only acquire customers but also to retain them. The report suggests a three pronged strategy to achieve this – enhance customer satisfaction, offer targeted discounts, and ensure timely delivery and a good return policy.

  3. Middle aged consumers – the cream of the pie, not just the youth

    Financially independent consumers above 30 years with a high spending power, are emerging as an important target. The survey also showed that 30%–60% of online buyers purchase at least once in two weeks. Capturing these untapped consumers will be a significant opportunity. Additionally, the survey highlighted that the women who shop online, tend to buy marginally more frequently than men. Though, women tend to influence more online purchase decisions for their spouse, with the incidences of spouse making decision for men increasing with age.

    The report suggests a three-pronged strategy to capture new consumers – prioritise target consumer segments, expand in Tier II/III cities and beyond, and increase share of women shoppers.

  4. Assisted buying to drive volumes

    E-commerce is uniquely positioned to track the buying journey of an online consumer, and will have to consider these differences while devising strategy specific to consumer segment and product offerings.

    The report suggests targeting individual customer by tracking a consumer’s buying journey. It also recommends players to develop category specific offerings and to offer discounts/ better pricing at the next purchase based on category frequency.

  5. Cash-on-delivery (CoD) – a necessary evil; cashless transactions crucial for sustainable growth

    While middle-aged shoppers prefer a cashless transaction, CoD is more popular in case of young (<30 years) and old (55+ years) consumers. Of the total respondents, while 71% of regular online shoppers prefer cashless transactions, 64% online shoppers have concerns about sharing card details.

    The report suggests encouraging cashless transactions by providing incentives, addressing cyber security concerns and encouraging use of mobile/ online wallets. Incentivizing buyers to move toward cashless transactions will likely help companies reduce cost burden and improve profitability over the long run.

  6. Targeted medium only way for effective communication

    Despite growing proliferation of social media, television continues to be the most influencing factor for Indian consumers due to its reach. For consumers under 21 years of age, 74% of respondents said that social media influences buying decision. On the other hand, 64% women said that family and friends are a key influence, while 51% of respondents over 55 said emails and SMSes help them finalise purchases.

    According to the report, companies will have to use the right channel for communication based on targeted consumer segments to achieve the most meaningful impact. Additionally, using local languages will help companies reach an expanded section of the society to drive future growth.

  7. It’s not about discounting alone, quality and efficiency matter equally

    According to the survey, 96% of the women consumers below 21 years of age buy only for discounts, while 86% of the respondents regularly look for discounts. Moreover, 55% do not want to pay for home delivery. In order to sustain over a long period, e-commerce players will have to reduce discounts gradually and look at offering targeted discounts, develop a hybrid pricing strategy, charge for fast delivery, and address operational issues.

You can access the report at ey.com/SustainECommGrowth.


About EY

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