India is the fastest growing major economy in 2018 with a growth rate of 7.4 percent and a supportive macro environment. Domestic consumption towards the country’s growth is mainly led by three factors. These are (1) rising affluence, (2) growing urbanization and (3) rising consumerism, with India expected to become the world’s fifth–largest consumer market by 2025.
By Malcolm Monteiro, CEO, DHL eCommerce India
The Incredible India story
The geographic pattern of India’s income and consumption growth is shifting too.
By 2025 the Indian consumer market will largely be influenced by its growing urbanization, with 62 percent of consumption within urban areas versus 42 percent today.
While much of this new wealth and consumption will be created in urban areas, rural households will also benefit, with annual real rural income growth per household accelerating from 2.8 percent over the past two decades to 3.6 percent over the next two decades.
Like many other markets, India’s consumption story is being bolstered by its rapidly growing millennial and Gen Z segment – a young and tech-savvy population, bolstered by rising literacy, education and disposable income. This translates into a consumer market that is heavily tied to mobility and connectivity, enhanced by the proliferation of internet-enabled devices such as mobile phones and 3G/4G penetration.
These habits and patterns have changed due to digitization which is rapidly changing the lives of the Indian population at large. The ‘mobile revolution’ in India is a unique one; mobile data adoption rates have rocketed and the ‘love story’ of Indians and Chinese mobile phone manufacturers with their attractive price tags have both contributed greatly to this trend. This has created a base for a strong digital infrastructure, and has provided great impetus to the growth of India’s digital economy. Users are consuming more of everything, from entertainment to shopping. The digital economy provides significantly more flexibility, speed, control and convenience to the consumer, and also offers huge opportunities to a large expanse of the population. According to the Confederation of Indian Industry (CII), the number of online shoppers in India is expected to reach 220 million by 2020.
The new ‘Digital India’
The Finance Ministry of India estimated that the digital economy is expected to grow to US $1 trillion by 2022 and comprise about 50 percent of the entire economy by 2030. Due to the hurdles faced in reaching and acquiring new customers, e-commerce players have found it difficult to expand their business and reach their goals. The digital economy, with its minimal or negligible start-up costs and access to a vast domestic consumer market, enables firms to overcome the challenges that traditional businesses have faced in the past.
The rise of the digital economy has seen the Indian government promote various modes of digital payment to achieve its objective of financial inclusion. Banks and fintech companies adopting new technologies for ultra-fast transactions, incentivising digital payments and use of data are some of the emerging trends that will push forward the adoption of digital payments. Some of the key trends in digital payments include Instant Payments (UPI – Unified Payment Interface), Mobile Wallets, PoS (Point of Sale) Devices and Artificial Intelligence (AI). The integration of these payment applications is what will change the landscape of digital payments in India.
The Government’s ‘Digital India’ initiative has also led to increased internet adoption, which in turn has given a boost to the e-commerce market. Technology has immensely helped diminish geographic borders for online shopping via the implementation of digital advertisements, digital payments and analytics-driven customer engagement.
E-commerce: A Strong Enabler of Growth
E-commerce has greatly transformed the way we do business in India. This segment has become the front-runner of the economy, especially the Indian start-up ecosystem. From the introduction of cash-on-delivery to introducing the option of exchange/return of goods, the Indian e-commerce market is thriving. India is among the fastest growing e-commerce markets in the world, and with the sheer population size in India, some might say we could even leapfrog China as the largest e-commerce market in the world. The potential for growth of e-commerce in India has launched national players such as Flipkart, Paytm Mall, Snapdeal and attracted heavy investments from global giants such as Amazon, Walmart and Alibaba, all of which are driving the sector. Driven by the rise in smartphone penetration, the launch of 4G networks and increasing purchasing power of consumers, the Indian e-commerce market – is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion as of 2017.
E-commerce transactions are already on a steady growth trajectory, with logistics service providers being an important driving force behind this. Taking into account the maturing market and population factors mentioned earlier in this article, there is a need to maintain a great customer experience, hence most e-commerce players in India engage a reliable third-party logistics company to ensure efficient and speedy delivery – one that will provide greater choice, convenience and control for the consumer.
Another growing factor is cross border e-commerce, which provides local businesses with easy access to the global market. It is noteworthy that India’s overseas population is the largest in the world according to the United Nations, with a diaspora of approximately 31.2 million residing outside India.
The mere presence of a vast NRI (non-resident Indian) population overseas has given an opportunity for Indian brands to showcase and tap potential consumers overseas.
To serve this growing market, many Indian e-tailers that lack the deep pockets of the big e-commerce giants are altering their packaging and product lines to ensure they can reach customers via road and rail to achieve cost efficiencies in their logistics.
E-commerce is revolutionizing international trade at a phenomenal rate and leaders such as DHL eCommerce are already helping companies big and small make the most of this opportunity. DHL eCommerce offers end-to-end logistics from Domestic Delivery, Cross Border Delivery and Fulfillment to connect buyers and sellers around the world. DHL eCommerce is a leading enabler of e-commerce in India and operates Blue Dart Express, the leading and largest logistics provider in India.
At the beginning of the year, Blue Dart announced plans to further strengthen its offerings in India by expanding to every Indian home with 100 percent pin code coverage, which has already been achieved in 16 States & Union territories. This initiative is in close alignment with the government’s ‘Make In India’ vision to generate and enable better business and employment opportunities. The aim is to cover all 19,100+ pin codes across India by December 2018.
In June, we also opened our new state-of-the-art aviation hub in Chennai with land and air side access which gives Blue Dart better efficiency and faster transit times. Through Blue Dart’s excellent B2B and B2C solutions in India, we are able to offer our customers day-definite and time-definite delivery across all industries to make your business truly incredible.