India to have 850 million online users by 2025, finds BCG

26 September 2017 4 min. read

A new study on the digital market in India has forecasted tremendous growth in the number of Internet users, with the number predicted to reach 850 million by 2025. The report provides analysis of demographic trends within the growth spurt as well as its impact on the economy.

Researchers from global consulting firm BCG last year estimated that the number of online consumers was set to rise to 300 million by 2020. Now, a new report from the firm, focusing on the projected growth of the online market in India, has revealed even bigger numbers for growth, as well as some striking trends within the market.

In terms of the overall digital scenario in India, the report provides four broad trends within the online space. Firstly, the number of online users is growing rapidly, projected to reach 850 million by 2025, which is incidentally more than the combined population of the G-7 countries as per the report. Secondly, the demographic composition of online users is growing to be more nuanced. While the digital market has thus far been dominated by urban, millennial males, half of the internet users in 2020 will be rural, 40% female and 33% will be over the age of 35.

Thirdly, Indian online consumers are heavily reliant on mobile devices, and the trend is increasingly moving towards faster and more efficient data connections. While it took nearly eight years for India’s mobile market to reach 250 million 3G connections, the country’s connection rate has been boosted exponentially by the new Reliance Jio 4G network, which added 100 million connections in just seven months. Finally, the study proclaims that the online usage of a consumer depends less on the demographic factors mentioned above and more on the digital maturity of the individual, i.e. the number of years that a user has been online.

India’s digital growth

Beyond these overall demographic patterns, BCG’s analysts have also identified several trends within the market that investors would do well to note, in order to best tap into the booming market. Firstly, the study found that the ends to which the online market is used did not meet their expectations. Contrary to popular belief, the Indian consumer appears to use the online market for a diverse range of functions, as opposed to simply socialising or following popular news. In essence, the digital world has become an integral part of daily life.

Further to this, the report found that categorising the online users by the nature of their usage is an extremely challenging task, primarily due to the fact that each individual has a unique digital footprint. For example, while one user might rely on the internet for social activity, another does so for their work, while a third might be a combination of the two.

Each Online User has a Unique Profile

Meanwhile, the crucial nature of a user’s first experience with any aspect of the digital world can shape how they use new technologies or choose to avoid them. In essence, if the first experience is user-friendly and fruitful then an individual is likely to embrace the digital market. On the other hand, a bad experience can breed mistrust and take a prolonged period to rectify. Lastly, the study found differentiation within the products with respect to the comfort with online purchase. For example, while a majority of consumers purchase small appliances online, the purchase of other goods such as apparel or accessories lies almost entirely in the offline realm.

For investors

Based on its analysis, the report offers strategic options for investors in the online market in India. Firstly, given the large growth predicted for the online market, companies are advised to expand beyond single product or service offerings and combine such basic models with integrated, personalised solutions that become possible in the online sphere. For example, Practo, an app originally designed as an online service provider for doctors, now doubles up as a point of contact for patients and doctors. Another feature of Practo’s development i.e. the development of a strategic partnership with Uber, represents the second piece of advice the report offers to investors. The Practo-Uber partnership allows patients to book both a doctor’s appointment as well as transport for the same.

How companies can influence online consumers

Finally, the report concludes by urging companies to shed the expectation that the online market in India will develop at the same rate as those in developed countries, stating that the growth in India will be of unprecedented proportions. Therefore, the best strategy for companies going forward would be to invest innovatively and on a large scale. An “omni-channel” approach to this, which entails the development of both in-store sales as well as online sales to suit different environments and needs, would be best, to avoid placing all a company’s eggs in one basket.