Internet driving Indians’ purchase decisions

Forty percent of India’s 90 million urban Internet users say that online product research and price comparisons influence what they buy.

This digital influence is expected to greatly accelerate over the next five years, according to a new report by The Boston Consulting Group (BCG). The report predicts the number of Internet users in India will almost triple from 125 million in 2011 to 330 million by 2016. This surge of Internet penetration will cause the digital influence on purchase decisions to explode.

To determine how Internet use affects buying decisions, BCG’s Center for Consumer and Customer Insight surveyed 25,000 Indian consumers on their online activities during each step of the purchase cycle, in 101 different product categories. On the basis of the findings, BCG assigned each product category a digital intensity index (DII). Categories with the highest DII have the most online activity among category buyers.

“The fact that air travel, with the second-highest digital intensity, has a DII of only 20.6 out of 100 shows how much opportunity still exists for companies to engage Indian consumers online – and to influence their buying decisions,” said BCG partner Arvind Subramanian.

The demographics of Indian Internet use revealed some unexpected findings. Indian men are far more likely than women to be on the Internet (32 per cent versus 12 per cent) and more than three times likely to be digitally influenced (14 per cent versus four per cent).

Although higher income levels are well represented online, even 18 per cent of the lower-income “strugglers” (whose annual household income is less than $3300) have Internet access, and six per cent are engaged in commercial activity online.

Overall, the Internet has the highest penetration among people ages 18 to 24 (48 per cent) and the lowest among those older than 54 (six per cent). The Internet is projected to reach small towns and the lower rungs of the economic ladder more quickly than retail chains will, bridging geographic barriers and feeding the growing appetite for consumer goods.

“The growing digital influence is particularly important in categories such as appliances and consumer electronics, in which 40 to 60 per cent of buyers have access to the Internet, and more than a third of them are relying on the Internet for product research or price comparison,” said BCG principal Nimisha Jain.

“We found that the post purchase stage is underserved. Digital offers business-to-consumer companies an opportunity to stay in touch with their customers, build loyalty and, potentially, even advocacy in ways that were not possible before,” she added.

BCG’s research also dispelled many misperceptions about Indian consumers. Only 30 per cent of online buyers were drawn to Internet shopping for discounts. A higher proportion (37 per cent) valued the convenience of shopping from home, and 29 per cent said that they appreciated the expanded variety of products available online compared with what is available at brick-and-mortar stores.

In contrast to more advanced e-commerce markets, digitally influenced consumers in India rely on company websites for detailed product information as frequently as they refer to third-party sites for comparative research and online purchases.

The rapidly expanding digital influence in India is a call to action for consumer products companies, says the report. By acting quickly and decisively, these companies can mitigate the risk of being disintermediated from their customers by e-commerce powerhouses as has happened in the US and China.

BCG says that to capitalise on this growing market, companies must integrate their online and offline strategies, engage consumers and build their loyalty, refocus ad spending, actively manage the Internet channel, mind the gaps in which online activity is low, and optimise the mobile experience.

“Today, India’s e-commerce numbers tell only part of the story. Far more important is the bigger picture: the relationship between online activities and offline sales, as well as the powerful influence that the Internet has in shaping the brand preferences and buying decisions of Indian shoppers,” said Subramanian.

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