Internet penetration in India is among the lowest globally ? at 21% in 2014 ? lower than in China, Brazil, and Russia, which all have penetration in excess of 45%, and significantly lower than in the US, Japan, and UK, which have penetration in excess of 80%. Even starker is the fact that online shoppers as a percentage of the total population is 2% in India versus over 20% for China, Brazil, and Russia and 40-60% for the developed countries. As a result, the eCommerce market in India is insignificant in the context of the global eCommerce market of US$879bn.
There is a network effect whereby when 20% of consumers and/or corporations have adopted a technology, peers tend to see that progress and want to follow suit. Penetration of 20% is the typical knee of the curve, as seen in the global smartphone market in recent years. India?s internet penetration has reached that 20% mark, aided by faster smartphone adoption.
Mobile platforms, one of the biggest trends emerging in India, are leading to improving internet penetration. The Internet & Mobile Association of India (IAMAI) estimates that total internet users amounted to over 300mn in December 2014, with close to 60% via a mobile connection.
The Big Demographic Effect on Indian Internet
India has more favourable demographics for internet penetration than have China, Brazil and Russia with 75% of its online population aged between 15 and 34. This demographic dividend is significantly better than in developed markets such as the US and hence is a huge driver for internet penetration and changing buying behavior. These people will primarily surf the internet through a smartphone and are more likely to transact online given busy work schedules and the associated convenience.
Rural internet users accounted for 31% of total internet users in F2014, up from 8% in F2009.We believe this can increase to over 40% in the next few years. This is quite similar to the situation in China, where of the 780mn active mobile devices in 1H14, 58% were registered in lower-tier cities where users? first internet experience is likely to be through a mobile platform.
