From Buzz to Bucks

Capitalizing on Indias Digitally Infuenced Consumers

Digital India
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From Buzz to Bucks
Capitalizing on Indias Digitally Infuenced Consumers
Arvind Subramanian, Nimisha Jain, Shweta Bajpai, and Shruti Patodia
Digital India
April 2013
From Buzz to Bucks 2
To determine just how digitally infuenced Indias Internet users are when they
are making purchase decisions, BCG surveyed 25,000 Indian consumers on their
online activities in a broad range of product categories.
The Size of the Prize
Our survey revealed that digitally infuenced purchases represent $30 billion of con-
sumer spending in India todayas much as fve times that of e-commerce alone.
This digital impact is expected to grow fvefold to $150 billion by 2016.
Indias Online Consumers
Digitally infuenced consumers earn higher incomes, are disproportionately
represented in key product categories, and spend more money on products than
their less-connected peers.
Capturing Indias Digitally Influenced
To capitalize on this growing market, companies must integrate their online and
ofine 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 optimize the mobile experience.
AT A GLANCE
The Boston Consulting Group 3
I
ndia is on the threshold of a digital revolution. Driven by cheaper mobile
handsets and the spread of wireless data networks, the number of Internet users
in India is expected to nearly triple from 125 million in 2011 to 330 million by 2016.
And although online purchases are just a small portion of commercial activity
today, the numbers obscure a critical fact: the Internets infuence on buying
decisions is growing rapidly. This infuence afects up to fve times more purchases
than those actually made online. Online activities such as product research and
price comparisons are shaping the preferences of Indian consumers, afecting what
they buy and why. Digital infuence is expected to greatly accelerate over the next
fve years. Whats more, digitally infuenced consumers earn higher incomes, are
disproportionately represented in key product categories, and spend more money
on products than their less-connected peers.
How can companies capitalize on this explosion of high-value online consumers?
And given the prevalence of mobile-only access, what new models of connection
and engagement will be required? To fnd out, The Boston Consulting Groups
Center for Consumer and Customer Insight surveyed 25,000 Indian consumers aged
18 to 55 living in 26 locationsthe biggest metropolitan areas and a mix of tier 1,
tier 2, and tier 3 cities. Our goal was to understand the nature and extent of digital
infuence on buying decisions. To this end, we explored how consumers use the
Internet during the product purchase cycle. We then examined specifc behaviors of
the digitally infuenced users. Our analysis assessed the use of digital technology
across ten touch points within the three stages of the purchase cycle:
Prepurchase. Product research, price research, search for store locations, and
search for discounts or coupons
Purchase. Online ordering and online payment
Postpurchase. Troubleshooting, customer service, accessory purchase, and posting
product reviews or comments
We explored the prevalence of digital touch points in 101 product categories, assigning
each category a Digital Intensity Index score (DII) on the basis of the extent to which
digitally infuenced consumers use the Internet in each of the ten touch points of the
purchase cycle. (See the sidebar Whats Your Products Digital-Intensity-Index Score?)
We also looked at how satisfed digitally infuenced users are with their online
experiences and the importance of digital media relative to other channels during the
Although online
purchases are just a
small portion of
commercial activity
today, the Internets
infuence on buying
decisions is growing
rapidly.
From Buzz to Bucks 4
To better understand the impact of
the Internet on diferent product
categories, we evaluated each
category on the basis of four factors,
as shown in the exhibit below:
Digital Footprint. The percentage of
buyers with Internet access
Digital Infuence. The percentage of
buyers who used the Internet
during any of the three stages
prepurchase, purchase, or postpur-
chaseof the buying process
Digital Buyers. The percentage of
buyers who made online purchases
Digital Intensity Index Score (DII).
The extent to which buyers used
the Internet across the ten touch
points of the purchase cycle
WhATs Your ProduCTs dIGITAl-InTensITY-
INDEX SCORE?
The Internets Impact Is Greater in Some Product Categories
Than Others
Category
Digital
footprint
(%)
Digital
infuence
(%)
Digital
buyers
(%)
DII
Air travel 66 42 21 20.6
PCs, laptops, and tablets 59 38 5 13.5
Air conditioners 61 25 6 17.4
Cars 56 22 0 9.3
PC and mobile accessories 63 19 5 20.1
Mobile devices 35 19 2 11.0
Other consumer durables 51 19 5 17.6
TVs 42 19 1 14.0
Refrigerators 42 19 2 13.1
Two wheelers 43 17 0 10.1
Hotel and holiday packages 47 17 5 14.4
Washing machines 48 16 2 12.7
Mobile services and
Internet connection
37 11 2 14.1
Health, life, and motor
insurance
31 10 2 17.3
Other fnancial services 27 9 1 14.0
Entertainment 33 9 2 15.4
The Boston Consulting Group 5
Our analysis showed that air travel has
one of the highest DIIs, with six
digitally infuenced touch points
including online purchasing. In
contrast, the auto category has one of
the lowest dIIs because online activity
consists primarily of price and product
comparisons. Product categories with
the highest DII have the most online
activity at diferent stages of the
purchase cycle, including the prepur-
chase and postpurchase stages. A
product category in which all digitally
infuenced buyers conducted all ten
aspects of the purchase cycle online
would achieve a perfect DII of 100.
The fact that air travel, with the
second-highest digital intensity, has a
DII of only 20.6 shows how much
opportunity still exists to increase the
online activities of Indian consumers.
Source: BCG CCCI Digital Influence Study, 2013.
Category
Digital
footprint
(%)
Digital
infuence
(%)
Digital
buyers
(%)
DII
Direct-to-home satellite TV 27 9 3 21.5
Rail and bus travel 22 8 3 17.3
Small appliances 24 8 1 12.5
Restaurants 32 6 1 12.0
Home decor and
building materials
22 6 1 12.5
Auto accessories 32 5 1 12.1
Baby care and pet food 21 5 1 14.5
Books, gifs, and online
courses
24 5 1 12.4
Perfume 30 5 1 12.1
Apparel, footwear, and
accessories
20 4 1 14.0
Cosmetics 18 4 1 13.0
Health food drinks, nutraceu-
ticals, and sports nutrition
19 4 1 12.3
Consumer goods 18 3 1 13.5
Pharmaceuticals and eye care 15 2 0 9.0
From Buzz to Bucks 6
purchasing process. The surveys insights can help guide companies as they develop
strategies for reaching and engaging Indias growing base of online consumers.
The Size of the Prize
Estimates of total online purchases in India today range from $6 billion to $10 bil-
lionnot that impressive given the size of Indias population and how quickly
consumer spending is growing overall. But those estimates fail to capture the full
impact of digital technology on purchasing decisions. Of Indias 90 million urban
Internet users, 40 percent report that their online activities infuence what they buy.
Put in terms of fnancial impact, this digital infuence afects $30 billion of consumer
spending in India today, as much as fve times that of e-commerce alone. With
growing access and use, this digital impact is expected to grow fvefold to $150 billion
by 2016more than the combined revenues of the major retail chains (estimated at
$106 billion) and 20 percent of the total retail market (estimated at $799 billion). (See
Exhibit 1.)
Indias Internet penetration is expected to reach 330 million users by 2016. A
number of factors will drive this growth. For one thing, mobile phones, which many
Indian consumers use, are becoming more afordable. Internet penetration has
reached small towns and rural areas, so online access is more widely available. An
increasingly youthful population and rising incomes will also drive growth. Finally,
government interventions and structural changes such as better broadband and
wireline access will improve penetration. As a result, the Internet is projected to
reach small towns and the low rungs of the economic ladder more quickly than
retail chains will, bridging geographic barriers and feeding the growing appetite for
2012 2016 2012 2016
115 450
30 150
650 1,110 1.7X
225 650 2.9X
3.9X
5.0X
8 50 6.3X
Digital penetration and inuence
will increase
...and have a signicant impact
on consumer spending
Consumer spending ($billions) Population (millions)
Spending by the
urban population
Spending by the
urban population
with Internet access
Spending by the
digitally inuenced
population
Digitally inuenced
spending
Value of online
purchases
Digitally
inuenced
urban
population
Population
making online
purchases
35
11
Population
with Internet
access
125 90
35
Population 1,210 375
835
Urban Rural
125
330 200 130
1,275 425
850
60
Sources: BCG CCCI Digital Influence Study, 2013; The Tiger Roars, BCG report, February 2012; BCG analysis.
Exhibit 1 | Digital Impact Is Expected to Increase Fivefold to $150 billion by 2016
The Boston Consulting Group 7
consumer goods among aspirer (annual income of $7,500 to $18,400) and next
billion (annual income of $3,300 to $7,400) households.
As Internet access increases, so does digital infuence and its impact on purchase
decisionsa pattern that repeats itself across product categories, age groups, and
demographics. Contrary to popular belief, digitally infuenced Indian consumers are
not just young, afuent city dwellers. In fact, digital infuence isnt a function of
demographics at all, but of digital agethe number of years a person has been
online. Consumers who have spent more time on the Internet are more comfort-
able, engage with a greater range of product categories, and are more likely to
perform commercial activitiesincluding purchasingonline. As penetration and
consumer spending increase, Indias Internet economyjust 4.1 percent of GDP in
2010is expected to reach 5.6 percent by 2016.
Our research also showed that consumers who use the Internet to make buying
decisions spend more than their less-connected peers. For instance, digitally infu-
enced consumers are only 16 percent of mobile-phone buyers, but they account for
24 percent of spending in that category, buying products that, on average, are 46
percent more expensive.
Indias Online Consumers
Studies consistently show that Internet penetration drives e-commercea dynamic
that is playing out in the U.S. market, other developed economies, and, more
recently, in China. Now, India is catching up. And since many of the countrys
consumers use mobile phones to access the Internet, the emerging 3G and 4G
networks will make e-commerce faster and easier. According to some estimates, 60
to 70 percent of Indias population has mobile handsets. About 45 percent of online
consumers access the Internet only through mobile devices, while another 30
percent use both mobile devices and desktop or laptop computers. Whats more,
Internet penetration is already beginning to reach small towns, less afuent con-
sumers, and older members of the population.
Given that the Internet breaks many of the compromises that consumers face in
their traditional ofine-shopping experiences, by providing greater convenience,
speed, price transparency, and product informationhighly valued aspects of the
online experiencewe expect that commercial activity and digitally infuenced
buying decisions will grow signifcantly in the coming years.
Demographics: Who Is Online?
The demographics of Indian use reveal some unexpected fndings. Indian men are
far more likely than women to be on the Internet (32 percent versus 12 percent) and
more than three times as likely to be digitally infuenced (14 percent versus 4
percent). Those with high income levels are well represented online, but even 18
percent of the lower-income strugglers (whose annual household income is less
than $3,300) have Internet access, and 6 percent are engaged in commercial activity.
Although users in Indias metropolitan areas are generally the most digitally con-
nected (30 percent) and digitally infuenced (13 percent), consumers in the smaller
tier 1, tier 2, and tier 3 cities still report Internet access rates of just under 20 per-
As Internet access
increases, so does
digital infuence and
its impact on pur-
chase decisions.
From Buzz to Bucks 8
cent. However, their commercial activity is considerably below 10 percent. It should
be no surprise that the best-educated consumers are the most likely to be online (63
percent of those with professional degrees) and to engage in commercial activities
(34 percent). Overall, the Internet has the highest penetration among people 18 to
24 years old (48 percent) and the lowest among those older than 54 (6 percent).
Internet use will increase in todays underpenetrated markets, and digital infuence will
grow exponentially as users become more experienced and more comfortable online.
By 2016, 70 percent of Internet users will be 25 years of age or older, and 65 percent
will be from small towns and rural areas. Low-income groups will also have more
online access. Moreover, several trendsincluding a population shif to urban areas,
rising incomes, and growing literacyare converging to increase penetration and use.
Product Categories: Which Have the Most Digital Influence?
Our research revealed that the Internet has a greater impact on some categories
than others at the present time. Although categories such as air travel, computers,
automobiles, consumer durables, and mobile phones have high levels of digital
infuence (greater than 15 percent), others, such as consumer goods and cosmetics,
have very low levels (less than 5 percent.) But high digital infuence doesnt always
translate into a high DIIa refection of the extent to which diferent activities in
the product purchase cycle are conducted online.
According to our analysis, India is behind other countries in terms of Internet
penetration, but the degree of digital intensity in certain product categories is
already on a par with the U.S. and China. For instance, although only 32 percent of
insurance buyers in India with online access use the Internet during the purchase
cycle of the category (compared with 69 percent in the U.S. and 67 percent in
China), the insurance categorys DII in India is 17.3comparable to that in the U.S.
and in China. In other words, Indias online consumers in the market for insurance
are relatively active at diferent stages of the purchase cycle.
Certain nuances drive the online evolution of product categories:
Prepurchase Research Needs. Consumer durables, electronics, and other high-
involvement categories have a lengthier prepurchase cycle owing to the need to
gather information on features, warranties, and prices. As a result, the Internet
plays an important role during the prepurchase decision-making process.
Ease of Delivery. Intangibles that dont require physical deliveryfor example,
air travel, insurance, direct-to-home satellite-TV subscriptions, and other servic-
estake of faster online.
Ofine Availability. Indian consumers generally visit traditional retail stores for
cosmetics, personal-care items, and other consumer products that are widely
available in standardized formats. Even though this standardization and product
familiarity would make online purchasing easy, consumers prefer buying these
products ofine because of the convenience and immediate gratifcation.
Products in less penetrated categories such as sports nutrition see higher
online-purchasing activity because theyre not as readily available ofine.
Intangibles that dont
require physical
deliveryfor exam-
ple, air travel, insur-
ance, direct-to-home
satellite-TV subscrip-
tions, and other
servicestake of
faster online.
The Boston Consulting Group 9
Repeat Transactions. Consumer online activity is growing in insurance, utilities,
direct-to-home satellite-TV subscriptions, and categories that involve frequent
repeated purchases or transactions such as bill payment and premium renewal.
Commercial Activities: What Are Consumers Doing Online?
Most of Indian consumers online activity involves the prepurchase stage of the
product purchase cycle. (See Exhibit 2.) Although some purchasing does happen
online, postpurchase activitiessuch as product support and service and posting
product reviewsare very limited. Heres what Indian consumers are doing online
in each phase of the purchase cycle.
Prepurchase Stage. Among Indian consumers, the most common Internet-based
commercial activitiessuch as product research and price comparisonsoccur in the
prepurchase stage. In fact, among digitally infuenced consumers, the Internet rivals TV
as a source of information for big-ticket items such as automobiles, computers, and appli-
ances. This digital infuence is especially evident in relatively high-priced-product
categories such as automobiles, laptops, consumer durables, and home theater equip-
mentproducts that have long purchase cycles or require a signifcant investment.
Indian consumers view the transparent data found online as more unbiased and
trustworthy than what they might hear from in-store salespeople on commission. Its no
surprise that online research is less important for consumer goods and other inexpen-
sive, well-known items.
The most popular sites for online research are company websites and third-party
comparison websites. Indian consumers choose among these on the basis of what is
lacking in their ofine-purchasing experience. In most cases, insurance agents and
auto dealers sell only one brand, so gathering information on product features,
pricing, and warranties for multiple brands can be time consuming and involve a
lot of legwork. For categories such as these, online research through third-party
comparison sites and online forums is far more convenient and efcient. However,
for appliances and other product categories available through multibrand channels,
company websites are the favored source of information: they generally have more
details on specifc products than would any single salesperson in a store. Indian
consumers become aware of these sites through search results and TV ads or
though family, friends, and colleagues.
Online product reviews have not yet taken of in India, mostly because there arent
enough sites yet that ofer them, so critical mass is lacking. Social media are popu-
lar but drive only about 25 percent of commercial consumer trafc. Most people in
India look to Facebook and similar sites for entertainment, not product information
or advertisements. They want to connect with friendsnot be sold something
and likes dont lead to commercial activity.
Purchase Stage. Few Indian consumers actually buy on the Internetin large part
because certain concerns are holding them back. Across all categories, the biggest
issues are delivery problems, lack of trust, and the inability to see and feel a prod-
uct. Despite these concerns, some product categories are generating more online
purchase activity than others. For instance, intangibles that consumers dont need
to touch or try on or that dont require packing and shipping are more likely to be
This digital infuence
is especially evident
in relatively high-
priced-product
categories.
From Buzz to Bucks 10
Accessing
purchase
coupons Ordering
Making
payments
Searching
for infor-
mation on
product
use
Arranging
for product
servicing
and
renewals
Searching
for
accesso-
ries and
add-ons
Posting
reviews
and
comments
online
Searching
for
store
locations
Searching
for
price
informa-
tion
Searching
for
product
informa-
tion
Air travel
Entertainment
PCs, laptops, and tablets
Direct-to-home satellite TV
Air conditioners
Rail and bus travel
Cars
Small appliances
PC and mobile accessories
Restaurants
Mobile devices
Home decor and building
materials
Other consumer durables
Auto accessories
TVs
Baby care and pet food
Refrigerators
Books, gis, and online
courses
Two wheelers
Perfume
Hotel and holiday packages
Apparel, footwear, and
accessories
Washing machines
Cosmetics
Mobile services and
Internet connection
Health, life, and motor
insurance
Consumer goods
Other nancial services
Pharmaceuticals and
eye care
5%10% 11%20% 21%30% > 30% < 5%
Health food drinks, nutra-
ceuticals, and sports nutrition
Digitally inuenced buyers
conducting this activity
online (%)
Source: BCG CCCI Digital Influence Study, 2013.
Exhibit 2 | Most Online Activity Involves the Prepurchase Stage of the Purchasing Cycle
The Boston Consulting Group 11
bought online. For a handful of product categories such as air travel, vacation
packages, and direct-to-home satellite-TV subscriptions, our survey respondents
reported a fair amount of online activity in the order and payment stages. Overall,
however, online purchasing is a small percentage of total commercial activity.
The reasons for this are threefold. First, electronic payments are not yet popular in
India, because few people have credit cards. Even among cardholders, paying cash for
purchases through traditional channels is still the method of choice. However, most of
these purchases are preceded by online research. Second, the shortcomings of Indias
infrastructure can present delivery problems and other logistical challenges. And
third, well-entrenched behaviors take time to change. As Indian consumers become
more comfortable on the Internet, their reluctance to make online payments will
likely fadeas it has for consumers in the U.S., Europe, and Chinaover time.
BCGs survey dispelled many common misconceptions about Indian consumers.
Contrary to the popular belief that online purchases are driven only by discounts
and special ofers, our research showed that convenience and variety are just as
important to Indian consumers. (See Exhibit 3.) Discounts are important to some
consumers, but the benefts of convenience and assortment are a powerful pull
especially given the growth of the working class and the fact that todays families
Most users are from
metropolitan areas.
Most users are 18 to 25
years old and auent.
34% of Internet users are from
smaller urban areas (tier 2, tier 3,
and tier 4 cities), and 25% are from
rural areas.
57% of urban users are older than
25 and will make up 70% of the
urban Internet population by 2016.
45% of urban consumers with
access to the Internet use only
mobile devices to connect.
Discounts drive 30% of online
purchases, but convenience
(37%) and variety (29%) are also
critical.
Search engines drive trac more
than 40% of the time.
The impact of social media is
limited, driving just 25% of trac.
Among urban Internet users,
40% engage in digital activity at
some point in the purchase
process, and 13% purchase
online.
Mobile Internet activity
is small and irrelevant.
Most online users are
discount driven.
Deals and discounts
dominate online sales.
Social media create a
positive buzz. Internet
users spend most of
their time on social
media.
The commercial impact
of the Internet is
overstated.
E-commerce is very
limited.
Common belief Reality
Who is online?
How do users
access the
Internet?
Why are Indian
users online?
What drives
online trac?
What impact
does the
Internet have?
Source: BCG CCCI Digital Influence Study, 2013.
Exhibit 3 | BCGs Research Dispels Many Common Misconceptions
About Indian Internet Use
From Buzz to Bucks 12
are smaller than those of earlier generations. Because of these changes, more
Indian consumers value the efciency, convenience, and home delivery that online
buying ofers. (See Exhibit 4.)
Furthermore, consumers are willing to pay an online premium for authentic prod-
ucts that are not readily available at retail stores. For instance, Healthkart.com
confrms that, given the growing popularity of bodybuilding in India, niche and
hard-to-fnd products such as protein supplements for ftness enthusiasts sell briskly
on its website.
As to the preferred mode of payment for online purchases, credit cardholders and
noncardholders alike prefer to pay cash. In fact, 60 percent of online buyers who
have credit cards paid cash on delivery (COD) for their most recent purchases
Spends 40 to 50 hours per week
on the Internetat work and on
his own time
Accesses the Internet on his
mobile device during his daily
commute, checking news and
sports, watching videos, and
searching for information
Helps me get things when I need
them
Saves a lot of time
Can buy things not available
elsewhere
Convenience of getting products
delivered to the doorstep: no need
to spend time going to the mall
Customization: can check
available choices and order
accordingly (especially when
booking seats for shows)
Apparel, hair care products,
perfume, movie and event tickets,
shows, gis, owers, mobile
accessories
Property searches, making
medical appointments
Madhuresh Srivastav, 25, Mumbai
Works for a multinational
Single, lives alone
Disha Bhatnagar, 27, Noida
Works for a multinational
Married, with a 6-month-old child
Rahul Singh, 23, Varanasi
Student, pursuing a masters
degree in engineering
Single, lives in a hostel
Spends 15 to 20 hours per week
on the Internet
Mostly study-related work, e-mail,
downloading music and movies,
searching for information
Mostly books, educational and
ction
Sportswear, including clothing,
footwear, and sunglasses
PC accessories such as a pen drive
and hard drive
Good deals: actively searches for
promotions
Does price comparisons, searching
for cheapest available option: pays
20% to 30% less than market price
Gets regular e-promotions: has
purchased products if a good deal
is oered
Spends 40 to 50 hours per week
on the Internet
Ocial work, social networking,
entertainment, information
searches, shopping
Baby products, gi vouchers, skin
care products, movie tickets,
travel, and accessories such as
bags, jewelry, and watches
Booked test-drive for car on the
Internet and pays all bills online
Internet as an information
encyclopedia, supplier of
everything
A better variety of baby cots, than
the limited selection in shops;
shopping in stores requires a lot of
time (working schedule does not
allow)
Everything under one roof
Variety for everything
My comfort zone
Entertainment
Social networking
Easy to compare
Convenience
Discounts Assortment
Consumer
prole
Internet
behavior
Online
shopping
and other
activities
Reasons
for using
the Internet
Key
benets
Convenience
Source: BCG CCCI Digital Influence Study, 2013.
Exhibit 4 | Indian Consumers Value What Online Buying Ofers
The Boston Consulting Group 13
largely because Indian consumers dont trust the online business to actually send
the goods they buy online, to send the correct order, or to make sure that the goods
will arrive undamaged.
One of the most commonly cited barriers to e-commerce adoption in China was the
lack of a satisfactory payment method, especially because few consumers used
credit cards. Taobao.com, Chinas enormously successful online marketplace, re-
solved the problem for most shoppers with its innovative Alipay escrow accounts,
now the most common payment method for all e-commerce platforms in China. Tao-
bao, JD.com, and other successful online players have addressed delivery concerns
and low levels of confdence in product quality by using local courier companies and
distribution centers. Until similar solutions make their way to India, however, online
consumers will likely continue to research products and make brand choices on the
Internet and complete the purchase transaction at a brick-and-mortar store.
Postpurchase Stage. Few of Indias consumers are actively engaging in postpur-
chase commercial activities such as troubleshooting, seeking service, and posting
online reviews. This holds true across most product categories, with the exception
of insurance and direct-to-home satellite TV subscriptions (whose renewals and
payments are made online), autos (for which queries are resolved or accessories
purchased), and a very limited number of durables. Postpurchase online engage-
ment has a long way to evolve, although the benefts of convenience could easily
overcome traditional habits and mindsets at this stage as well.
Understanding Indias Differences
To capitalize on the rise of digital infuence in India, companies must understand
the countrys unique commercial environment, which difers from other rapidly
developing economies such as China and from developed economies such as the
U.S. and Europe. Key diferences include the following:
The Devices Used for Internet Access. Given the low price points and portability of
mobile phones, far more Indian consumers access the Internet using these devic-
es than laptops or PCs. Even in less urban tier 4 areas, mobile Internet use is 15
percent, close to the 20 percent penetration rate in metropolitan areas. In
contrast, PC- and laptop-based Internet use is only 9 percent in tier 4 areas
compared with 25 percent in metropolitan areas.
Category Dynamics. Good online portals and sources of information are still
emerging in many product categories. And products themselves difer in their
relative online popularity. Case in point: in India, e-books are far less common
than in the U.S. and Europe, because few people have e-readers such as the
Kindle. Furthermore, there are so many languages spoken in India that content
would be highly fragmented. Even regular online sellers of traditional books
would be challenged to manage the range of inventory needed to meet Indias
various language needs. And because of the countrys large black market for
pirated reprints, bestsellers are inexpensive and widely available. Other e-com-
merce categories that are popular in the U.S., such as apparel and toys, are
dominated by unbranded local suppliers in India, impeding online sales.
Given the low price
points and portability
of mobile phones, far
more Indian consum-
ers access the Inter-
net using these
devices than laptops
or PCs.
From Buzz to Bucks 14
Method of Payment. Given the low penetration of credit and debit cards and the
aversion to making online payments due to security and trust issues, COD is in
India to stay. It will be a long time before Indian consumers embrace online
payment.
Because of these diferences, the online pioneers that succeed in India may be very
diferent from todays e-commerce powerhouses such as Amazon.com and Taobao.
In fact, the market is so new, consumer product companies that seize the opportu-
nity in time could build defensible positions against those pure e-tailer market
leaders.
For a preview of how quickly Indias e-commerce market could develop, consider
how e-commerce exploded in China in just the last fve years, driven by accelerat-
ing Internet penetration in cities and rural areas alike and the growing use of
mobile devices. Today, Chinanow, with more online shoppers than the U.S.is
expected to become the worlds largest online retail market by 2015. In 2010,
Taobao alone sold more than Chinas top fve brick-and-mortar retailers combined.
Today, India is at a similar tipping point, its e-commerce market about to break out
and rapidly accelerate, driven by increasing Internet penetration, cheap mobile
devices, and growing consumer demand. Forward-looking companies are taking
action now to capitalize on the markets potential.
Capturing Indias Digitally Influenced
Indias digitally infuenced consumers are a high-value and rapidly growing market
segment. To gain a greater share of their business, companies must understand how
these consumers make purchase decisions, and reach them more efectively by
combining traditional and digital media. According to the insights from our survey,
this means taking action on a number of fronts.
Integrating Online and Ofine Strategies. Our research shows that online
activities drive ofine behavior. Although Indian consumers arent buying much
online yet, they are actively researching products, comparing prices, and making
brand decisions. Until consumers are more comfortable purchasing on the Internet,
companies should use their websites and mobile apps to drive shoppers to their
ofine stores. For instance, Standard Chartered ofers a mobile app that helps
consumers fnd its bank branches, ATMs, and cash deposit machines. Retail chain
Shoppers Stop recently drew in customers with a mobile app that launched an
end-of-season sales ad. The app included an augmented-reality feature that ofered
a real-world view of the stores physical environment through computer-generated
videos and sounds. Given the preponderance of Indian consumers who research
products online but buy ofine, companies that set themselves the broader goal of
using the Internet to drive overall market-share gains rather than merely to expand
online sales can steal a march on pure e-tailersand even sidestep the disinterme-
diation threat that consumer goods companies are wrestling with in other large
e-commerce markets.
Engaging Consumers and Building Their Loyalty. Digital technology gives
companies an opportunity to reach out and connect directly with consumers in ways
Consumer product
companies that seize
the opportunity in
time could build
defensible positions
against pure e-tailer
market leaders.
The Boston Consulting Group 15
that were not possible in the past. Providing consumers with what they needinfor-
mation, hard-to-fnd products, more convenience, a sense of community, a source of
entertainment, the best selection, lower pricescan be an efective way to create
buzz, attract business, and build loyalty. At the same time, digital listening and
capturing consumer data can generate valuable customer insights, lead to more
attractive products, and reveal new ways to engage and sell to consumers. For
instance, Safola, Indias leading health-food brand, started a digital campaign, Heart
OK Please, urging people to go online and share their own stories about unhealthy
lifestyles. The campaign generated a get-healthy movement among consumers,
encouraging them to sign up for cholesterol tests and expert advice and providing an
opportunity for the brand to engage directly with consumers.
Online promotions and discounts are other ways to engage consumers and turn
them into customers. Third-party websites that ofer good bargainssuch as
Snapdeal.comcan be a good way to increase ofine sales using online triggers.
Refocusing Advertising Budgets. Most companies spend most of their ad budgets
on TV spots. But our research showed that for Indian consumers who are online
and digitally infuenced, the Internet rivals TV as a source of brand awareness for
many product categories. Online advertising and websites can be high-impact,
cost-efective ways to reach target consumers. The cost per contact is substantially
lower than for traditional media, and the ability to provide additional information
on products and services is much higher. Cosmetics company LOral launched its
new Maybelline Clearglow BB cream through a global online-only campaign last
year, creating online buzz in India and across the world with its Women Take
Forever (WTF) and Dare to Go Nude campaigns. As a result, the company sold
75,000 units of the cream in just one montha record for Maybelline.
Actively Managing the Internet Channel. Companies should integrate digital
strategies into their marketing plans, carefully thinking about how the Internet fts
into the whole. The online channel ofers a wide range of ways to reach consumers:
corporate websites, third-party websites, online communities, Internet search and
display advertising, online videos, and social media. Manage third-party websites
the same way youd handle key retail accounts ofine and company websites as you
would an exclusive brand store. For some productsthose with niche markets, for
instancethe Internet and third-party websites can be efective in achieving
greater reach into small towns and greater scale by providing access to more
consumers overall.
Many multinational companies in a broad range of industries are recognizing the
importance of the online channel and have set up teams specifcally to manage
their digital activities. Nokia, for instance, has a team that tracks the brands online
image, oversees digital advertising, and manages relationships with third-party
e-commerce sites.
Minding the Gaps. Of the many potential digital touch points in the purchase
cycle, only those related to prepurchase activities such as product research regularly
engage Indias consumers today. The purchase and postpurchase steps of the cycle
represent relatively untapped opportunities to reach consumers, and companies
For Indian consumers
who are online and
digitally infuenced,
the Internet rivals TV
as a source of brand
awareness for many
product categories.
From Buzz to Bucks 16
with an eye to the future should be looking for ways to address these gaps. For
instance, Eureka Forbes set up an online service system for buyers of its water
purifers and vacuum cleaners. Customers who need service fll out an online
application. Unresolved problems are automatically escalated up the ranks of the
companys service staf.
Optimizing the Mobile Experience. Many Indian consumers browse on their
mobile devicesnot laptops or desktop computersso the user experience is
somewhat constrained. Companies can attract consumers and build loyalty by
creating a website thats convenient and easy to use. Moreover, the mobile screen is
small, so its important that content be managed and presented in a way that
optimizes the format. In the absence of proven mobile-advertising models, compa-
nies that can use the mobile experience to drive ofine sales have yet another
opportunity to outpace pure e-tailers and independent information portals.
Many companies are realizing the importance of capitalizing on mobile devices and
digital media. For instance, Indias ICICI Bank has a user-friendly mobile-banking
interface that provides easy one-touch access to common transactions such as
recharging prepaid mobile phones, utility bill payments, and funds transfers. As a
result, the banks mobile-banking transactions grew 60 percent in volume and 98
percent in value from February through August 2012.
Fueled by growing Internet penetration, Indias expanding base of online consum-
ers presents an enormous opportunity for forward-looking businesses that can
understandand efectively capitalize onthe countrys distinctiveness and
unique challenges. The six strategies outlined above are a good starting point.
T
hroughout the world, digital and mobile technologies have transformed the
product purchase cycle and how companies market their brands. Although late
to the game, India is rapidly catching up. Today, the countrys e-commerce numbers
tell only part of the story. Far more important is the bigger picture: the relationship
between online activities and ofine sales and the powerful infuence that the
Internet has in shaping the brand preferences and buying decisions of Indian
shoppers. Moreover, the DIIs of the various product categories show just how much
opportunity still exists for increasing the online activities of Indian consumers.
Companies that dont act now to create an online presence, build their brands, and
engage Indias consumers risk missing out on a fast-emerging market with enor-
mous untapped potential.
Indias expanding
base of online con-
sumers presents an
enormous opportuni-
ty for forward-looking
businesses.
The Boston Consulting Group 17
About the Authors
Arvind Subramanian is a partner and managing director in the Mumbai ofce of The Boston
Consulting Group. he is the lead advisor in India for the frms Center for Consumer and Customer
Insight. You may contact him by e-mail at subramanian.arvind@bcg.com.
Nimisha Jain is a principal in BCGs new delhi ofce. You may contact her by e-mail at
jain.nimisha@bcg.com.
Shweta Bajpai is a project leader in the frms new delhi ofce. You may contact her by e-mail at
bajpai.shweta@bcg.com.
Shruti Patodia is a consultant in BCGs new delhi ofce. she is a topic expert for the frms Center
for Consumer and Customer Insight. You may contact her by e-mail at patodia.shruti@bcg.com.
Acknowledgments
This research was sponsored by BCGs Center for Consumer and Customer Insight, which inte-
grates consumer and customer insight research into strategy development. several BCG colleagues
shaped the thoughts underpinning this research on digital infuence. The authors would like to
thank neha Ahuja, david dean, Belinda Gallaugher, Indira Ghagare, Tarandeep Ghai, rahul Jain,
Gaurav Jindal, Vineet Kumar, Gaurav Malhotra, Amitabh Mall, Alpesh shah, Abheek singhi, and
harold l. sirkin. david C. Michael, the global leader of the Global Advantage practice, and Miki Tsu-
saka, the global leader of the Marketing and sales practice, steered this efort and provided valu-
able direction.
special thanks also go to Martha Craumer for her editorial direction, as well as to other members
of the editorial, design, and production team, including Katherine Andrews, Gary Callahan, Angela
diBattista, elyse Friedman, and sara strassenreiter.
For Further Contact
If you would like to discuss this report, please contact one of the authors.
To fnd the latest BCG content and register to receive e-alerts on this topic or others, please visit bcgperspectives.com.
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The Boston Consulting Group, Inc. 2013. All rights reserved.
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