E-commerce might be adding new customers at a reasonable pace. But the frequency of purchase and the average order value is growing in single digits. E-commerce market can grow to $50 billion by 2020, if it can clock a higher growth on all these fronts.

The e-tailing industry is adding new shoppers at a compounded annual growth rate of 27 per cent, while the frequency at which shoppers buy from online platform is growing by just 8 per cent. The average order value is growing at an abysmally low one per cent, finds a study by RedSeer Consulting.

Despite internet and mobile phone having penetrated well in the Indian market, the share of internet users purchasing online in India is one of the lowest among global e-commerce markets. Only 20 per cent of the internet users purchase goods online. In China this is 55 per cent and in the US it is 79 per cent. In Indian metro cities, 32 per cent of the internet users buy online, 27 per cent in tier I and 8 per cent in tier II cities.

The annual spend per shopper on online shopping is also very low in comparison to US and China. In India an online buyer purchases an average $205 worth goods annually, while his Chinese counterpart purchases for $1800 and the US buyer for $2000.

“The new consumer coming to the platforms, shops for lower price standardized products. We feel going forward the online shopper penetration will increase and the e-tailer will be able to provide a good experience resulting in the consumer buying more,” said Vaibhav Arora, Associate General Manager of RedSeer.

Mobile phones and their accessories and other personal electronics are the largest category sold online. But the frequency at which one replaces a personal electronic gadget is more than a year. Fashion, furniture and consumer durables are not monthly purchases.

Increased online penetration of smaller categories with higher frequency of purchase will make the consumers more habituated with the platforms, finds RedSeer. Online grocery and FMCG are the two key categories that can bring more customers online and increase the frequency of purchases. Online grocery habituates the consumer with frequent purchases thus ensuring that consumers are more accustomed to shopping from e-tailers. E-tailers are hence focussing big time on this category.

RedSeer expects the e-tailing industry to witness a 40 per cent CAGR to become a $50 billion market by 2020 if the frequency of buying online keeps growing along with the number of shoppers. E-commerce companies will be able to get more number of new shoppers if they shift their focus towards tier-II+ cities.