Digital influence to impact 63% of consumer durable sales in India by 2023: report

Cheaper data rates, and access to online shopping has pushed the digital influence on the sale of large appliances such as televisions, air conditioners, and washing machines to 28% of the overall consumer durables market.

New Delhi: Digitally influenced shoppers researching, shopping, and reviewing large appliances online are set to spur the demand for such goods using the internet as a medium over the next five years, according to a recent report by consulting firm Boston Consulting Group in collaboration with search giant Google India, released on Tuesday.

Cheaper data rates, and access to online shopping has pushed the digital influence on the sale of large appliances such as televisions, air conditioners, and washing machines to 28% of the overall consumer durables market. Such “digitally influenced” sales measured by the report as the use of internet by shoppers during the entire purchase cycle—from researching to buying—will impact 63% of total consumer durables sold in India by 2023, the report said. That translates to $23 billion in sales over the next five years, the report titled “Digital Powers Consumer Durables” noted.

By 2023, $10.4 billion or 28% of sales for durables will be online, the report said.

BCG and Google surveyed over 6800 shoppers for the report. The report measured consumer preference towards purchasing large appliances such as air conditioners, washing machines, refrigerator, small appliances excluding mobile phones that are already heavily sold online.

Even though pure-play online sales for durables ie products researched for and purchased online stood at 10% of the overall consumer durables market as measured by BCG and Google in 2017, the number is set to rise sharply going forward.

“When you look at e-commerce stats they significantly understate the role of digital because it is only a small percentage of people who purchase online but it is a larger percentage of people who are influenced online,” said Nimisha Jain, partner and managing director BCG.

Jain added that today close to 28% of total sales of durables are digitally influenced. “Over the next five years our estimate is that that number will come to over 60%, that is a pretty significant number,” she said.

Digitally influence in consumer durable industry has doubled over last five years—which means shoppers are increasingly using the internet before, during and after buying large appliances.

Mobile phones still dominate a bulk of all consumer durables sold online. However, as India’s e-commerce market has matured sales of bigger, pricier appliances such as TVs, machines, and ACs have also shifted online. Additionally, rising smart phone usage, cheap data rates, and a decline in smart phone prices apart from growth in vernacular content and offers by e-commerce companies are prompting consumer shift to online.

“We have more than 450 million people who are on the internet. Give or take a couple of million, we have 375-400 million people who own smart phones. What we’ve seen post the Jio effect when the internet prices fell down consumption (of data) went up by 18-20 times,” said Vikas Agnihotri, Country Manager, Google India. As a result, shoppers today, said Agnihotri are searching for products, they are searching for information, etc. “Therefore, a lot of behavior is percolating down in terms of influencing overall consumer behavior towards buying goods— consumer durables being one of them,” he added.

As of 2017, the overall durables retail market in India stood at $16.9 billion.

Of this digitally influenced online sales stood at $1.7 billion in 2017. However, a bulk of shoppers in India still buy such goods in store with no digital influence — such non-digitally influenced sales stood at $12.3 billion in 2017. While $3 billion worth of sales are digitally influenced but bought in-store.

Digitally influenced in-store sales could go up to $12.5 billion by 2023, the report said; while digitally influenced online sales could touch $10.4 billion in the same period.

More urban shoppers are prone to such digital influence, the report noted.

As of today, 29% of urban consumers are digitally influenced, BCG and Google expect this number is to become 55% by 2023.

Interesting with cheaper data rates shoppers in India’s tier 2 and tier 3 cities are quickly harping online to research and shop. In such markets digital influence has grown “disproportionately”, growing five times over the last 5 years, the report said.

The trend was more pronounced among women shoppers.

India’s overall consumer durables market is expected to touch $36 billion by 2023, the report noted.

The report also said that low price (52%), convenience (46%), ease of returns and refunds (40%), availability (29%) as well as choice of multiple payment options (24%) are the key factors driving buyers to make purchases online.

About 80% of digitally influenced online buyers and 60% digitally influenced in-store buyers make the final purchase after up to 2-3 weeks of researching. The report revealed that search engines are the most popular mode of research followed by social media (36%), online videos (26%) and then blogs and online forums (24%). Over 90% of the people have said that they discover new brands or products through YouTube.

Moreover, online reviews play an important role in buying newer products. 67% of in-store buyers and 74% of online buyers regard online reviews to play a very important role in affecting their purchase decision.

When it comes to buying goods online, shoppers surveyed suggested that they prefer pure play e-commerce aggregators than brand websites for shopping. An estimated, 90% of online buyers prefer buying via e-commerce aggregators, while the remaining 10% prefer buying through the brand website or app.

However, consumers have not fully warmed up to shopping for large appliances online.

The report noted that shoppers still prefer touch and feel of such goods, have concerns around receiving duplicate goods, and the lack of someone explaining the product push them to go to stores to buy such goods.