India represents a trillion-dollar digital opportunity around the Internet: Bessemer Venture Partners

Internet penetration continues to climb at approximately 59 per cent, and as the number grows and consumer behaviour and shopping patterns continue to shift online, India represents a trillion-dollar digital opportunity that will lead consumption in this coming decade, according to a report by Bessemer Venture Partners.

The country has seen a meteoric rise in e-commerce businesses, online payments through the unified payments infrastructure (UPI), and the maturation of supply chain and logistics technologies, the report added.

According to the report by 2030, the number of users will increase from 125 million to 500 million, and the average digital spend per person will increase from $750 to $2,000. At present, about 125 million Indians, or less than 10 per cent of the total population, and less than 20 per cent of the Internet population, transact online.

The study states two major aspects of the region set the stage for increased traction among internet marketplaces: fragmentation and offline operations challenges.

Moreover, the marketplaces have evolved from horizontal listing — connection platforms where sellers list their products and services and consumers find suppliers of different goods and services online such as JustDial.

With online payments and logistics evolving — led by the proliferation of technologies such as UPI, eWayBill and GST—marketplaces moved to a transactional model (marketplaces could now own not just the discovery, but also the transaction closure and payment).

Going forward, the report noted that the two major axes of evolution in building Internet businesses for Indian consumers are new consumer segments and distribution channels.

“We believe that new internet marketplaces and brands will be built to serve these new consumer segments, which have come online more recently. Early signs of this new cohort are already taking shape, as seen through Nykaa and Good Glamm Group, with offerings built to serve women, arguably the largest new consumer segment in India,” stated the researchers.

Additionally, today’s marketplaces are leapfrogging textual, browsing, and catalog-led commerce and jumping directly to social, video, and influencer-based commerce. “Businesses serving these new sets of consumers will be required to be native on social, video, and influencer channels from day one,” the report added.

The report said there were five tenets of internet marketplaces in the country: India is a supply-constrained market: build technology to onboard, standardize, manage, scale, and retain supply; The full stack model achieves end-to-end ownership across the ecosystem, resulting in a superior customer experience at a lower cost, increased retention, and higher gross margins. Owning distribution creates a moat: leverage mobile, social, video, and content to build sustainable moats before ramping up third-party distribution; When performing marketing, the customer acquisition cost (CAC) always rises: best companies also find repeatable growth through a mix of social, UGC, video TV, and offline channels; Flatline cohorts unlock long-term value: a 1 per cent increase in flatline cohort retention leads to a 3X jump in long-term value.

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