Last week, two news items captured the front-page headlines of the Indian financial newspapers. The first was an announcement by Flipkart on July 29 that it has raised fresh capital of $1 billion in one of the largest funding rounds. The second was an announcement by Amazon on July 30 that it will invest another $2 billion in India. These numbers appeared large to us when seen in the context of overall online retail sales in India. As per the Forrester Asia Pacific online retail forecast published in early October 2013, India’s online retail spending was expected to reach $2 billion by the end of 2013. We believe that the pace of eCommerce in India picked up faster than our expectations during the past 12 months and these companies would have witnessed very strong growth. According to Amazon, at current scale and growth rates, India is on track to become the fastest country ever to reach $1 billion in gross sales. It is important to note that Amazon launched India operations in June 2013 only.
These events raised many interesting research questions for us. We will try to address them as we work toward updating our APAC online retail forecast for the years 2014 to 2019. The two most important questions relate to the number of online buyers in India and the mobile commerce opportunity in India.
The advertising industry mega-trend of the last decade — ad dollars shifting from offline to online media — is continuing in this decade, as well. This is because more and more users are becoming "addicted" to the Internet. According to a recent study by the Pew Research Center, “The Web at 25 in the U.S.,” it has become harder for consumers to give up the Internet than TV. Fifty-three percent of Internet users say the Internet would be very hard to give up, up from 38% in 2006. Only 35% of adults say their television would be very hard to give up, down from 44% in 2006.
The mega-trend of the decade is the shift of ad dollars from desktop/laptop to mobile devices. Based on Forrester estimates, US mobile ad spend was just 6% of total US online ad spending in 2011. The share of US mobile ad spending in the total US online ad spending is expected to reach 44% by 2019. All three components of mobile advertising — display, search, and social — will witness increases in their spend levels.
Mobile display. There is an increasing shift of ad spending from mobile Web to in-app display ads. This is because apps capture most of the smartphone usage. According to a recent study by Flurry, apps capture 86% of usage, whereas only 14% of US mobile consumer’s time is spent on mobile Web. In-app advertisements and mobile video will drive the growth of mobile display ad spending.
The Indian online retail market is still nascent, yet it is growing rapidly. Despite all of the existing challenges — underdeveloped logistics and supply chain operations, poor last-mile connectivity, delivery rejections at the doorstep when cash-on-delivery payments are used, and low conversion rates — online retail in India grew by 67% in 2013. Forrester expects India’s online retail spending to grow at a compound annual growth rate (CAGR) of more than 50% over the next five years as more Indian consumers start purchasing online. Our recently published report India Online Retail Forecast, 2013 To 2018 discusses our online retail forecast and the growth drivers for India.
On the demand side, Forrester sees a lot of room for growth in the number of Indian online buyers.
India had a total population of 1.28 billion in 2013, nearly 16% (or one in six) of whom are online. While higher PC penetration rates have driven Internet adoption in the developed economies over the past two decades, faster mobile penetration is helping boost the Indian Internet population, thanks to “mobile-only” Internet users.
Of all Indian online users, just 14% currently purchase online. Forrester expects the online buyer population in India to grow to 128 million by 2018.
Our recently published Forrester Research Online Retail Forecast, 2013 To 2018 (Asia Pacific) reveals some interesting insights on the evolution of online retail spending and the online buyer populations across Australia, China, India, Japan, and South Korea. The forecast details online spend for each of the following categories: computer hardware and software; consumer electronics; beauty and cosmetics; media (books, music, and videos); apparel and accessories; footwear; and appliances (personal and home).
Each country is at one of three different stages of eCommerce adoption:
Nascent: In the nascent stage, online buyers form a very small share of the total online population, with only a small percentage of Internet users purchasing online; India is one example. Although the retail opportunity is huge in India, we believe that India is still at least eight years behind China in terms of eCommerce adoption because of infrastructure issues and only minimal government support.
Ascending: In the ascending stage, online buyer penetration increases much faster. If it takes 10 years for online buyer penetration to increase from 5% to 25% of the total online population in the nascent stage, it can grow from 25% to 50% in half that time during the ascending stage — driving faster growth in online retail spending. China is in the ascending stage. As a result, the number of online buyers in China will surpass the total population of the US by the end of next year.
Mature: eCommerce in Japan, Australia, and South Korea is now (relatively) mature. Although the opportunity for growth still exists, it is constrained by the tailing off of growth in the number of online buyers.
I had several research questions in mind. Which are the top 20 social networking sites in the US? How many unique monthly visitors do they attract? How much time do visitors spend on these websites? How many visitors access these websites via mobile? Which of these websites are most important for marketers? What is the share of social media spending within total online advertising spending? How much can it grow? What will drive growth? This last question was of particular interest to me. We believe that mobile will be a key driver for social media spending growth. Here’s why:
More users are accessing social networking sites through mobile. As per our forecast, we expect the number of US social media users accessing social networking sites via mobile to exceed 200 million by 2018. Nearly one-fourth of them will be mobile-only social media users; the rest will access social networking sites via both PC and mobile.
The share of time spent on mobile social networking apps continues to increase. Social media apps are among the top apps that smartphone users use. The amount of time they spend on these apps continues to increase.
The European economy is still struggling for growth after the global recession. While overall GDP growth was positive in 2010 and 2011, it again turned negative in 2012. A slow economic recovery is projected through 2017, but growth is not expected to reach 2007 levels during the next five years. Despite this weak macro-economic environment, spending on social media has continued to grow in Europe and will continue to see double-digit growth over the next five years as well. Why?
The continuous shift of ad spending from traditional media to online media. The megatrend of the past decade — advertising dollars shifting from offline to online media — is expected to continue in this decade as well. Internet advertising’s share of overall advertising spend grew from 1% in 2001 to 22% in 2012 for Western Europe. There still exists a significant gap between the time spent online by consumers and the share of online spend in overall advertising spend, but this gap will decrease over the next few years with the continued shift in spending.
Social media’s increasing share of online ad spend. Currently, display ad spending is nearly four times higher than social ad spending in Western Europe, and search advertising is eight times larger. However, social will experience faster growth than display or search in the coming years. Social’s share of overall online spending will increase as companies spend more to engage with consumers on social media platforms for marketing and sales initiatives.
Ten years ago, the most common way to connect to the Internet at home was via a PC or a laptop. Now, connectivity at home is increasingly being supplemented by tablets, smartphones, and other media devices, although PCs/laptops still dominate. Consumer electronics device manufacturers cashing in on this shift are offering Internet-ready capabilities in many of their devices. Although the notion of “connected devices” can be quite broad, we focused specifically on game consoles, Blu-ray players, and high-definition (HD) TVs in our recently published Forrester Research Connected Devices Forecast, 2012 To 2017 (US). Here is a brief commentary on each of these device segments:
Game consoles: In 2012, the game console manufacturers experienced declining sales. Unlike in the past, when the introduction of a new console generally saw significant uptake in sales, Nintendo’s Wii U (launched in Q4 2012) is not expected to hit the peak sales of the original Wii. We believe that this trend will be seen more broadly in the game console industry. This is largely (though not exclusively) driven by the availability of low-cost/"freemium" titles on smartphones and tablets, which fulfill the gaming needs of the casual gamer — and have a negative impact on the console market. However, we still expect the console market to see moderate growth. By 2017, the majority of consoles will be “connected” to an IP connection because consoles are multi-purpose and allow users to do many activities online such as rent/buy movies and TV shows, purchase games, watch streaming videos, and listen to streaming music.
If you search for “the death of email” on the Internet, you might be surprised by the number of articles on the subject. Why are so many people talking about it? Is this 40-year-old method of communication really under threat from social media? Does it mean that marketers will spend less on email marketing solutions? We paid close attention to these questions and many more when building the Forrester Research Email Marketing Forecast, 2012 To 2017 (US). We believe that spending on email marketing solutions will continue to grow. Why? We will see:
1. An increase in the number of active email users. Our email address is our online address, and it offers us universal interoperability. As per our forecast, we expect the number of active email users in the US to grow to 227 million by 2017.
2. The evolution of email clients. Over the past 40 years, email clients have evolved from text-based to desktop to web-based to mobile clients. As per our forecast, 178 million users —78% of all US active email users — will also access their emails through mobile email clients by 2017.
3. Email’s integration with social media. Email marketers have started leveraging a combination of email and social media marketing to get the best results. They are providing links to share via social media in their email messages and are encouraging their social media followers to subscribe to their email lists.
In 1974, an Indian Bollywood Hindi-language film was released with the title Roti Kapda Aur Makaan (English translation: Food, Clothing, And Shelter), referring to the bare minimums of life. If it were to be released today, the director of the movie would need to add the word Internet to the title because access to the Internet has become a necessity for many people over the past decade.
In a recently published Forrester ForecastView report titled “Forrester Research World Online Population Forecast, 2012 To 2017 (Global),” Forrester found that 2.4 billion people across the world use the Internet on a regular basis — i.e., at least once a month — from home, school, work, or any other location via a PC or a non-PC (mobile) Internet access device. This is expected to grow to 3.5 billion by 2017, representing nearly half of the 2017 overall world population of 7.4 billion. Our forecast provides the details of the Internet population in 56 countries across five regions.