Internet reaches inflection point. What comes next?

India now has the third-largest base of internet users, according to a recent survey.

As of September, the country had 112 million internet users, including 88 million urban and 24 million rural users, said the report, released recently by I-Cube jointly with the Internet and Mobile Association of India (IAMAI) and IMRB. It projected the base at 121 million by the end of December.

Of the total users, 34% reside in the top eight metros, led by Mumbai, followed closely by Delhi and NCR, though smaller cities are also contributing good numbers. In fact, compared with last year, active internet users from urban and rural areas are up 13% and 68%, respectively.

Only USA and China ranked higher with 485 and 245 million internet users, respectively, the report said.

Unlike in those two countries, however, the numbers haven’t started translating into online financial and commercial transactions in India yet.

“There are not enough serious internet users in India. Majority of us still use it primarily for accessing emails,” said Sandip Biswas, director, Deloitte Touche Tohmatsu, which provides financial advisory and technology services. “Internet usage in the country in still not very transactional, but we are definitely heading in that direction,” he said, predicting that the user base will touch 450 million by 2015.

Only one in 10 people shop online, according to First Data, a provider of electronic commerce and payment solutions. “India has just about 10 million active online shoppers,” Amrish Rau, vice-president and country manager of First Data had noted in a recent report.

Of the total e-commerce pie in India, e-tailing, or sale of retail goods online, is estimated to account for just 20%. The rest is travel related, which includes activities such as hotel booking, ticket and railway tickets.

“Though online purchases have grown in the last couple of years, lack of trust and fulfilment issues are major roadblocks for e-tailing,” said Rajesh Kamra, co-founder and managing director, Koovs, a one-stop solution for all lifestyle products.

Dr Subho Ray, president, IAMAI, however, believes this segment is growing strongly. “The online shoppers segment is growing at a decent rate compared with the growth rate globally. We cannot compare our growth with the USA and China as their markets are already well-evolved and we still have enough room for development,” he said.

“Like travel has evolved in the last 8-10 years, e-tailing will also grow. But, since the concept is just five years old, people will take time adapt to the same,” said Sandeep Komarvelly, head - marketing, Snapdeal.com.

Experts feel Indians are still not comfortable shopping for products on the web. Also, many don’t know how to use debit and credit cards online and use the internet mainly to look for information.

“Many Indians still don’t buy unless they get the physical touch of the product,” said Krishna Motukuri, managing director - ecommerce at tradus.in, an online shopping portal offering retail products.

Encouragingly, internet usage has seen a substantial rise since youngsters spend a lot of time playing games online and their level of awareness about the internet is also very high. Indeed, more than 75% of internet usage is still driven by youngsters that include young men, college kids and school going kids, said the IAMAI report. This sure opens up the market for those below 18 years of age.

With this momentum, experts see the e-commerce business growing by more than 50% a year as there is enough room for rapid growth in this nascent market.