In 2016, about 69 million consumers purchased online and the number is expected to cross 100 million by 2017 with the rise of digital natives, better infrastructure in terms of logistics, broadband and Internet-ready devices to fuel the demand in e-Commerce, according to an ASSOCHAM-Resurgent India study.
The joint study reveals, Indian e-Retail looks even more promising which is Up from $3.59 billion in 2013 to $5.30 billion in 2014 (a phenomenal increase of 48%), by the end of 2018, it is expected to touch $17.52 billion (with growth of 65%). The e-retail sale continues to register an unprecedented growth and increase by leaps and bounds over the 2013-2018 period. This year witnessed many historic developments let’s throw light upon some of those..
Consolidations and acquisitions..
Speaking exclusively with Indianretailer.com Mihir Kittur, co-founder and chief innovation officer at Ugam said, “The Indian e-commerce landscape has gone through horizontal growth path. People like Snapdeal, Flipkart and Amazon have really dominated the market as they began to focus on certain verticals be it apparel, shoes or any other. Many of them are consolidating via acquisitions because market is going through a phase which I should call ‘sanity’. “
Last year, Future group did small scale acquisitions in many dot com sites especially in home segment, for example, FabFurnish.com. In one of the major acquisitions we saw Jabong was bought by Myntra. In last 12 – 18 months there have been many wallet acquisitions by Flipkart and Snapdeal. In fact, Flipkart launches its own digital wallet called as ‘Flipkart Money’. Mainly, the move was taken to complete with Snapdeal-owned online recharge and utility payments platform Freecharge. Certainly, payment start-ups were very attractive to many e-retailers in the year gone by.
Flipkart vs Amazon: who won the race …
If you look at Indian e-commerce be it Flipkart or Amazon or Snapdeal. To a great extant, they all are betting big on apparel and consumer durable categories. As Assocham study reveals, in 2016, it showed that a higher amount was being spent on average for popular categories such as apparel by 85 per cent, mobile phones by 68 per cent and cosmetics by 25 per cent, when it comes to online shopping.
Report also indicated that there was also a significant increase in spending on categories such as watches by 75 per cent and artificial jewellery by 65 per cent. Computer and consumer electronics, along with apparel and accessories, account for the bulk of India's retail e-commerce sales.
As Kittur feels that Flipkart is looking to consolidate in apparel category that could be the major reason behind foraying Myntra and Jabong. As he said, “Apparel segment is huge and mostly under penetrated; this category churns better margins especially when you do private labels. Flipkart and Amazon, they both do a lot of private labels especially in apparel segment.”
He also informed that ‘Athletic leisure’ is emerging as hot category, initially Amazon use to do it, lately Myntra and Jabong have also started retailing it. However, apparel category has its own complexities because of high number of returns.
“CDIT is a category which is over represented in India,” he said. Going further he added, “It is very price comparative and low margins category. If you look at the more developed markets, electronics is not the biggest category. In fact, it is home and grocery categories. Most of the electronic category is not driven by private labels and mainly ruled by national brands. Typically, this category starts from Rs5000 so even 10% discount on this sum is a lot of money.” However, the chances of ‘returns’ are low in this category.
“Today, if you want to buy a shirt or trouser, there is a lot of friction; you don’t know what the material will look like, size issues, etc. And, if you are buying a phone, let’s say if you have ordered a Samsung phone, chances are high to get Samsung phone only,” he said.
Despite enormous growth prospects and fundings no e-commerce giant could become profitable in 2016. “If you look at the fundamental economics of e-commerce globally, nobody has made money in e-commerce so far. Amazon made money after years of being in business, that too from its other vertical. Globally, we have seen examples where people started as an e-commerce player, and later went on buying physical stores and then became profitable” said Kittur.
Kittur feels that there is a need to draw a balance between growth and profitable growth in a manner that e-commerce giants don’t run out of money. E-commerce is certainly here to stay, and they are definitely going to see growth and consolidation and investment from external retailers in the time to come.
“Two years back Flipkart was doing 3000 crs business now they are crossing 15000 cr mark. So, there is a tremendous amount of growth. And, there are many untapped market in India which have money but e-commerce has not reached over there yet,” he concluded.
As per Assocham report there is a surge in the number of people shopping on mobile across India with tier II and III cities displaying increased dominance. In fact, 50% of our traffic is coming from mobile and a majority of them are first time customers.
Demonetization and e-commerce
As the year 2016 comes to an end, the country witnessed biggest economic movement of the century as big currency notes were swapped with new currency, forcing its citizens to go cashless. To an extent, cash on delivery generate (COD) is a very large chuck of money for any e-retailer. Almost, every e-commerce player was affected as cod was discontinued in the initial days of demonetisation. In medium term they all are evolving by convicing people to go cashless and initiating new services. Post demonetization, Snapdeal started “Cash@Home” service which allows its users to circumvent ATM queues and avail convenient doorstep delivery of cash. A nominal fee of Re1 fee is applied as convenience charge to process the request.
Speaking on post demonetization effect, a spokesperson from Snapdeal said, “We believe that demonetization has acted like a catalyst towards the narrative of building e-commerce companies in a very sensible and methodical manner, focusing on unit economics. It has played a pivotal role in increasing the pace of this shift towards upfront payment through debit, credit cards, and digital modes. In the initial phase, we observed a temporary dip in COD orders, which soon returned to normal. The trends from the first ecommerce sale, post the demonetisation announcement indicated that users have quickly adapted to digital payments, with 75% of the sale orders being placed using various digital options including FreeCharge, Credit / Debit cards and netbanking.”
As ASSOCHAM- Resurgent India report has forcasted, the year 2017 will see large scale growth in the Indian e-commerce sector with increased participation from people across the country. This industry will continue to drive more employment opportunities and contribute towards creating more entrepreneurs through the e-commerce marketplace model.
As per the joint study, the total retail sales in India will likely to increase from the $717.73 billion during CY 2014 to touch $1,244.58 billion by 2018. The total retail sales is growing at an impressive rate of 15%, registering a double digit growth figure year after year.