The Indian e-commerce juggernaut- it’s mobile

I have often noticed this fact typical to the Indian Consumer- considering their restlessness and the variety of choices available in the market, they are ruthless in terms of giving failures another chance.   Chances for recovery when a particular car model fails to appeal or when a mobile network fails to deliver on its promises are very bleak. But there is one area where they have been immensely patient and forgiving so far. This is the magnitude of impact the lower pricing of e-commerce has had on the Indian shopper.

If recent events like the Flipkart Big Billion Day and Snapdeal Big Savings day are to go by, it has exposed the lack of attention to the backend and delivery systems. People I know are still sceptic of buying shoes and clothing online as long as the manufacturing and size standards are not established. Big budget purchasing of furniture through e-commerce is not recommended in my opinion as their prices are still higher than what a large scale furniture retailer might offer. Not to mention, it is always advisable to verify the quality of material and workmanship along with exact dimension (which I found do vary in reality) of the units.

If all these do make my sentiments towards e-commerce a bit negative, I am still one of the millions in India who is fuelling this huge wave of ‘internet enabled shopaholics’. And if the data from last week’s Google annual online shopping growth trends report is anything to go by, (http://www.business-standard.com/article/companies/google-says-indian-e-commerce-market-to-hit-15-bn-by-2016-114112000835_1.html) India will have 100 million online shoppers by 2016 and the market will be worth a whopping USD 15 billion from USD 3 Billion today. Also, the report mentions that Mobile phones emerged as an important access device for online shoppers with 1 out of 3 online buyers transacting on their mobile phones in Tier 1 and Tier 2 cities. In terms of numbers, 50% queries come from mobiles and this was at 24% in 2012. A key driver for the rural consumer is the social elevation offered by the access to the best brands sitting in their own towns and the ability to order over mobile internet.

Experts are now ready to acknowledge the fact that what happened in many other global market by virtue of desktops is happening in India via mobile phones and apps. This is the space where we have to acknowledge the fact that by December 2014, India is poised to become the 2^nd largest market with mobile phone subscribers in the world. With 300 million subscribers, India will launch past the United States and yet be short by half to the 600 million in China. But the point to note in this case is the rise in numbers of the rural consumers. It is this mass segment which is now the driving force in e-commerce. (http://www.afaqs.com/news/story/42537_India-to-cross-300-Million-Internet-Users-by-December-2014) Imagine the numbers- internet users have increased by 39 per cent to reach 101 million in October 2014. It is expected to reach 112 million by December 2014 and 138 million by June 2015.

It just takes my mind back to the actions by the Ministry to Communication & IT in 1999 when they implemented the Universal Service Obligation. Under this, all telecom operators were required to develop the rural telecom infrastructure at a minimum of 10% of its urban presence as well as further licenses were issued in accordance. The seeds sowed then are bearing fruits today with a 100 million new customers added in just one year as we went from 200 to 300 million.

If we correlate the two reports, there is a definite synergy between the rise of e-commerce in India with the rise of internet access via mobile. Much as India never had a dominant industrial revolution as in the West before the service based economy took shape, we have skipped the dominant phases of the desktops, landlines, land based internet and directly arrived to the highs of the mobile phones and mobile internet. The penetration of retail in the form of shopping malls is limited, but the penetration of mobile app based e-commerce is on the rise.

The wave of e-commerce is like a juggernaut- with the ability to breach the divides of physical limitations and access. The driving force here is the ever growing number of mobile connections and mobile internet capabilities at the hands of millions of Indians; which is paving the road at a super pace. 

Online retail in India- Still a long way to the top

11.11.2014 was an exciting day for online retail and shopping enthusiasts. After an impressive opening at the NYSE, Alibaba and Jack Ma have been in the headlines for all the right reasons. The Singles Day sale on 11^th November was like a show of its might and abilities to deliver and grow year on year. The numbers are simply mind boggling- $9.3 billion in sales with 278 million orders shipped in 24 hours. The figure is a significant rise from 150 million orders shipped last year, which again was a massive improvement from a year ago. It has shown exponential growth in sales and traffic over the past six years. Surely enough, the Chinese dragon is making its presence felt around the globe.

While all this was happening in China, on the very same day, Snapdeal and Amazon were looking at causing a few ripples in the Indian market. Snapdeal Savings Day was being heavily advertised for four days preceding the sale. To keep the shoppers interested, they put up a listing of all the range of products which would be up for grabs on the day and complete with hourly and limited time sale across categories. It seemed to be a well charted approach with special discounts or cashbacks on use of certain cards or modes of payment.

Parallel to them was the Amazon Appiness Sale- an exclusive sale for its mobile app customers and targeted towards increasing the number of mobile based internet users shopping via its app. But this also had a lot of attractive offerings like the chance to win 11 months of free shopping worth Rs 11,000 each month if one buys through the application.

Both the retailers seemed to have their marketing hats on and trying to ride in the mass wave of consumerism that has set in India. But coming hot on the heels of Flipkart Big Billion Day debacle, as an enthusiast and online buyer, I was really interested in how these two giants fared in comparison. With not much to buy available under the ‘Sale’ tag, I was happy to just a spectator and gather information and understanding. Sadly, the reports were not really encouraging.

Snapdeal Savings Day went on much the same way as Flipkart. The social media channels were buzzing about problems right from site not opening to payment gateways unable to check out orders. Comparisons came up rapidly to the extent where people commented that even the while Flipkart managed to get consumers up to some basic levels, the Snapdeal site was unable to meet this. As for Amazon, the social media pages were filled with more of customer complaints rather than anyone talking of the joy of shopping. While the reports in newspapers focussed on another online disaster caused by Snapdeal, the Amazon offer was possibly lost even for the media. The bottom line was clear in both cases: Snapdeal possibly lost more than gained and Amazon failed to build on the buzz.

In my opinion, the online shopping scenario in India is heavily dispersed across retailers who sell in specific categories and then the big ones who have everything under one roof. In the current boom, customers are actually spoilt for choice and thereby there are even retailers like Junglee (used to be the Indian brand by Amazon) which have got into the mode of a search engine for retail to give you the best deals. Sadly, it is too early for people to have formed loyalties and majority of the population sways to the retailer where the prices are lowest for the day. It is hardly surprising that in case of a flash sale, the number of users multiply exponentially and the support structures are collapsing. Also, it is not viable to maintain a backend in terms of inventory, servers and payment gateways for the flash sale volumes for all other days of the year.

Not to mention, physical retailers have been crying foul towards flash sales riding on predatory pricing strategies. Since the online retailers have no direct arrangements with the manufacturers of durables; LG, Samsung, Videocon, Sony and Panasonic forbid their trade partners to sell their products with deep discounts during flash sales on e-retailers, while to buyers of the products are termed not eligible for after-sales service or warranty. I have had one experience where my product was not even handled by an authorised service as it was an exclusive online product.

I guess on an overall, online retailers have to introspect into what they are offering and what they need to make this wave sustain in the long term rather than more of flash sales and heavier discounts.

a)      Market Size: Online retail is on a boom and is looking at exponential growth. But all put together, it accounts for a fraction of total of physical retail sales in India. The number of categories is today limited and growing, but it has many miles to travel before replacing the traditional formats to a significant degree anytime soon.

b)      Deliveries: Last year I was proud to awe my brother with the record 2 days for a standard book delivery by Flipkart. This year the same has been extended to 5 days. My friend over two weeks has been fighting over apologies and no responses after a wrong book was delivered to him. Another one reported of a delivery boy who fainted on the road due to fatigue and overload of pending deliveries over Diwali. All these are just signs of the lack of robustness in the delivery mechanism which needs an urgent shot in the arm.  

c)       Revenues: Every sale so far has had huge spends on media, investment in inventory and delivery and heavy discounts. This is driving the top line of the sales chart- but what about the bottom line? How far can it be ignored? It is known that everyone in this business run in debt, but is this how things will run for ever?

In every business, there has to be a consolidation phase before the next big step. I believe its time it was attended to as well if we do dream to see someone to be India’s answer to Alibaba.