Challenges in E-commerce

E-commerce spending has risen to $2.1 Trillion in the past few years and will reach $5 Trillion by 2020. Such rapid growth promises a great future for the Indian E-commerce industry signifying a strong market and increased customer demand. Despite these growth trends, many e-commerce businesses fail to take off within their first year. It is worth exploring the various challenges which the ecommerce industry faces today.

Borderless Economies – Mobile technology has empowered consumers in myriad ways. It has opened doors to a digital economy, taking globalization to a new level. Traditional boundaries are clearly blurring, with online retailers expanding to new geographies. This leaves companies to deal with government regulations, geopolitical status and extensive local and international competition. Modern E-commerce businesses are in race to provide the best premium services to their consumers while finding the right balance between globalization and localization.

Building Trust – Building consumer trust and brand loyalty is essential for any business to succeed. The traditional brand building exercises are mostly irrelevant in the current E-commerce sector. It is easy to lose an online customer. Failure to deliver on any one aspect of customers’ demands would lead to failure in retaining them.

Disparate Systems – There are various data management systems such as – Point of Sale, Enterprise Resource Planning and CRM systems. These systems differ tremendously in their architecture, deployment and usage, usually built on dated technology and are prone to stagnation. A great deal of your resources is being spent on separate systems, interfering with internal business demands and distracting the focus from the core tasks.

Lacks of Collaboration – There are four key divisions in E-commerce – Technology, Data Curation, Product Delivery and People management. Modern companies face the challenge of collaborating between different departments, some geographically isolated and present in different time zones. Marketer’s merchandisers and E-commerce managers need to learn to strategically operate through one integrated channel.

Personalization – Modern E-commerce thrives on delivering the best personalized experience to their consumers. Managing a repository of customer data is a challenge in itself, added to that e-commerce companies have to understand how to use that data. Delivering customized content in the form of advertisements, special offers etc. are some of the methods which can be employed.

Ease of Technology – Ease of use and technology have given consumers more power and increased global competition in the e-commerce sector. Omni-channel retailing is the way forward for e-commerce. This places pressure on companies to deal with technical issues of running an online store like server issues, bandwidth issues, dynamic IP address, data privacy and security issues. The transition from a multi-channel business to an omni-channel is another aspect that is not easily adopted by many companies.

Managing logistics, seller registration and inventory accounting present bigger challenges for the e-commerce companies. To overcome these challenges would require greater deployment of manual resources and can’t just be solved through cloud services.

India’s top Tech Billionaires

Wipro Chairman Azim Premji leads the pack of Indian Tech Billionaires followed by HCL cofounder Shiv Nadar and Infosys chairman emeritus NR Narayana Murthy, according to Forbes 2016 list of World’s billionaires.

Azim Premji, his net worth is $15 Billion and global rank is 55. He is the founder and chairman of Wipro, India’s third largest software exporter. His family office Premji Invest has invested in companies like Snapdeal, Myntra, PolicyBazaar and Cyanogen among others. Shiv Nadar, net worth $11.1 Billion and global rank is 88. He is the founder and chairman of HCL, India’s fourth largest software services exporter. He is also a philanthropist with Shiv Nadar foundation.

NR Narayana Murthy, net worth $1.9 Billion and global rank is 959. He is cofounder of Infosys, India’s second largest software services exporter. He was the Infosys CEO from 1981 to 2002 and as chairman from 2002 to 2011. His private investment firm Catamaran Ventures has invested in Yebhi, Hector Beverages, Coverfox, and also has a joint venture with Amazon called Cloudtail which is the largest seller on Amazon India.

Kris Gopalakrishnan, net worth is $1.6 Billion and global rank is 1121. He is cofounder of Infosys and its chief executive from 2007 to 2011. He contributed 225 crore to setup the Centre for Brain Research at the IISc in Bengaluru and also backed a stem cell centered multidisciplinary programme on mental diseases and blood disorders.

Nandan Nilekani, net worth is $1.6 Billion. He is cofounder of Infosys and its chief executive from 2002 to 2007. He was the chairman of UIAI until March 2014 and is currently chairman of EkStep. He has backed companies like Team Indus, Fortigo, Mubble, LetsVenture, Power2SME and Systemantics.

Binny Bansal, net worth is $1.2 Billion and global rank is 1476. He is cofounder of India’s largest ecommerce platform Flipkart and took over as its chief executive in January 2016. He is currently responsible for operationally driving the company and overlooks all its business areas. Sachin Bansal, net worth is $1.2 Billion. He is cofounder of Flipkart and was its chief executive until January 2016, post which he assumed the role of executive chairman. Along with Binny Bansal, he has backed startups like Ather Energy, InShorts, Tracxn, and Tinystep.

K Dinesh, net worth is $1.2 Billion. He is co-founder of Infosys and was the board member from 1981 to 2011. He is retired as the Head of Quality, Information Systems and the Communication Design Group in 2011. SD Shibulal, net worth is $1.1 Billion and global rank is 1577. He is cofounder of Infosys and was its chief executive from 2011 to 2014. He setup a startup incubator Axilor Ventures with Kris Gopalakrishnan.

Amazon and Flipkart Control of Ecommerce

Amazon India and its largest local rival, Flipkart, which was modeled on the American Online retailer, are changing their strategies in diverging ways to dominate fast growing e-commerce market. Amazon India and Flipkart are the country biggest e-commerce firms. Both are supposed to operate as marketplace platforms that connect small merchants with buyers. They are not allowed to sell directly to shoppers.

But both the companies have adopted complex corporate strategies and used a mix of the marketplace and the direct selling business model. Amazon is using a joint venture to increase the direct selling component in its model, even as Flipkart is fast moving towards a marketplace. Amazon is willing to do whatever it takes to succeed in India, the last big unconquered e-commerce market in the world.

Amazon has already lost out to Alibaba Group Holding Ltd in China. Amazon success has been built on its avowed principles of offering the widest product coupled with low prices. To stay true in a nascent market such as India, the company has decided that it needs to have more control over its supply than what a pure marketplace allows. This requires more cash, but the online retailer has already pumped $2 Billion into its India Business over time.

Flipkart has changed its role model to China’s Alibaba. Flipkart was started in 2007 by two Amazon.com Inc. employees. The firm began as book retailer, just like Amazon in 1995 but gradually added all kinds of other products, including mobile phones, laptops and clothes. Until 2013, it sold all these directly to shoppers not through third party merchants. However, this model is simply not conducive to making profits.

Flipkart, which has raised $2.6 Billion over the past 18 months, is expected to report huge loss this year because of its aggressive expansion and deep discounting. At some point it needs to go public and the pressure to do that increases every year. Indian Ecommerce market resembles that of China more than the US. The success of Alibaba IPO strengthened Flipkart resolve to try and adopt Alibaba advertising driven revenue model.

Under this model, Flipkart plans to operate as a marketplace and earn the bulk of its revenue from ads and other services, such as logistics and warehousing charged to sellers. Flipkart is still trying to find the success formula that will work in India. Currently both companies along with Snapdeal have the same goal to dominate the e-commerce sales. 

After E-commerce, it’s time for Taxi in Internet Market

The next big thing in India’s Internet marketplace after online retailers Flipkart and Snapdeal will be on demand taxi hailing service. Companies such as Ola, TaxiForSure, Uber, and Meru are experiencing a boom in demand for their cab services in a country where the transport infrastructure is still creaky and safe public and private commuting options are few. This is because of shift in consumer habits towards convenience and on-demand services, and most crucially, low prices, have fuelled the boom.

In present scenario, a person wants a smartphone first rather than a car. Such shifts in consumer habits including use of smartphones for buying goods and services are helping the industry grow exponentially. Ola and Uber have grown explosively over the past year by offering car rides at prices lower than the fares charged by auto rickshaws. These companies spend massive amounts of capital on marketing, discounts, recruiting thousands of new drivers and expanding into new markets.

Earlier, cabs were used for airport rides. That has changed now because of unrivalled ease of access offered by mobile apps. All the large companies, including Ola and Meru, get a majority of their business from mobile apps, while Uber is entirely app-based. Similar to online marketplaces Flipkart, Snapdeal, and Amazon, all of which host product owned by third party sellers, Uber and its rivals have no ownership of the cars their customers use.

These firms don’t even employ drivers; they simply connect customers with drivers using technology and charge a commission varying 13-20% on each ride. All these taxi companies are funded by investors. Investors will pump in much more money this year to support the spending spree of the cab aggregators. Ola is also in talks to raise more funds. Ola, Meru, and Uber are rapidly expanding into new cities. Ola is planning to expand into 200 cities by March 2016.

While cab services are becoming increasingly popular with customers, Uber, Ola and others face significant regulatory hurdles. In upcoming time, Taxi companies will enter into Billion dollar business and some may open publicly. Third big thing in Internet market after E-commerce, and Taxi will be Food business online. We may see more businesses coming online and making needful impact in society.

Planet of the Apps

India has the third largest mobile user’s country in the world. With data showing Indian users, spend an average 198 minutes each day on their smartphones. It is believed that mobile phones are the future of an economy. Soon laptops may become obsolete and everything in the world will be operated through smartphones and tablets. Many companies are trying to make this happen.

Smartphones are used on a large scale because of 1.3 Million Android apps and 1.2 Million Apple app available to use. With introduction of mobile apps, most businesses in the world are turning their focuses towards mobile apps. Especially in the Internet based business. For E-commerce, business mobile app is the future. Mobile apps began appearing in 2008 and are operated by Operating system of a mobile. Mobile app is a short version of a website and a handy layout to operate.

Every social networking, news, business, entertainment, and sports have their apps. This not only will increase the usability and business for app developers, but will also increase the use of smartphones. In India, number of toiletries is less than the number of smartphones people have. Apple, Facebook, Microsoft, and Google are the most dominating companies in mobile apps. I remember the first app I used was the Shazam in my Nokia Symbian phone six years back.

After that Whatsapp, the most used chat app in the world. As the time passes by, now I use plenty of apps in my Android Smartphone. It has become easy for me to collect any information in an instant of time from mobile apps. There is no doubt that mobile app developers and companies will grow more. However, there will be time when everything will be available on the app. Most e-commerce business they use mobile apps because 70% of orders are placed from mobile apps.

The benefit of companies from mobile apps is that they collect user information and can sell that information to other companies in millions. Now talking about, E-tail companies give more discounts on ordering from mobile apps. In India, E-tail companies offer vouchers for other businesses too. Amazon was the first company in India to launch app sale, although Flipkart did planning first. However, there is an increase in growth of mobile apps and a majority of this growth is coming from outside of metro cities.

If internet reach is more in rural India then increase in number of users for mobile apps will also increase. However, new government “Digital India” initiative can make this possible. This will not only add value to reach people but will also contribute to Indian Economy. More companies will emerge out and people from Rural India can bring their businesses online.

Indian E-commerce Train

Indian e-commerce is projected to explode from $10 Billion to $43 Billion in the next five years. There are eleven categories and within them 42 players that are poised to shape this blazing path. Let us look at e-commerce industries in different categories, their investors, and funding raised by them.

The first in the category of e-commerce is Market Place. This multi category segment is on fire this year. The largest pie of the line retail ecosystem is drawing the maximum risk capitals and eyeballs. The top three players – Flipkart, Snapdeal, and Amazon are expected to do $4 Billion in sales this fiscal. All multi category players are on the Inventory less market place model. They are all investing heavily in warehouses and delivery. They are making acquisitions. Their focus is now on growth and less on profitability. Investors in Flipkart are Accel and Tiger Global. Investors in ShopClues are Nexus Venture and Helion Ventures. Snapdeal investors are Kalaari, Nexus Venture, Intel Capital, Bessemer, eBay, and Premji Invest.

The second category in the list is Travel. If multi product players have the eyeballs then travel portals have the wallet. At around $8 Billion, online travel accounted for 70% of the overall Indian e-commerce market in 2013. Three shifts are underway, one with air tickets becoming a staple, travel portals are turning their focus to hotel bookings and travel packages. There is a growing emphasis on smartphone traffic and applications. Big players are Cleartrip, Expedia, Ibibo, IRCTC, Makemytrip, RedBus, and Yatra. Investors in Cleartrip are Concur Technologies and Reliance Ventures. Investors in Makemytrip are SAIF partners, Tiger Global. Investors in RedBus are Naspers. Yatra investors are Capital 18, Norwest, Intel Capital, IDG Ventures, Vertex, and Valiant Capital.

The other category in Indian e-commerce is Fashion. After electronics, fashion and lifestyle is the largest industry in online retail with a 25% share. Myntra and Jabong are the leaders competing fiercely with discounts and for exclusive brand partnerships. Myntra is launching private labels including Roadster and Dressberry. With external brands give up to 35% and in house labels go up to 60%. Jabong is in partnerships with international brands and designers. Other players are Yepme, Fab Alley, and Zovi. Investors in Jabong are Rocket Internet. Investors in Myntra are Kalaari, Accel, Tiger Global, IDG Ventures, and Premji Invest. Investors in Yepme are Helion Ventures. Investors in Zovi are SAIF Partners and Tiger Global.

Furniture is the third largest segment in e-commerce. The value of goods sold by leading players is on course to increase 3-4 times this fiscal. Pepperfry and Urban Ladders are the leaders. Among market places, Snapdeal has launched and Flipkart, Amazon are exploring. In this industry, players need to build a specialized supply chain and help in building the manufacturer ecosystem. Pepperfry is working with manufactures to build furniture that can be assembled on delivery. Other players are FabFurnish and Zansaar. Investors in FabFurnish are Rocket Internet. Investors in Pepperfry are Norwest and Bertelsmann. Investors in Urban Ladder are Steadview, SAIF Partners, and Kalaari Capital. Investors in Zansaar are Accel and Tiger Global.

With an estimated market of $350-400 Billion, the grocery segment is larger than anything else is. It is also challenging. One needs to build Hyper-local sourcing, warehouses, and supply chain. Expansions across regions are staggered. The exception is BigBasket, which is in three cities. Other players are Ekstop, LocalBanya, IndiaMart, Homogennie, and Zopnow. Investors in BigBasket are Ascent Capital and K Ganesh. Investor in Ekstop is Unilazer. Investor in LocalBanya is Karmvir Avant Group. Zopnow investors are Accel Partners, Qualcomm, and Times Group.

Hyper-local market is the other growing category in India. Even if big players enter into market then also small shops and establishments will make a large percentage of sales. Platforms like Just Dial, Findable, PriceBaba, and Zopper are looking to bring them online in multiple ways. BookMyShow is doing the same with ticket bookings in arts and entertainment. Just dial the largest local search player with revenues of Rs. 561 crore in 2013-14 extended into transactions this January, enabling services like doctor appointments and flower deliveries. Zopper and PriceBaba are also expanding quickly. With smartphones and data connections, their numbers are expected to increase. Investors in Just Dial are Tiger Global, SAIF Partners, and Sequioa. Investors in Zopper are Tiger Global, Nirvana Ventures, and Blume.

Some e-commerce websites are differentiating by targeting niche customer profiles. GreenDust sells factory second and refurbished consumer electronic products at a 10% - 76% discount to market price. Limeroad is a social shopping platform focused on women that also offers users tools to curate and share collections offline. Onemi sells products only on equated monthly installment even to customers who do not have a credit card. Overcart is also a new startup. Investors in GreenDust are Lightbox Ventures, Vertex, and Reliance. Investors in Limeroad are Tiger Global, Matrix Partners, and Lightspeed. Investor in Onemi is VenturEast. Investor in Overcart is K Ganesh, and GSF Superangels.

Other than these, there are some smaller specialists in different categories. First is the Babycare category. Babycare and kids wear products categories are emerging. The leader is Pune based FirstCry. FirstCry is flanking its online presence with stores – 70 running and 30 more coming this year. It is collaborating International brands to provide free hospital kits to parents of newborns in about 6,000 hospitals in top 18 cities. Other players are Babyoye and Hopscotch. Investors in Babyoye are Tiger Global, Accel, and Helion Ventures. Investors in FirstCry are SIAF Partners, IDG Ventures, and Unilazer. Investors in Hopscotch are Lion Rock Capital, and Nisaba Godrej.

Healthcare is one segment where niche portals have managed to build strong franchises. While focus of Healthkart is protein supplements and personal care, that of Lenskart is eye care. It expects post revenue of Rs. 100 crore this fiscal. Other startups in this segment are Healthadda, Helathgenie, and Saralhealth. Investors in Healthkart are Intel Capital, Sequoia, and Kae Capital. Investors in Lenskart are Unilazer Ventures and IDG ventures.

Stores in general, have failed to offer Indian women a wide choice of products or a comfortable shopping experience. Online players are stepping in, offering wide variety of products, new categories like shapewear and the privacy to shop without human contact. China largest category in e retailing is apparel. Online players are PrettySecrets, Koovs, and Zivame. Large players like Flipkart, Myntra could acquire them to make these brands anchor tenants on their website. Investors in PrettySecrets are Rehan Yar Khan. Investors in Zivame are Unilazer Ventures, IDG Ventures, and Kalaari Capital.

India’s appetite for jewellery is growing every year. Players are entering into online platforms and Bluestone, Caratlane are some established players. Investors in Bluestone are Accel Partners, Kalaari Capital, and K Ganesh. Investors in Caratlane are Tiger Global. Online business is also growing in Food Chains sector. Platforms like Zomato and TastyKhana are offering in wide categories. While Zomato is into restaurants chains and it is Google of Food, TastyKhana delivers your food in quick span of time. Medical shops are also entering into online selling and delivering of medicines. Apollo Pharmacy, 98.4, and local keepers are entering. In flower delivery service, Ferns & Petals, and other players are emerging. Taxi and Ride booking is also emerging at a rapid pace. Electronic stores, customize printing business, fruits and vegetables,  are some other categories where business is growing. It is expected that after five years everything in India will be available online.