With growing internet penetration and disposable incomes, people of India are experiencing a massive change in their shopping habits. People from all fronts of life are using their smartphones to buy products and items. With the big three— Amazon, Walmart, and Alibaba—entering the E-Commerce sector in India, the market is slowly maturing and expanding its footprint to the most remote locations across the country.
According to an analysis website, the E-Commerce Industry in India grew from 4% of the total population in 2007 to around 40% in 2017, clearly indicating the rise of the internet era in the world's fastest-growing economy. It is expected to reach around 50-55% by 2020. This internet boom is directly proportional to the emergence of E-commerce in India and other internet-based domains.
This post analyzes the current scenario of E-Commerce in India along with its future trajectory.
E-Commerce Industry In India
This success story started in 2007 with the inception of India’s most successful startup, Flipkart. Initially, companies found it tough to encourage people to shop online but with advancing technology, logistics, and payment methods supported by various offers and sales, people slowly drifted to this convenient mode of online shopping. Internet penetration and low data costs were and continue to be the most prominent factors encouraging this trend.
E-Commerce in India is expected to touch $200 billion by 2025 from the figure of around $40 billion in 2017. The internet economy, on the other hand, is expected to double by 2021 to $250 billion, majorly riding on the E-Commerce wave. Seeing this potential, Amazon, Walmart, and Alibaba are heavily investing in India and building a strong presence. Various domestic players like Snapdeal, Shopclues, Infibeam, etc. are also a part of this organized and exponentially growing E-Commerce segment in India.
Growth Of Amazon In India
Amazon has expanded its footprints in India by promising to invest $5 billion, and until now it has already pumped around $4 billion. These investments are being used for expanding its portfolio by bringing various sellers onto its platform, building and leasing warehouses for storage, improving logistics, offering heavy discounts to acquire new customers, and for foraying into new verticals like grocery and payments wallet.
In 2017, Amazon’s founder Jeff Bezos stated that Amazon’s app was the most downloaded shopping app in India. Moreover, the company’s loyalty program—Amazon prime—was adapted in India at a much faster rate than any other country. Its international losses as of April 2018 were $622 million and the revenue was $14.08 billion, whereas a year back the figures were, $481 million and $11.06 billion respectively. Amazon is also focusing on improving its smart AI-based speaker, Amazon Echo. Alexa, Amazon's voice-controlled personal assistant, is being trained to understand Indian dialect and vernacular languages.
Amazon is also concentrating on its Hindi website and app to conquer customers from tier-2, tier-3, and rural areas where English is not widely used or taught. With a growing focus on improving customer service through setting up various fulfillment centers and faster logistics, Amazon is working to counter its local competitor Flipkart which was recently bought by Walmart and Paytm Mall (which is backed by Alibaba). It is also looking towards providing drone-based delivery. With its increasing investments despite heavy losses, Amazon strongly believes that today’s investment of Re.1 will yield returns of Rs.100 tomorrow.
Growth Of Flipkart In India
On the other hand, India has a domestic successful E-Commerce player in Flipkart. Initially, it had its share of struggles in bringing sellers and buyers on its platform while dealing with the challenges of logistics and maintenance of warehouses. But with grit and hard work, Flipkart has been successful in bringing a revolution that changed the face of the startup ecosystem in India.
It was the first E-commerce company to introduce the system of cash on delivery, being mindful of the reluctance people faced while using their cards online. It also accomplished the task of setting up its own logistics unit, Ekart, along with various warehouses for storage and faster deliveries. Just like Amazon, Flipkart’s founders also started their startup by selling books online and slowly scaled their startup to various segments. It has also acquired various startups like Myntra and Jabong in the fashion segment, and Phone Pay to delve in the mobile wallet industry. As of FY2017, it held around 45% of the total market in India, with losses about Rs.8771 crores and revenue rising by 29% to Rs.19,854 crores.
Flipkart also launched its smartphone segment under the name 'billion', and also forayed into the electronics segment under the name MarQ. It is even venturing into the untapped potential behind the furniture segment. The basic reason behind launching an in-house brand is to attain profitability; many experts say that in-house brands will ultimately become the backbone of E-commerce. Success was not easy for Flipkart. Ideas like trying to turn Flipkart into a mobile app completely didn't go down with customers, and there were other failure stories as well.
Flipkart was recently acquired by the American based supermarket giant Walmart for $16 billion. This lead to Flipkart's valuation reaching to $21 billion. This deal was a win-win situation for both as Walmart got a 77% stake for expanding itself into the world’s new E-commerce battleground, and Flipkart got ammunition in the form of investment and equity to counter Amazon. Recently it also launched its loyalty program named Flipkart Plus, where users are provided with free delivery and points. It also has a Flipkart affiliate program where you can become a partner and earn money. These points can be further used to redeem offers on platforms like Bookmyshow, Zomato, Hotstar, etc.
Flipkart recently launched its refurbished marketplace, 2gud.com, after parting ways with eBay India. With the competition getting tougher every day accompanied with a growing market size, it remains to be seen whether Flipkart will be able to maintain its supremacy. No matter what, Indians will always be proud of Flipkart as it changed the way an average Indian shops.
Also read : Snapdeal - Catering to 400 million Value
Other E-commerce Players In India
The third dimension to E-commerce in India is Paytm Mall and other small players. After the fall of Snapdeal, Paytm Mall was quick enough to conquer the third spot in the industry. Focusing on its online to Offline model (O2O model) which allows consumers to avail online discounts and offers in Offline partner stores, it has established a niche in this particular segment.
Currently, it has annual gross sales of around $3.5 billion and plans to achieve $10 billion of AGS by 2019. It has been successful in raising $650 million since its inception from various VCs like Softbank and Alibaba. A recent report states that Paytm Mall along with Google might pick a 7-10% stake in Future retail. Also, reports have surfaced that Paytm Mall might collaborate with Bigbasket to counter Amazon and Flipkart. This $2 billion arm of Paytm is broadening its roots into different segments to increase its product portfolio. It aims to become a one-stop destination for users shopping online.
Another small player, Shopclues, has been successful in attracting customers from Tier-3 and Tier-4 towns, clearly indicating its difference in thinking from Flipkart and Amazon. It consists of various small sellers on its platform selling quality goods at a cheaper price. This business model has attracted people from various rural areas who have low disposable incomes when compared to their urban counterparts. According to a ROC 2018 filing, it was revealed that Shopclues' revenue increased by 60% to Rs.180.3 crores and losses came down by a massive 40% to 332.65 crores. It also hinted at profitability in the coming quarters.
Many people from the industry feel that the current E-commerce ecosystem in India (consisting of both the marketplace and inventory type) is less than 5% of its actual potential. With this industry growing exponentially, many small and big players feel that there are more horizontals and verticals which are yet to be explored and organized. The E-commerce segment will be imperative in pumping up the Indian economy and boosting the employment rates.