By Amit Gupta, Co-Founder & Director, Surpluss.in
Surpluss.in is an e-Commerce provides an opportunity to the Indian customers to get global brands at their doorstep at a fair price. The company has over 10 years of experience in global sourcing.
India is waking up to a digital revolution unseen in any country outside China. The next 3 years are particularly ground breaking. Internet population of India is set to cross the half billion mark. That is equal to the population of entire Europe. Smartphones are set to do to Indian internet what mobile phones did to India’s telecom access. BCG estimates that the digital economy of India will be worth USD 200 billion by 2018 and will give direct employment to 2 million people by 2020. Deloitte estimates that India’s internet economy will ultimately give job to 65 million people and increase per capita income by 29 percent.
However, a lot of people ask me about the future of the industry. Where is e-Commerce heading in India with mind boggling valuations of even small sized players? Well, when industry goes through such a rapid rise there are high impact changes that happen. There are many new technology-driven segments that pop up as huge opportunities. So, suddenly like its 700 million users, we cannot do without Whatsapp and add our contribution to the 30 billion Whatsapp messages the platform exchanges.
As I sat down to write this article, I tried to foresee what are the five big things to happen to Indian e-Commerce.
The first thing that I believe will happen is that there will be increase in the money, risk and venture capital that is flowing into the Indian internet economy. When we talk of pure e-Commerce, India has room for several multi- billion market cap entities. Morgan Stanley predicts that the Indian e-Commerce market will be more than $100 billion in 2020. Simple mathematics will tell us that the collective market cap of these e-commerce companies will be into hundreds of billions of USD. That gives the Indian internet economy huge headroom for funds to flow in. Any analyst or market observer feeling nervous about the high valuations running among the Indian e-Companies are simply missing the wood for the trees.
Last week I was talking to one of the Managing Directors of a New Delhi based venture capital firm. As we were discussing the critical success factors of e-Commerce start-ups, he clearly identified ‘capital’ or ‘ability to continuously raise capital’ as one of the most critical success factors. But raising capital and that too continuously is not easy. There will be organizations that will be well capitalized. Looking at the current market situation in Indian e-Commerce, we see a few highly capitalized market leaders.
The funds flowing into them have created a huge financial barrier for new entrants. But as heavily funded companies scale up and become ‘valuable’ entities – the VCs and PEs funding them will look for bumper exits. Market dynamics, probable value erosion among portfolio companies, pressures to exit, complementary skills and assets, funding sustainability, and a host of other factors will force e-Commerce players to merge. This will be a strong trend in the Indian e-Commerce market. We have seen early signs of this already in the Flipkart-Myntra deal. But we are bound to see more of this in the Indian market. This will be more true because the Indian e-Commerce industry will not be likely to see sustained profitability any time soon and hence, there will be dependency on infused capital.
Myntra has become an app-only business from May 2015. It is the first among major e-Commerce players in India to do so. Certainly it is a bold move. The jury is still out on whether it is a correct move. But there is no denying the huge potential that mobile devices possess.
So the app will take centre stage in e-Commerce strategy – both as sales medium and also as marketing. Early signs of customers acquired through app and mobile marketing indicate lower cost of acquisition, better retention, higher basket size, and improved quality of sales (lower cancellations and returns). However, the most powerful trend will be leveraging app and mobiles for offering augmented reality options to app customers. This will be extremely attractive to lifestyle customers to see, for example, how a bag or fashion item will look on them.
Established e-Commerce players will also focus on user experience in the last mile. The point of delivery is a huge moment of truth which has been somewhat ignored so far by majority of players in India. That is set to change. There will be last mile innovations depending on the products being sold, customer requirements, and entire biz model. Another trend that will be a high competitive differentiator will be Big Data. Customer analytics and personalization driven by those analytics are potential game changers. What if your app knows the size you wear and shows only apparels of that size? Yes, of course they have their limitations and errors can be embarrassing. But the potential is quite high.
But even with all these big strides, I feel, even 2020 will be Day Zero of Indian e-Commerce. As experts say, and as an ever optimist always believes – even the sky is not the limit.