Financial year 2015-16 has been a tough one for many new age e-commerce businesses. And it has been a rather volatile one too with several Venture Capital (VC) firms keeping a tight leash on funding. However, it is equally true that online businesses with unsustainable revenue models are the ones that have faced most of the heat.
The immediate impact of the above was reflected in the discounting models adopted by several large marketplaces. Discounts and promotions shrunk, margins charged by marketplaces to their merchants increased and the likes of Flipkart also started seriously focusing on complementary businesses like E-Kart to hedge against uncertainty. The year also witnessed a relatively high rate of attrition among the top management at large e-commerce marketplaces. We need to realize that all of the above was inevitable since business models purely driven by discounts were always unsustainable.
The Indian e-commerce industry is at crossroads right now and the future of all large marketplaces is uncertain. Consolidation and acquisition among them is a given and it remains to be seen who survives. But there is ABSOLUTELY no doubt that e-commerce as an industry is permanently here to stay. The consumers love the experience, the convenience, the variety and the prices. Discount driven business models will gradually be replaced by fundamentally sound models.
The internet and e-commerce industry in India
The world is moving digital and India is getting there at an even faster pace. We had 92 million internet users in 2010. We saw this internet user base grow 4 times to 354 million in 2015. The magical smartphone has acted as a catalyst for this growth and we have 75% of all internet traffic coming through mobile devices!
The Indian online retail market is slated to see an unprecedented growth from USD 22 billion in 2015 to USD 100 billion in 2020! More importantly, the Indian online retail market was 1% of total online retail in 2015, but is expected to be 5.4% of total online retail in 2020 over a 5-year period only. This pace is indeed rapid as compared to a mature economy like the US which saw this share grow from 1.8% in 2003 to 7.5% in 2015 over 12 years.
To top it all, India is a very young country. Our median age is slated to be 29 years by 2020.
What does this mean for you?
A shout out to all entrepreneurs and intrapreneurs who have painstakingly built and nourished a brand in their careers! You have surely put your blood and sweat over the last several years to come up with a brand that consumers love. And most certainly, you want your brand to grow and reach out to more consumers.
But where are these newer consumers? Please look up the statistics above; your newer consumers are online!
It would be hard to believe that you do not want to introduce your brand to the new age online consumers. Furthermore, you surely would want to capture them early on to avoid very high costs of customer acquisition a few years down the line when digital competition heats up even more. For all you know, by 2020 or 2025, these new age online consumers may buy your competitor brand if that is online and your brand is not.
Your products may be available online via marketplaces. But you certainly do not want to solely depend on them for your online business. If you do, please keep in mind that you would not be able to build an online brand, own the online consumer or develop any customer loyalty. An industry stalwart that I recently met, passed this cheeky comment - "Marketplaces ka kya hai, aaj hai, kal nahi hai!"
Shoptimize helps brands setup a profitable and independent online sales channel. We offer an end-to-end e-commerce solution that comprises of technology, marketing and analytics. We have worked with over 100 large and small brands across India now. Read here about how we have helped some of our clients go online and grow online.
3. MasterCard Worldwide Insights 4Q 2010, PWC e commerce in India report,