(By Sanjib Parida co-founder of Muvi.com. Connect with Sanjib on Twitter @codemonsoon.)
Dynamics that are at play in e-commerce sector of India and could make the investments here smartest internet investment ever made.
What we have over here is the third largest country on the Internet, population that is rapidly urbanizing, widely distributed middle class who are adopting new lifestyles and spending behavior at an alarming rate. Most of these factors are roughly doubling YoY. The physical equivalent of this is a busy market street where everyday more people are showing up with more money in their pockets looking out for more new things to spend their money on.
Now if you are a retailer this is paradise in the making and you definitely want a piece of it. Organized retail as a sector itself is at its nascent stages in India. Some ease in FDI regulations have got the Walmarts and the Tescos of the world interested in the sector but the fragmented nature of operatives that are required are not comfortable for these huge retailers. The Shoppers Stops, Centrals, Pantaloons, etc. of the world have captured attention of some uber urban demography but their scale will not allow them to get into every small pocket of consumer demand that will be spanned across numerous lower tier cities across the country. And this is the multibillion-dollar opportunity for e-tailers like flipkart. Their nimbleness supported by technology and capital efficient operations will allow them to spread wide with smaller investment and take care of a bigger markets.
We have already seen a similar story in the mobile space where the majority of the current consumers leapfrogged from no connectivity to mobile connectivity skipping the landline stop over. There is a current generation growing up which will be making their first big ticket lifestyle purchase as in a cellphone, computer or even fashion accessory not from a physical brick and mortar store but from a online e-commerce site.
Branding and access to market will be significant contributors to this shift. The interesting factor with this shift is that it takes care of one big friction that e-commerce sector across the world is facing i.e. training consumers to shift behavior from offline buying to online buying. And efficiencies of technology scale by online retailers will allow them to have low cost of operation and product procurement which they can pass on to their consumers. Interesting thing to note here is time and again FMCG and white goods companies have proved that in India a delta of one rupee in price point moves market share.
I liked the point where you talk about people who will be making their first big ticket sale online.
This group will not need Cash on Delivery or some convincing to buy online, because they trust the system to deliver.
The next frontier in e-tail can be extension of credit depending on customer’s buying history (with individual credit rating – integrated into the eCommerce engine). For example, a customer (who has a good credit rating and a buying history with an eCommerce platform) will have the option of buying stuff worth Rs. X without paying anything now. She will not have to fill some application or submit documents. She will just see a custom interface which will tell her to buy now and pay within a year or 6 months – or you can buy stuff worth 200,000 without paying anything now.
Good article! Thank you so much for sharing this post. Your views truly open my mind.