Where is India heading in Ecommerce?   Link

K Ganesh, Founder of GrowthStory talks about Tata Digital's Retail eCommerce venture and more

India's eCommerce is at an early stage and set to grow exponentially. "ECommerce is a global phenomenon which India is catching up with and Covid has only accelerated it. It is several orders of magnitude cheaper to sell online in a vast country like India than to build tens of thousands of stores." Operators can quickly and cheaply scale up to all-India levels and chain stores like Future group are struggling to compete. Tata and Reliance (two Indian mega conglomerates) have entered this sector. They have vast resources, professional competence and prior experience in traditional retail to rely upon.

Tata took the unusual step of buying into growth rather than doing it all within the company. It is paying a premium for loss-making but highly growth-orientated, new-age digital companies. For super apps to be successful, they must satisfy a core purpose that is heavily frequented. This can be chat or messaging, digital payments, daily shopping, commuter ticketing, etc. Tata's stakes in BigBasket [fresh fruit & vegetable shopping] and medicine acquisitions work is in that direction. However, customers will look for great functionality from a super app and not just a good one-off app. I think Reliance's deal for bringing in WhatsApp has the best potential for a super app. [Tata Digital is to go public with an IPO. Retail IPOs including Paytm & Zomato are great for domestic investors as they can share in the emerging boom in new Indian equity.]

Indian eCommerce market is so big that both Flipkart and Amazon are growing tremendously. This is despite Amazon going all out to win market dominance and crush the competition. Amazon and Flipkart use national distribution channels where products can be shipped anywhere from distributed warehouses. Others — DoorDash, BigBasket, Swiggy— use the hyper-local distribution where products are shipped from a nearby traditional store.

"Most products can be delivered by either method. But fresh products like foods, vegetables, restaurant food, etc can only be delivered by hyper-local companies. Hyper-locals compete for neighbourhood by neighbourhood, in city after city. Also, large investments are needed so the hyper-local model is costly and does not work on one national strategy. To meet the challenge of competition, they have to stitch together local strands, build the right culture and hope customers keep coming back!" For example, hyper-locals find it more convenient to use existing stores as warehouses and for delivery. So they co-opt local stores and national chains and run their businesses with smooth digital interfaces.

"To sum it up, there is a great opportunity in the hyper-local. At the national level, Flipkart and Amazon are there and we may see large players like Reliance and Tata that can become big. But for hyper-locals, the field is still fully and completely open. Competition is really not the issue as they are taking share from offline or traditional stores."

What are your thoughts on 20% Ethanol blending target? Is it sustainable? Link

Sabyasachi Majumdar, Vice President of ICRA

"Quite simply if India's entire sugar exports are diverted to ethanol production, the blending target can easily reach 20%!! 

"In recent years, new sugarcane varieties have substantially boosted sugarcane production from UP as well as sugar recovery. A surplus of 5m tonnes of sugar is produced every year and exports are being encouraged through incentives. Firstly global demand & supply situation can reduce exports in some years which creates cash flow problems and storage issues. Also beyond a few years – I believe after 2023–, subsidies will have to stop as there are trade rulings barring them. So, Government is looking for alternative uses for sugar.

"Avoiding the surplus is the biggest worry. For example, petrol makes up just 10% of total oil imports, though a lot of the rest is refined and exported. A 20% saving on oil for petrol has a small impact on forex but it does not reduce our dependency on imported oil very much. [Edit: sugarcane juice can be converted to aviation fuel or bio-butane which can be consumed or exported.]

"However, ethanol blending is a massive boost for the sugar industry, as it brings sustainability of quality incomes to farmers and stability of employment in factories along the supply chain. I see it as a game-changer for our industry! Domestic sugar price will rise, but so will production to compensate. Blending norms can be adjusted if there is a deficit sugar year or production falls away due to disease."