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."
