Latif Nathani
How Personal Mobile Connectivity Is Driving India’s Retail Evolution
Back in April I wrote an article titled Are you part of the “connected” revolution.
In it, I talked about the fact that more and more Indians are accessing the Internet, and doing so by way of mobile devices.
The impact on the Indian economy as a result of this new age of personal connectivity, is significant.
In today’s post, I will examine more closely, these key areas impact from the standpoint of the retail industry.
The Retail Evolution
Lately, much has been said and written about India’s retail market, and how it will skip a stage in terms of its evolution. At the heart of this accelerated transformation is the emergence of online retail as a viable and trusted platform.
Of course with 243 million Internet users – more than the United States and second only to China, it is clear that Indians are not only comfortable with technology, but are embracing it. So skipping a stage is not entirely a surprise. Especially given the comments made by eBay India’s Managing Director Latif Nathani during an interview earlier this year.
In the interview, Nathani made the statement that the entire evolution of e-commerce happened over a period of 15 years in India. This was a considerably shorter period than it was in what he considered to be advanced markets such as the United States, where it took more than 50 to 60 years to reach the same point.
I have little doubt that – at least in part – the original vision of the Digital India initiative helped to compress the time from 50 to 15 years.
Described as being an “umbrella programme”, Digital India’s primary objective has been centered on “inclusive growth” in key areas such as broadband and mobile connectivity.
What is most interesting however, is how mobile connectivity is almost single-handedly reshaping the next phase of the Indian retail marketplace.
Today, an ever increasing number of people – especially those who are part of the younger generation (35 and under), use mobile devices to both buy and sell online. Many of these have never even used a desktop or notebook personal computer.
As indicated in the following excerpt from part 1 of my 4-part series in Brokers Forum of India magazine, mobility is truly going to be the key driver of e-commerce in India for many years to come:
In his May 16th, 2014 article The Internet of Things and M2M – Some Predictions for a Bubbly Next Few Years from http://bluehillresearch.com/, Tony Rizzo talked about the fact that by “2020 wearable technology alone will be generating 1.2 zettabytes (yes, zettabytes) of data.” Think about this for a moment in the context of how people will interact in an eCommerce world. Specifically the devices they will use to buy and sell. This is the backbone of the new economy, where bricks and mortar storefronts will cede way to virtual stores where buying and selling can happen with a click of a button.
As a result, this has forced retailers to bypass or skip their mid to long-term e-commerce strategies, and become more proactive in their roll-out of programs that accommodate the new mobile reality.
A Case In Point
In her July 8th, 2015 live mint article “The medium term is dead,” Sapna Agarwal provided an example of how retailers have had to dramatically change their strategies.
Referencing a 2013 interview with Zomato’s Deepinder Goyal, Agarwal wrote that the restaurant chain’s founder had originally indicated that it would take “4-5 years to launch an order online facility on its platform.” The reason given was that the “logistics and infrastructure to connect all the restaurants would take time.”
This was, as Agarwal pointed out, less than two years ago.
Here we are in 2015, and instead of taking the previously predicted 4 to 5 years to launch their order online facility, Zomato’s just recently started the pilot to “allow consumers to order online.”
The restaurant chain is not alone, as most companies are following suit and introducing their own strategies at a quickened pace.
Conclusion
In the end, India’s retail evolution – and the evolution of business overall both domestically and globally, will continue to become increasingly personalized.
When I say personalized, I am talking about the power of individuals to transact business from anywhere at any time, whether for their own personal needs or, the needs of the organizations for whom they are buying (or selling).
This brings it own challenges, relative to security and controlling spend – at least in the traditional sense.
While security and managing spend is a discussion for another day, in the here and now, a proactive response to this new age of personal mobile connectivity should be the focus of every business.
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The Future of Indian eCommerce
EDITOR’S NOTE: The following is part 4 in a 4 part series by cloudBuy’s Nilesh Gopali that has been published in the Brokers Forum of India magazine. You can access part 1 in the series through the following link (July through October issues); http://www.brokersforumofindia.com/NewsLetters.aspx
“ What is interesting though in India is that the entire evolution of e-commerce happened over 15 years. In advanced markets like the U.S., it took over 50-60 years . . .” – Latif Nathani
In an interview [1] earlier this year, Latif Nathani, Managing Director, eBay India, talked about the rapid growth of the Indian eCommerce market. Compared to what he referred to as being advanced markets such as the United States, the comparison was nothing short of amazing.
Nathani’s enthusiasm relative to eCommerce growth was however tempered by challenges relating to amongst other things infrastructure support, and the unique elements of the Indian economic landscape.
In this the fourth and final part in my series that began with the first article Connecting the dots between eCommerce innovation and a robust economy [2], I will examine more closely both the promise and challenges of the emerging Inidian eCommerce world.
Assessing The Possibilities: Defining The eCommerce Revolution
When you consider the potential of the Indian eCommerce marketplace there are good reasons for optimism.
To begin, and as reported in the above referenced Nathani article, the country now has more than 200 million Internet users, of which 89 million are regularly visiting online shopping sites.
This has led to a proliferation of eCommerce companies that are well funded and strategically positioned to capitalize on the promise of the new economy both nationally and internationally. For example, and according to Nathani, “every eleven seconds someone in the world is buying a product from an Indian eBay seller”, while within India itself “16 products are sold every minute”.
Beyond the Indian borders, the potential for the general online market to dominate in other countries such as the United States is even more pronounced, as demonstrated by a Business Insider Study [3].
In markets such as Media, Sporting and Hobby Goods, online sales have increased by 40%. This upward trend is expected to surpass the 65% mark by 2020. Other industries such as Electronics and Appliances and Furniture and Home Furnishings, while not as robust, are also on a similarly positive trajectory.
Conversely offline sales for even the giants such as Wal-Mart, JC Penny, Best Buy and the Gap are experiencing a steady decline into negative growth. This has resulted in these as well as other chains closing physical stores at an alarming rate. As a point of reference, Staples is expected to close 225 stores by the end of 2015.
Even premium brands such as Abercrombie & Fitch are not immune to the effects of the emerging eCommerce economy, as the chain is scheduled to close 180 of its locations in 2015.
“We’re in the midst of a profound structural shift from physical to digital retail . . . it’s happening faster than I could have imagined” – Jeff Jordan, partner at Andreessen Horowitz (January 2014)
In the U.S. $1 out of every $20 is now spent online. This means that eCommerce in that country, is viewed as being the driving force in “nearly all retail growth”. With the proliferation of mobile and wearable technology – about which I talked at some length in part 1 of this series – it is clear that this paradigm shift in shopping will continue worldwide.
The Indian market has the potential to experience similar results in terms of the shift to doing business in the virtual realms. However, before a true transformation can occur, there are a number of indigenous barriers that must be removed for the eCommerce potential to be fully realized.
Converting Possibilities: Capitalizing On The eCommerce Revolution
Despite the positive trending relating to eCommerce adoption globally, within India there are a number of barriers that must be overcome for the country to truly become part of the revolution. This includes the disparity between those visiting online shopping sites and those actually buying goods and services online.
Referring once again to the Nathani article, of the 89 million who visit shops online, only 14 to 15 million make a purchase. This is a significant statistic in that it points to a number of serious problems.
To start, and unlike the US, the infrastructure to support electronic trade – including the use of credit cards – is not nearly as developed in this country.
The reason is quite simple . . . credit cards have been a major economic staple in the US for many years. Its utilization outside of the physical bricks and mortar model has been greatly facilitated through several transformation points including catalogue and TV shopping.
In India, such facilitation has not taken place. This has created an economic vacuum centered around an immature logistics and fulfilment process, and a lack of trust in terms of electronic payment vehicles. This is one of the reasons why eBay has introduced their “Power ship” and “Paisa Pay” programs. Tailored specifically to the Indian market, the hope is that such initiatives will begin to lay the foundations of reliability and trust resulting in the Indian consumer making the move from virtual window shopping to paying customer.
In certain situations, regulatory obstacles represent another potential barrier that has to be removed before the eCommerce model can be fully embraced. This includes a requirement in some states that buyers complete and submit a form to the seller before a purchased product can be shipped.
Of course the biggest challenge that must be faced and addressed before eCommerce in India can fully evolve, is the successful migration from the present day cash-based transaction model, to modern electronic payment systems.
In this regard, the expressed “inclusive” vision of the Reserve Bank is both necessary and welcome.
Earlier this year, the Reserve Bank of India’s Chief General Manager, Department of Payment and Settlement Systems, Vijay Chugh’s [4] made the following statement regarding “an urgent need for all stakeholders to collaborate to enable access to an efficient payment system for the unbanked and under-banked population”. Being able to provide this capability at an “affordable cost” is critical for not only eCommerce success, but the growth of the Indian economy as a whole.
Despite these challenges there is little doubt that India is truly on the cusp of a major retail paradigm shift.
The Emerging B2B World: When Familiarity Breeds Opportunity
In the April 29th, 2013 CXOtoday.com article B2B marketplace to accelerate in India [5] by Sohini Bagchi, the dominance of the B2C market in India is viewed as a springboard for the emergence and maturation of the B2B world.
As Sohini adeptly points out, the same issues faced by the B2C world were the same “factors haunting specifically the B2B segment where trust also plays a prominent role”. As a result, it is reasonable to conclude that understanding and addressing the B2C challenges, will inevitably translate into B2B success. The experts seem to agree with this assessment.
According to Sohini, industry pundits believe that “B2B e-commerce can certainly be successful in India because of the vital role B2C has been playing the past few years”. This is especially true in the Indian market where business buyers as Sohini calls them “may be resistant towards using e-commerce”, because of the aforementioned issues relating to “trust and skepticism”. The fact that B2C e-commerce is gaining traction in India bodes well for the future of B2B e-commerce in the country.
In short, as B2C users begin to feel more comfortable in terms of buying goods and services on the web, the more likely this level of trust and certainty will facilitate the transition to a B2B e-commerce platform.
This undeniable link between B2C experience and B2B success was highlighted in a January 8th, 2014 In The Cloud post [6] by Ronald Duncan.
Duncan the Chairman for cloudBuy – which has recently established an Indian-based office – indicated that many of the adoption barriers in the B2B world had been removed as a result of “the growing and continuing dominance of the B2C world”.
Of course the connection between the B2C and B2B world can be a two-edged sword, especially in terms of user experience.
This latter point was driven home by Duncan when he made reference to the increasing number of business users asking the question “why can’t we have the same experience sitting at the office as we do at home”? Within this context of familiarity, B2B e-commerce providers would be well advised to assimilate B2C functionality into their platforms.
Viresh Oberoi [7], who is the Founder, CEO and MD for mjunction Services shares similar sentiment to those of Duncan.
In an interview Oberoi stressed that a competitive edge can be gained by B2B providers through the use of “flexible business development models”.
Focused on delivering “greater results”, Oberoi’s organization listens carefully to its customers in terms of identifying specific pain points, and redesigning their processes based on this feedback. This enables the company to “deliver greater results” in the critical areas of transparency, efficiency and low inception costs, which according to the mjunction founder is where many B2B platforms falter.
Of course the parallel between B2C and B2B extends beyond user experience.
From a financial perspective, industry experts project that as B2C adoption grows, so too will the B2B e-commerce market.
On The (Leading) Edge Of Change: Realizing The Total Indian eCommerce Vision
In an April 2014 article [8], Global VC firm Accel Partners provided the following insights relating to the future of eCommerce in India:
- By 2016, the current number of shoppers in India will double to 40 million, and their spending will more than quadruple to US $8.5 billion.
- Fashion eCommerce doubled last year, and will see 400 percent growth by 2016, rivaling the electronics and mobile category. This is likely driven by women’s growing influence, which will grow by five times in the next three years.
- Tier 2 cities’ eCommerce adoption is growing far faster that Tier 1 cities, but some states lagging behind still need better infrastructure in place.
- Online retail is still just a sliver of total retail sales. It only accounted for two percent of mobile shipments and one percent of fashion sales.
- 3rd party ewallets will become a significant alternative to cash-on-delivery in coming years.
- Only nine percent of Indians with an Internet connection shop online, compared to over 30 percent in other BRICS countries. India’s eCommerce market is still 60 times smaller than China’s.
- 88 percent of the growth in Indian eCommerce will come from 200 million Indians coming online in the next three years, especially young people.
While each of the points referenced in the Accel Partners findings are in and of themselves notable, what stands out the most is their collective impact in terms of the potential or “headroom” for growth in both the B2C and B2B world.
The fact is that all of the pieces for a successful eCommerce market are falling into place. Through the collaborative recognition of where we are today, and what we need to do to get to where we ultimately want to go, India is on the right track.
In this context, eCommerce’s future in India is not a question of if or how much, but when. For Indian business and the health of the overall economy this means that the future is now.
Reference Links:
[1] Indian e-commerce market is nowhere near maturity – eBay India MD, The Hindu (April 21, 2014) – http://www.thehindu.com/business/Industry/indian-ecommerce-market-is-nowhere-near-maturity-ebay-india-md/article5929148.ece
[2] cloudBuy’s Nilesh Gopali writes about eCommerce innovation and the Indian economy, Brokers Forum of India (April 5, 2015) – https://cloudbuyblog.wordpress.com/2014/07/04/244/
[3] E-COMMERCE AND THE FUTURE OF RETAIL: 2014, Business Insider (August 22, 2014) – http://www.businessinsider.com/the-future-of-retail-2014-slide-deck-sai-2014-3?op=1
[4] IFC, Partners Focus on E-payment Systems for Inclusive Finance for India’s Low-income Households, IFC Press Release (April 22, 2014) – http://ifcext.ifc.org/ifcext/pressroom/IFCPressRoom.nsf/0/5056288A4E095CA185257CC20030AD29?opendocument
[5] B2B marketplace to accelerate in India, CXOtoday.com (April 29, 2013) – http://www.cxotoday.com/story/b2b-marketplace-to-accelerate-in-india/
6] Risk awareness versus risk aversion in the emerging B2B Marketplace, In The Cloud (January 8, 2014) – https://cloudbuyblog.wordpress.com/2014/01/08/risk-awareness-versus-risk-aversion-in-the-emerging-b2b-marketplace-by-ronald-duncan/
[7] B2B marketplace to accelerate in India, CXOtoday.com (April 29, 2013) – http://www.cxotoday.com/story/b2b-marketplace-to-accelerate-in-india/
[8] A peek into the future of India’s fast-growing ecommerce market, Tech In Asia (April 4, 2014) – http://www.techinasia.com/peek-future-indias-fastgrowing-ecommerce-market-slideshow/
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In The Cloud 