Indian E-commerce Industry: Cinderella Or Sleeping Beauty?
Talking about ecommerce in India the other day, a colleague remarked that ecommerce in India runs on Softbank's subsidy. This raises the question whether Indian ecommerce is because of the time bound gifts of the fairy Godmother's magic wand or the inspired hopes of Prince Charming playing the waiting game
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Talking about ecommerce in India the other day, a colleague remarked that ecommerce in India runs on Softbank's subsidy. This raises the question whether Indian ecommerce is because of the time bound gifts of the fairy Godmother's magic wand or the inspired hopes of Prince Charming playing the waiting game.
To answer this conundrum, we turned to ComScore's data on the traffic to ecommerce sites in India. A caveat though, ComScore measures only data on desktops in India and does not include the burgeoning traffic from mobile. While this does make the biased in some way, it is perhaps a reasonable proposition that all web traffic would be affected similarly by the gaps in ComScore's data. Thus, while the data itself may not represent traffic to these sites accurately, the underlying trend is likely to be consistent even with mobile traffic not being included. So let us venture forth.
Ecommerce in India is not dead…
Comparing the latest period for which data is available (January to October) in 2016, to the similar period in 2015, all metrics show an upward trend.
Now, while visits and time spent are not substitutes for revenues, it is reasonable to assume that visitors to ecommerce sites are not merely 'window shopping' since the Internet offers many more opportunities for voyeurism, which, presumably are more interesting than eRetailTherapy.
The growth rates of average daily visitors (8 per cent) and time spent per visit (7 per cent), is significantly higher than the growth of the visitor universe (2 per cent). The anemic growth of the visitor universe suggests that ecommerce penetration is likely to be still low, albeit growing, even if slowly, very slowly. On the other hand - among users of ecommerce the increase in the daily user traffic and the time spent per visit suggests that the adoption of ecommerce is strengthening rather than weakening.
The situation on the supply side, viz, ecommerce providers also seems to be robust, with the number of sites being tracked by ComScore increasing by 10 per cent from 1085 in 2015 to 1194 in 2016.
… but, who's winning
To answer this question we looked at the growth some key visitor metrics for the major ecommerce sites in India. Clearly the winner was Amazon, while the others, at least from this data should be hurting and hurting badly!
As is apparent from the chart, while Amazon has shown impressive growth on all the metrics, the bigger home grown ecommerce sites seem to have lost the plot, with nearly all the sites losing pace in 2016 - it remains to be seen if this is a mere flash in the pan or the precursor to their long term decline!
Is Amazon the only gainer?
Amazon indeed seems to be the king of the heap. However, as all things in India, there is a huge base, ie the 'bottom of the pyramid'. It is here that there seems to be lot of action and growth. We looked at some sites at random and found that nearly all of these sites, though unheralded and unsung, were posting double and triple digit growth rates in their traffic.
While we have not analysed this data in depth, two phenomena we observed, anecdotally, were:
" Ecommerce ventures seem to comprise a mixed bag of first time entrepreneurs, existing mainstream players - large and small, manufacturing and services, etc.
" As a class, new entrepreneurs who are focused on using digital channels seem to be doing better at attracting traffic than mainstream players, even those who are well-heeled and with strong brands.
So, what does all this mean?
1. Clearly ecommerce is here to stay though growing glacially. This ponderous growth may not appeal to investors used to seeing blow-out growth in other corners of the planet's geography, but, as we say in India, "We are like that only". And, as has been shown in other categories, in India, the leviathan's pace may be slower, but is more sustainable.
2. Deep pockets do not seem to equal success in the ecommerce market place in India. Sustained constancy and chipping away at the blocks appear to make for success in India's digiverse.
3. Mainstream players should take heed - there is success to be had in India's emerging digital environment. The success though is not going to reflect in the quarterly results, but will require sustained commitment to woo a more 'vote-with-the-feet' consumer audience in an environment, where history and money are not the necessary critical factors for success.
Harking back to the question, whether India's ecommerce is a Cinderella or a Sleeping Beauty, the answer clearly is that it is a Sleeping Beauty. The conundrum it poses to investors is, absent the blow out returns, should one invest low and wait longer for the blow out returns or earn the blow-out elsewhere and come back to India when the opportunity is pricier and the returns even harder to get!
Investors would do well to heed the advice of Mulk Raj Dhabaria, who, in kinder and gentler times, said of Vijay Verma:
"Yeh lambi race ka ghoda hai"!
Place your bets folks … the race has begun!
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.