DISRUPTING E-COMMERCE 1.0
As on-demand, hyper-local players scale up,
promising speed and convenience to consumers, online commerce as we know it is
beginning to feel the early signs of disruption. These new-age startups, which
co-opt your neighbourhood retailers to help make express deliveries, may be the
next-gen of e-commerce
What's happening now is reminiscent of the time,
not so long back, when online retailers came in as the upstarts and
successfully challenged the reigning kings of modern retail by offering better
selection of products, convenience of shopping from the confines of one's home
and eye-popping discounts. Today, the disruptors of brick-and-mortar retail are
finding themselves becoming increasingly vulnerable to the threat of a new
breed of smartphone app-based, hyper-local ventures which bring on board local
retailers to service consumers in quick time.They deliver everything from
groceries to mobile phones to medicines in a few hours sourced directly from
the supermarket next to your home.
Neeraj Jain, co-founder of Zopper, one such
hyper-local marketplace for electronics and white goods, points outs that out
of India's 250 million internet user base only 30 million of them have shopped
online despite facilities like cash-on-demand, attractive return policies and heavy
discounting. The stumbling blocks, according to him, are the lack of trust
among shoppers regarding the quality of products sold online and worries over
aftersales support. “This is where a hyper-local commerce model comes in and
connects local retailers to buyers. Consumers know from which nearby shop the
product is being delivered from, they can go to same local shop to get their
problems resolved and thing are delivered in a few hours,“ he says.
On-demand is next-gen of e-tailing?
Backed by top investors, this hyper-local brigade is banking on disrupting the supply-chain and logistics piece currently used by the e-commerce players. “Ondemand businesses are built on the back of hyper-local logistics technology, a mobile-first consumer experience and local retailer partnerships. The mandate for companies like Grofers is simple to disrupt e-commerce 1.0 by providing consum ers with the unprecedented convenience of delivery in minutes, instead of in days,“ says Abheek Anand, principal at venture fund Sequoia Capital, which invested in the Gurgaon-based Grofers at the seed stage.
Seeing early signs of an upheaval, online
retail's juggernaut Amazon kicked off a pilot run for Kirana Now, an on-demand
delivery service which sources from local mom-and-pop stores and guarantees
deliveries within two-four hours. Amazon's country head, Amit Agarwal, says
there's room for many players in this segment as it's not a winner takes all
scenario. “We've been leading the way on speed and reach so it was a natural
progression to get in to this segment. The best way was to partner with sellers
who were closest to the customers,“ he says. It's a similar battle for Amazon
Fresh in the US where the posterboys of mobile-driven, express delivery ,
Instacart and Postmates, heavily funded by VCs, are helping small stores with
technology to get logistical efficiencies.
The country's largest e-commerce player,
Flipkart, too, is working on getting its grocery category live with a push
towards express delivery. But hyper-local startups say they have the advantage
of being focused and gain from strong onground, local tie-ups with retailers.
Logistics will be key
Zopper's Jain says he is keen on pushing
categories where logistics is a pain point.Typically, the cost of moving a
television set for e-commerce firms varies from anywhere between Rs 1,500 in
the same city to Rs 3,000-4,000 if shipped to outside cities. Our cost of
delivery is close to Rs 300500 which gives us a huge advantage.
It's not only the horizontal e-commerce biggies
feeling the heat, grocery e-tailers which are largely based on the inventory
model are also under pressure to quicken their deliveries. Serial entrepreneur
and investor K Ganesh, co-promoter of Big Basket, the country's largest online
food and grocery store, says the hyper-local model is fraught with challenges
in the Indian market. “The existing e-tailers will face some pressure as these
startups burn investor capital without bothering about unit economics or per
order profitability but the impact will not be significant for players which
have their own private label as the margins will be substantial,“ he says.
Though, he admits there's a consumer need for quick, within-an-hour delivery
service for urgent buys and topup needs. Not surprisingly then, Big Basket said
recently it'll soon be introducing deliveries within an hour or less through
collaborations with neighbourhood stores. What's up for grabs for all is the
Indian e-commerce market estimated to grow 15 times to $300 billion by 2030,
says Goldman Sachs in a recent report suggesting the domestic online retail
industry is “evolving into a hyper-local, ondemand market.“
“In the near future, e-commerce in India will
become a more hyper-local play because it's more cost-efficient. As for us, we
might get into similar categories like grocery such as bakery, frozen meat
later but not electronics or furniture,“ Navneet Singh, co-founder, Peppertap,
which is funded by Sequoia Capital. But some disagree, pushing the case for an
inventory-led model. “Indian consumers and logistics are very different from
that of the US. In India without your own inventory or assured availability
under your control, there is always a challenge of fulfillment and customer
satisfaction as we have seen in true marketplace models versus warehoused
models,“ says Big Basket's Ganesh.
Store-first Vs Product-first
Since everyone is chasing the I-want-it now
generation of consumers, the new players say they will propel a paradigm shift
in the demand-supply equation of products going forward. “If you can order your
everyday necessities on our mobile app, we are in a position to innovate how we
will fulfill the order. Over time, the local market's selection will be driven
by what people are buying on their apps rather than the other way round,“ says
Albinder Dhindsa, co-founder of Grofers, which intends to add categories like
pharma, electronics and cosmetics very soon to its platform.
Hyper-local players can be broken down into the
ones which have a storefirst approach like Instacart, valued at $2 billion, and
Grofers versus the ones which have adopted a product-first line such as
BigBasket, Zopnow, Peppertap among others. Dhindsa says the storefirst category
is likely to become more horizontal and delivery heavy while the product-first
players will have a vertical focus. What's to be pointed out is that it's still
very early days for on-demand delivery startups in India which is why Amazon's
Agarwal says the “power of execution'“ will become the key differentiator when
players will have to do these things at scale. “That's where our asset lies,“
he posits.
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Samidha Sharma, Anand J and John
Sarkar
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TNN
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TOI22MAY15
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