Indian E-commerce is poised to grow big – Myth or Reality?

Head of Digital Marketing : Aditya Birla Online Fashion

Couple of weeks back attended an event conducted by Google India – “Think Retail 2017”. Some of the data presented made me very hopeful for future of Digital India but, at same time some data made the e-commerce marketer in me very jittery. The rosy eCommerce projections for India may have some serious speed breakers.

Key positive projections by Google on future of Digital India and E-commerce

By 2020-21, Internet users in India will grow by 2X to 600 Mn
India will add 150Mn new eCommerce buyers to its existing base of 50Mn

Indian eCommerce will grow from 16Bn to 55-60bn by 2020.
Lifestyle and Fashion will overtake consumer electronics to become the biggest online category. Home and personal care will see steep increase in penetration rate

All the numbers above shows that all is well with Indian eCommerce but, if we dig numbers bit deeper than all may not be well and online players need to tighten the screws if they truly aspire to create real value.

The numbers which are really worrying for eCommerce world are

Top 1/3rd of customers will drive 2/3rd of shopping value
Most of the new growth in internet users/online buyers will come from low end mobiles ranging from Rs 2500 – 7000.

Both points above suggests these worrying signs

Most of the valuable consumers from e-commerce point of view may have been already acquired and new acquisitions may not give significant boost to top/bottom line
Since 67% of the marketing will only contribute to 32% of the business. The per unit cost of serving the newly acquired customers will be very high and may not be viable business growth
As most of the new customer acquisitions made will be via low cost smart phones, eCommerce websites have to shell lots of money in infrastructure to make user experience good and improve eCommerce adoption rate. However, this may dramatically change with Telecom Companies' ability to provide better bandwidth at cheaper cost

However, not everything is lost but, within given constraints Indian eCommerce is seeing some fundamental changes which should push it towards profitability

Though the high value new customer addition will be low but, projected business growth is almost 4X (60 Bn by 2020). This augurs well for eCommerce players as better adoption of technology and operational excellence will help drive existing eCommerce buyers to increase their spends
Reasons to buy online is slowly shifting from discounts to convenience. This has happened owing to deeper adoption of eCommerce by Indian customers and tactical change by players to focus on right business metrics than blind customer acquisition

Change in payment patterns suggests that trust and adoption of eCommerce is happening on sound grounds. Lower COD contribution will result in higher operation efficiency and lower returns
Finally the increase in business volumes will result in better unit economics as lot of fixed costs will spread out and variable costs will also have higher scope for optimization.

Closing on a controversial note (if addressed can make eCommerce a better business proposition): The cost of customer acquisition and retention for e-commerce players is another reason for bloated marketing expenditure and hence this question stares at our face “Growth at what COST?”

Currently the big boys of digital media world namely Google and Facebook are calling all the shots and eCommerce players are at virtual logger heads to get share of customer screen space. However, to make this ecosystem more viable eComm players need to collaborate to have a top ceiling on CPCs/CPMs etc. and real competition is based on product offering and operations excellence. Will try and cover my thoughts on this in another article :)

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