Posted in Marketing & Strategy Articles, Total Reads: 1620
, Published on 08 January 2015
Anyone noticed the recent changeover in online commerce? Flipkart a young Indian based online store announced $1 billion funding from a venture capital investor, the biggest funding that any online company has ever received in India. A day even not completed, a global online legend Amazon announces $2 billion worth of investment in India. Nearly 100’s of online shops are functioning suddenly in India. Many of big shots are eagerly waiting to invest their money in online shops. So what is the term online shopping? How did it take a blazing height? Why suddenly it started to catch the eyes of the people? What is the reason behind it?
Online shopping is a new trend and emerging field in India but it was started 3 decades ago in UK. Later America grows as emerging online market and it spread all over the world as forest fire. Alibaba, Amazon, eBay are the largest online shoppers in global market. In India Flipkart (registered in Singapore) started in 2007 by Sachin Bansal and Binny Bansal (who are the former workers of Amazon), the Bangalore based firm ships close to 30,000 items per day. Or, in other words 20 products per minute.
In 2013 Amazon entered into India, following jabong, eBay and many other big foreign online firms entered simultaneously. Lot of drastic changes and competitive growth started happening in the Indian e-commerce. Lot of offers were showered by companies, Myntra’s acquisition by Flipkart, Snap deals raise of investments, Promotions and advertisements everywhere, Amazon’s one day delivery and counter action of Flipkart’s quick delivery, Ratan Tata’s interest in investing at online firms etc. What are the reasons behind these?
India is a very big market. Capturing the minds of the people is quite easy, as youngsters are accessing internet very hugely and internet is accessed in every corners of India. Also one statistics says half the world’s population will have internet connection by 2017 and even the rural population will access the internet. There are 243 million internet users in India, which can be easy for the firms to acquire customers.
Smartphone prevail new way for online shoppers. Domestic producer’s started selling smart phones very cheaply. 96 percent of smartphone users access internet. However, with rapid spread of high speed mobile data and cheap internet plans people can access anything in a fraction of second. India’s internet contribution to GDP could increase from 1.6 percent in 2012 to between 2.8 percent to 3.3 percent by 2015, according to McKinsey. This is one of the giant leaps in GDP and these are the hopes of online retailers to move next step in Indian market and for venture capitalist (VC) of these companies. The VC funds the firms in late stage and early stage finance. Accel partners, Tiger Global Movement, Blume Ventures and Kalaari Capital are some of the VC funding the firms.
As the effect of recent online trending, the e-commerce market has been doubling for the last two years at least. As per a report by consulting firm Technopak, it was $2.3 billion at the end of March 2014. This same market was less than half the size at $1 billion a year before. This is also a good sign for the firms.
The e-commerce firms gradually get the funds from different VC to expand their firm size. This Amazon and Flipkart come under multi category segment of e- commerce. Myntra’s acquisition by Flipkart helped to develop more in the multi segment category. Usually most of the people think e-commerce means something related to electronics, phone, laptop and fashion. There is a huge market beyond this. There are many niche market firms in e-commerce sector like travel portals, furniture, grocery, lens and frames, baby care products, portals selling second hand goods, health care products, jewelry, sports goods.
Next to the multi category segment the fastest segment on fire is the travel portal. They have a huge business in their pockets. The travel portals include the online booking of tickets and hotel rooms. Travel portals new strategy is introducing tour packages. They also specify some hotel and they get commission from them. The highest revenue created from this sector is by IRTC. There also many firm like make my trip, ibibo, redbus, expedia, yatra. The VC investors show interest in investing in this sector also.
The big question is; how are they going to utilize the money which they got as funds? A good place for this money would be funding operating losses. Another big area is bolstering the technology infrastructure, the logistics and warehousing infrastructure to deliver goods in more cities and every streets in lesser time. Another area is brand building because they want to be seen more on digital marketing platforms and mainstream media like television.
Many started their next steps in this competition. Amazon had built a fulfillment centre on the outskirts of Mumbai, in Bhiwandi. Second warehouse in Bangalore are recently in operation and also announced it is setting up five more fulfillment centers in Delhi, Chennai, Jaipur, Ahmedabad, and Gurgaon. Flipkart leased 500,000 sq ft of space across the country and fitting them out to commission them before this Diwali. Snapdeal has 40 fulfillment centers in 15 cities and will be expanding to 30 cities within a year. The big giants are building their inventory to reduce the delivery time.
What will be the future of this game? Apart from only electronics and fashion there is a huge market in other sectors. Amazon and Flipkart have already started to explore furniture area so that in near future they can expand their business in this emerging field. Because they know furniture segment is next emerging sector, and consumers are slowly exploring this market. Though this market doesn’t draw much eyeball in the VC investors, it is a promising market for all the investors. The major firms who successfully created a brand image are urban ladder, Pepperfry, fabfurnish, zansaar.
Jewellery! The buzz word for many Indian women and this sector is emerging into the e-commerce recently. This segment is no- brainer for development, because even the physical stores are struggling with the growth. But Caratlane took a big step by starting this online firm. One of the major drawbacks in this industry is to gain trust from the customers.
Indian E-commerce is projected to explode from $10 billion to $43 billion in the next five years, according to Nomura's India Internet Report last month. The future of e-commerce is in the brighter side. When more funding is done by the VC investors the firm’s develop, which in turn attracts the customers more. This industry will not have a decline as it made the shopping of many people very easy and convenient. Also these firms give discount to attract the customers. So whatever war comes between the firms, it is always beneficial to the customers. They avail all the offers from the firms.
Many top companies like Reliance, Tata, future group etc. can come into the e-commerce industry easily because of the VC’s continuously funding the top e-commerce firms. When the big giants enter the market the customers will welcome them and the competition will be firing up in the Indian market.
It is just the beginning of game, still gamer points yet to come. Flipkart, Amazon, Snapdeal, eBay and more emerging firms are ready to do anything to conquer Indian online market. Thus the game of thrones may or may not favor for the firms but definitely a favor for consumers to buy products easily and economically and this boom in the e-commerce market will surely increase the Indian economy.
This article has been authored by Karen Nirupa. N & Karthick. P from Anna university regional centre, Coimbatore
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