[Matrix Moments] The road ahead for Indian ecommerce startups post COVID-19

The nation-wide lockdown due to coronavirus crisis since March 21 has impacted several businesses and sectors in the country. One sector that has seen different kinds of impact is the ecommerce sector. While the government mandated and allowed the movement of essentials, non-essential ecommerce has come to a complete standstill. 

Also, with essentials, there were few weeks of supply chain constraints with delivery boys not being able to deliver, and the factory workers not being able to go to their production units and warehouses. But now, as there is talk of movement and loosening of restrictions for some businesses, what will the next step be? 

In this episode of Matrix Moments, Tarun Davda, Managing Director, Matrix India, and Gourav Bhattacharya, Director, Matrix India, spoke to K Ganesh, co-founder of Bigbasket, also a serial entrepreneur and investor; Ananth Narayanan, co-founder and CEO of Medlife and former CEO of Myntra, and Helen Wong, Partner at Qiming Venture Capital, on the way forward. 

Push towards convenience and health 

All three panelists believe that home delivery of products and services will be the main focus going forward, with access and convenience gaining more importance than discounting. 

They expect demand for health and wellness products to increase. On the other hand, demand for ‘impulse’ categories will likely be muted until at least the end of the year.

In terms of other sectors, remote working, video conferencing, and online seminars will become more common and the new way of life. At the same time, localised experiences will start seeing more interest from consumers.

Speaking of the current scenario, Ananth said, “For medicine delivery and diagnostics, demand has gone up by 1.5-2X. However, there are a number of challenges in terms of fulfilment. For instance, securing passes for on-ground mobility from local authorities has been a task, starting with warehouse staff all the way to delivery personnel. Manpower shortage has been another challenge and contributes to a large part of the problem.” 

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Collaboration and partnerships work 

Ananth added that managing inventory levels to meet the surge is hard, and these nuances are easier to solve in Tier I and metro cities than Tier II and III cities. The teams have also had third party partnerships. For example, Medlife is working with Vogo for last-mile delivery. 

Ganesh says, “The uptick in demand and the key issues that Ananth has described translate to grocery as well. Fortunately the supply chain has held up so far and there is no supply shortage. Companies like Bigbasket are adopting multiple approaches towards last-mile fulfilment, like delivering in bulk and combining neighbourhood orders to effectively manage last-mile logistics. Our biggest hurdle is arranging for employees to reach our warehouses for packaging, sorting, segregation, etc.” 

While the government has been doing a fabulous job so far in managing the process in India, the complexity of the problem means that it cannot be solved using central policy alone. Each state is different and needs to be managed in a different way. 

“At Medlife, a liaison team has been put in place in each district to directly coordinate with the local authorities of that area. Organising the approval process electronically with tele-passes, real-time updates, and making approvals time-bound would further help improve the process,” adds Ananth. 

Shift towards grocery and essentials 

There is also a big shift with several ecommerce companies looking at grocery. Ganesh believes this is because there has been a large unmet demand, and any company that can provide grocery supply is the kind. 

“Opportunistic entrepreneurs who have flexible operating models that can support the grocery supply chain should find ways to enter the space. In this environment, convenience and access have taken precedence over pricing and discounting. In the long-term, a fundamental shift in consumer behaviour is expected, with home delivery for all products and services across sectors being the norm. However, grocery is tough, and figuring out a profitable business model will be the key.” 

Ananth believes that founders will need to increase spend dramatically on health and safety for all employees - PPEs, insurance, and other health and safety measures that are specific to their company, and the nature of business should be undertaken with no compromise. 

“For teams that are working from home, a good practice is doing informal video calls with team members to talk about non-work-related topics. It is important to over-communicate using virtual townhalls, and celebrate employee achievements. Team-bonding needs to become part of the WFH routine,” says Ananth. 

For non-essentials, the panelists advised founders to not make any major irreversible moves in the face of uncertainty. At the same time, founders need to manage cash such that they have a runway for at least two years. 

Is there dry powder? 

“VC capital is available, but it is not a BAU situation and fundraising processes will happen keeping the current situation in mind. For example, as a VC, it is hard to write large cheques without on-ground diligence and meeting teams in person. Founders need to acknowledge that their revenues will either be zero or will tend towards zero for some period of time, and they need to rework their cost base from a grounds-up perspective accordingly to extend runway,” says Helen. 

She added, the good news is that across the board, investors are being supportive and helping their portfolio companies navigate the environment. Entrepreneurs too need to be generous with ESOPs – it helps carry the team along in what is a challenging time.

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Learnings from China 

“COVID-19 has been a real wake up call for all offline businesses in China to start finding ways and means to digitise their models. There has been rapid and widespread adoption of online grocery, with demand increasing manifold. O2O (online-to-offline) models like Hippo Supermarket have gained traction. Offline retail and consumer brands are using digital channels like WeChat to keep customers engaged and drive sales. Besides commerce, online education and online food delivery have seen significant uptake,” adds Helen. 

She added that in terms of offline recovery, people are slowly returning to malls and restaurants, but traffic is still low – current demand is at 30 percent of pre-crisis levels, but progress is slow, especially in formerly high footfall venues such as malls and high-street retail.

What next?

The panelists advise that for 2021, plan for the worst in terms of demand, and work backwards to forecast supply and inventory, as well as other resources that would then come into play.

They believe that shifting into grocery, PPE, etc., is a temporary pivot, and long-term focus should remain on providing the core offering of your business and navigating a way to adapt and make it work in a post-COVID19 world.

Both Ananth and Ganesh believe the rebound period for all sectors in commerce will depend on how quickly they can adapt their business to a delivery and tech-based model. The recovery for businesses catering to the mass market should take place over the next two quarters, while the luxury market could take longer to recover.

Listen to the podcast here.