A perspective on the future of eCommerce in India
December 08, 2017
I grew up in 80s and 90s India. Back then, borders were much more permeable for travel than trade. Shopping was limited to local bazaars and hand carts. Choice of products were limited to say the least. Brands ubiquitous today were unheard of. Style had a thin definition, and fashion meant Bollywood.
Right in time for me, India opened up its borders. Markets were increasingly flooded with international products and brands year after year. With the increasing penetration of Television, teleshopping came into existence. I remember watching the programs on teleshopping networks showcasing new products with tons of advantages over their older counterparts. How I wish I was living in Delhi or Mumbai back then, those were the only cities they would deliver.
When eCommerce, more specifically, e-retail arrived, it was received with a cold response from most of us. The convenience of shopping from home was overpowered by doubts, and for good reasons.
* Logistics infrastructure was broken, return policies were a nightmare both for customers as well as for online shops. There was no accountability for lost packages.
* Online payment options were not only limited, but far from effortless. High payment failure rate was a big deterrent.
* Internet speeds were dismal, Penetration was low, mobile internet was non-existent.
Smartphones were unaffordable.
India lacked infrastructure and ecosystem essential to make the eCommerce experience smooth. But this changed drastically over the past few years.
* Logistics saw a lot of attention from entrepreneurs and VCs alike. While the bigger players like Amazon and Flipkart set out to open their own logistics branch, third party logistics service providers became increasingly more efficient and accountable.
* Fintech too has been in the list of top sectors by VC activities for past few years. Mobile wallets and UPI payments are gaining popularity and increasing acceptance amongst shoppers. Though there is a long way to go.
* Smartphones are within the affordability of most of the Indian shoppers. It has become the device of choice for internet users and has been instrumental in increasing internet penetration in India.
* Mobile internet speeds have come to a practical level of workability and affordability. At Miracas, we see nearly 80% of our sales happening through mobile devices. The story is the same for every e-com firm, goes to state the importance of smartphones in eCommerce.
Fueled by these improvements, eCommerce has been one of the hottest sectors for VC funds for past several years. In 2017 itself, 4 out of top 10 funded startups were flipkart, Paytm, Delhivery and Paytm Mall.
From local shops with limited options, to shopping online with plenty of options, a lot about shopping has changed since my childhood. However what is about to come is even more fascinating.
Shopping is about to transcend international boundaries. The future of shopping is cross border!
Apart from the fact that this seems to be a natural course of development, there are specific reasons for being optimistic on cross-border e-commerce. But before I come to that, let's define cross-border eCommerce and understand why one should shop cross-border.
eCommerce in a broad term that includes e-retail, travel and other categories.e-Commerce is many times mistaken to mean just e-Retail. That is the mistake I deliberately plan to make here. More specifically, I plan to discuss the cross-border B2C e-retail market. Here is a chart borrowed from Alibaba research representing various channels of cross-border trade.
1. Traditional channel, the way we have always shopped
2. e-Retail, Traditional but with a twist. The goods are sourced using cross border trade and sold on domestic online marketplaces. Flipkart, Amazon etc.
3. Online B2B e-commerce, retailed offline. Alibaba
4. This is what I intend to discuss here. The future of shopping, where the end customer gets the freedom to directly buy from the producers of the goods with no bounds on border.
Let me start by asking a question. Where were the apparels you are wearing right now manufactured?
In the era of globalization, apparels are manufactured where it is cheapest to manufacture. These are then imported in the country based on the aggregate demand forecast and prediction models of the importers. This model leads to many inefficiencies.
* Long supply chain inflates the cost of the product
* Maintaining inventory adds to the overheads at seller’s end, further inflating the price.
* By the time designs are in your hands they are already several months old.
* The buying options you get, depends not on your choice, but on the aggregated choice of the entire population.
In a nutshell you end up buying outdated designs of someone else’s choice at an inflated price.
With integrated cross border e-retail platforms (CBEC), a shopper gets many more options than domestic marketplaces, at a cheaper price. The CBEC model eliminates the need for demand forecast models and the entire supply chain, giving the consumers more power and choice than a conventional e-retail model.
While domestic e-retail is enjoying the prospects of an increasingly mature ecosystem, the reason for being optimistic on cross border b2c e-commerce (CBB2C) is the same. Progress in technology and policies, emergence of a few success stories and growing opportunities, are a few factors making cross border b2c not only possible but a lucrative business.
Technology that helped the conventional e-commerce grow will also be instrumental in cross border eCommerce. One specific area where technology can play a big role in facilitating cross border shopping is remittances.
Remittances have been a big pain point in cross border trade. Currently, international remittances cost an average of 8% of the total amount in transfer/withdrawal chargers and the currency conversion charges. Blockchain technology offers a great solution for this. With cryptocurrencies like Bitcoin and platforms like Ethereum, international remittances are bound to get cheaper and simpler than traditional methods.
The Blockchain technology, has been around for 8 years now. It has gained worldwide acceptance, generated a lot of buzz, and there is every reason to believe that the concept will only grow and mature in coming years. International trade and remittances is one of the natural applications of Blockchain. With a growing number of startups in this space, the challenges of bitcoin-based remittances are rapidly being ironed out. It’s still a long way to go but the possibility of a cryptocurrency based world economy seems real now.
Vendors selling cross-border must themselves be ready for the challenge. The ecosystem developed for domestic e-commerce can be carried forward to facilitate cross-border e-commerce as well. To some extent, this is already being done.
For example, one of the challenges a CBB2C platform may face is to ensure the product availability at the vendor's end. Given that the vendor may be listed on multiple platforms in multiple countries, ensuring availability of the product will be absolutely essential for any CBB2C platform. This requires the vendors to maintain their own inventory and provide a real-time programmable access of their inventory management system to the listing CBB2C platform. A good example of this is the Alibaba open platform. As the traction in cross-border shopping increases, the technology will be increasingly tailored for the purpose of CBB2C.
There is little doubt, if any, that the size of the opportunity in cross-border b2c retail is huge.
The contribution of cross-border B2C e-commerce towards total e-retail sale is increasing, and is expected to continue doing so.
There is a large gap between the number of products listed on any familiar Indian eCommerce portals and their counterparts in the countries with more mature eCommerce ecosystem. CBB2C can take a shortcut, and fill this gap directly for Indian customers. Indian shoppers are becoming more ambitious, bold and boundless with their shopping choices.
The early adopters are already shopping cross border. Fashion is one domain where we at Miracas.com are observing the transformation. Our customers are increasingly opting for fabrics, designs and styles from international fashion trends. Being unique, different and fresh is becoming the need of the hour for a fashion conscious Indian.
The emergence of success stories in cross-border e-commerce space is a strong signal of the positive drift towards CBB2C. Aliexpress, Wish.com and Amazon global store are just a few examples. Going forward increasingly many startups will find it lucrative to experiment with CBB2C and innovate on business models to iron out the currently unresolved challenges.
From 80s India to India of today, a lot has changed about the way we shop. In retrospect, much of this change seems to be the natural course of evolution. Maturing ecosystem fueled by the booming domestic eCommerce is leading us to the next stage of this evolution. With advancements in technology, government policies and business innovations; cross-border B2C e-retail is now not only viable but also an increasingly lucrative opportunity. There are however several challenges that still need to be addressed, which makes this space a very fertile ground for innovative startups to grow.
That is what keeps us busy at Miracas.com. We are enabling our customers to shop internationally with an ease of domestic shopping. Our vision is the future of eCommerce where markets are borderless and shopping is universal. The next step, of course, will be interplanetary, but I think we are too soon to discuss that :)
Thanks for reading.
December 08, 2017
December 08, 2017