E-Commerce is a new business and hence regulations either don’t exist or are not very clear, says Sanjay Sethi, CEO & Co-Founder, ShopClues.com, in an interview with CIO&L.
How is India’s e-commerce industry growing and players sprucing up their product lines?
e-Commerce in India is at a very nascent stage yet with the total retail size about 500 billion, out of which about 8 % is organized retail while e-commerce is about only 0.2%. GDP is growing at 5%, but the organized retail is growing at about 10% and e-commerce is growing 50% – 60% year over year.
So clearly, India becomes the last largest untapped e-commerce market in the world. The dynamics of this industry is little different from how you would you see in European markets. In developed market, it is more about convenience. You find everything around your home only –from a camera to a TV.
But in a city like Delhi, you won’t get everything you want to buy from around. As you move out of metros this problem becomes acute. So the primary driver of ecommerce in India is the necessity. It’s not about convenience, it is about availability.
India’s e-commerce industry will grow from 0.2% to 8 % in 5 to 6 years and it is not going to come from main cities only, rather this is going to be powered by middle classes people from smaller cities.
Next phase of growth will be powered by mobility. Because laptops and desktop computers are expensive, people are likely to use their handhelds to do shopping.
What all challenges do e-tailers face today including technology hurdles?
The entire concept of shopping online is still very new. All businesses are built on some kind of challenge that they try to solve. ShopClues is built on the challenge that India’s retail market is very fragmented and is primarily dominated by small and medium businesses. We have twenty-five million retailers in India who retail for living and they are all over the country. Now making them participate online is a challenge but you can say this is an opportunity.
ShopClues has taken the challenge of the market cashing in on the small and medium businesses. We leverage the fact that there is absence of organized retail and that organized retail is not going to become large because for it to become large there are many constraints including regulatory, infrastructure, occupancy cost, rent cost, etc. Plus, when you have high land cost it’s difficult to create large malls like in US.
We take challenge as opportunity. For instance, if logistics is a problem then we will partner with hundred courier partners across the country, organize them and give them service to merchant so that they can deliver value to the buyers.
India has made lot of progress but the speed of change is lower than what we expected. For instance, adoption of 3G and 4G services are yet to catch up.
The challenge that I face today is clarity on regulations, and taxes. Again this is a new business, so regulations either don’t exist or not very clear or the interpretation is not clear. And then there are issues like water, electricity, and Internet connectivity.
How do you see e-commerce industry five years down the line in India
Internet commerce is a behavioral change and it is here to stay. It will become larger, more efficient and provide more value to buyers. By 2019, India e-commerce will be approximately 16 to 18 billion in size. There will be multiple players in the industry catering to different values to buyers. Because Indian consumers are very diverse, extreme, very brand and value conscious, there will be multiple sellers of multiple value propositions.
India currently is very diverse in all aspects like language, culture, buyers. So the reason when diverse people try to buy, a single company or single business model cannot deliver on the entire spectrum. For example, if you are a mall, you can’t be a sector market and if you are sector market you can’t become a mall.
Secondly, you will see growth of verticals. For example, somebody would only sell eye glasses, somebody selling health items, somebody taking care of senior citizens, and so on. These are like niche vertical businesses. We will see entry of international players in Indian market. Players like Walmart, IKEA, etc will all make a mark in India.
I am also assuming, in next five years the inflection point where rapid adoption of e-commerce is already happening and will accelerate, the market will become large enough for all these multiple players to have their own niche.
Consumers will say ok I want to buy x I will go here if I want to buy Y I will go there and for something else I will go somewhere else. People sometimes like consolidation but it will not stop new businesses to come up because it is a growing market.
Opportunity is huge and inefficiency in market is still very large and every inefficiency will lead to the emergence of a player to plug the hole. When we started ShopClues, the entire market was inventory based. Everybody was catering to inventory led models.
Internet commerce is going to go deeper into households. I feel very optimistic about Indian market becoming more mature. Infrastructure will become more evolved. Courier, logistics, payment systems, smartphones, and Internet connectivity will become much more robust so it will become a main stream thing.
What do you do different at ShopClues?
Our value to the buyer is selection and pricing. Simple thought process is this: the way consumers think about us is that ‘if I can’t find a product on ShopClues chances are it is not sold online.’
We have more than one million products on our site. By the end of this fiscal year, we will be the largest catalog of all online products that can be sold.
The way we organized ourselves, the way we have run a platform, and the way we approach our customers, it’s about Classes vs Masses. The classes segment is more what you see right now, the Masses segment is what ShopClues caters to. There are about 50,000 merchants on ShopClues who sell online. These merchants have huge collection to the site in all price ranges.
Plus, the bottom of the pyramid is not serviced yet, and this is where we are trying to service.