E-commerce 2.0: Key Takeaways

2018 has been a milestone year for the e-commerce space in india, with the Flipkart-Walmart merger dominating headlines. We believe that 2019 will be as eventful, with newer models emerging. With this in mind, we held a collaborative session within the startup community along with key industry voices, Kartik Sheth, Ashwin Rastogi and Suchita Salwan to throw light on what we call E-commerce 2.0. and whether there is a real opportunity beyond the hype. Highlights from our session are below:

1: E-commerce 2.0: hype or reality?

Q: is there a real e-commerce opportunity beyond the hype and buzzwords such as social, vernacular, cross-border etc.?

Suchita: “i think what’s exciting today is that the benchmarks for e-comm basics have been set- significantly by Amazon- as fast delivery, vast selection and great price. What makes being in commerce exciting is the ability to  innovate over and above and add-on to this the hype is for real, we see it in our product, we see it in brands such as Club Factory, and across the e-commerce space.”

Kartik: “Having worked in the early days of modern retail, one can draw the  parallels between then and now, hyper markets where everything is available at a good/discounted price easily, delivered to you in under 48 hours, which set the foundation for other players be it Big Bazaar or Shoppers Stop. E-commerce 2.0 is going down a similar path wherein the innovations are no longer COD or on time delivery, it’s about the experience, discovering products, and buying stuff you didn’t know you wanted or knew existed. i see this as a natural evolution, and that the two threads of offline and online retail will eventually converge. E-commerce 2.0 will somehow merge with retail 2.0.”

Ashwin: “With digital connectivity going beyond the metro cities and deep into tier 2 & 3 cities, demand from regional india is exponentially growing, radically changing the landscape of the e-commerce space. The future or the new future might be an omni channel approach, catered to  the vernacular audiences, and localizing in india requires localizing at the regional and state levels. it will be interesting to see large companies innovating for regional languages.”

2: Specialized models

Q: Are we in some ways educating this market for users to get more sophisticated over time, for the larger global players to be able to serve them? is this a transient way of getting users online, training them, and then eventually they will gravitate towards a more standard commerce experience? is there a moat that can be built to prevent this?

Kartik: it actually works the other way around, wherein the large players are training e-commerce users, exposing and teaching them about COD, digital payments, what to expect when someone shows up at your doorstep with a package etc. i genuinely think that the large players have done a massive service to us. They have created the entire structure, they have created the supply chain, they have created vendors who are able to deliver stuff at a cost effective amount. You can rent warehouses by the cubic square foot - all of which would have never been possible if it wasn’t for the large horizontals that have opened the way for us and that is a foundation that everybody else is now building on. There are some weaknesses’ of this model but they are outweighed by the strengths, which is that it is a scale model and a two player model at best. So it’s a consumer facing way of thinking, which implores you to think about the differentiators and also the way to differentiate. The experience will now move from a search based one to a discovery based one.”

Suchita: What’s important to note is that there is a big difference between  buying and shopping. There is a huge experiential difference in between spending money on a standardized product- like a phone charger or a cell phone- and ‘shopping’ (for a shirt, or a pair of shoes, or a lamp for your house) which in my opinion is a highly nuanced customer experience. i think in this difference is where moats for upcoming commerce companies will lie... in knowing that all consumer product choices aren’t made the same way.

Basics have to be met- you have to have selection, delivery, price checked off. But in the nuance of selling- knowing what you sell, how you can help consumers make the best choices, and adding experiential layers on top of a well established commerce framework is where the opportunity lies.

3: Learnings from China:

Q: What can we learn from China? How are we similar and how are we different?

Ashwin: There is a fundamental difference in how an indian company works and a Chinese company works. To a large extent they still think that india will evolve as the next China, they still think an ecosystem model needs to work, there will be a few players but a cross ecosystem in e-commerce whether we are offline or not. So, that’s how they think. Currently, if you look at supply, in the indian ecosystem, there is demand differentiation, someone is selling content, someone is selling branded stuff someone is selling labels cause of that a lot of differentiation being offered, and i think a major reason why Club Factory works is for two reasons: i think first is supply differentiation and secondly the price point at which we sell there is a lot of impulse buying which was not there under one platform before. So, people are still trying to shop for a single product, probably unbranded but you know at a cheaper price and of course having a large team in China helps and my thesis was manufacturing isn’t going to increase, consumers are going to increase, demand is and we have to put in that capital and trade with China is already increasing. So, a lot of Chinese companies they don’t really think about online market sharing, they think more on the lines of what’s the biggest city in india, what is the disposable income and how can i target that. We will see a lot of this in the next 1-2 years, on how to find customers at a lower cost within the eco-system.

4: Content versus Commerce:

Q: Are we seeing hybrid content + commerce models yet, or is it too early?

Kartik: “i think we are taking baby steps in that direction, and it comes down to the scale of the two, content and commerce. Content apps have insane number of users, there are more apps on content than e-commerce can ever have in a lifetime, and the e-commerce players have revenue but very little engagement and you have to assume that at some point the two will converge. The creation of infrastructure for this ecosystem really helps. There is so many hours of usage by so many millions of indians on content apps, and we’re beginning to see early signs of the two converging.”

Suchita: “My learning has been that we mustn’t confuse ‘content to commerce’ and using content as a lever to understand what to build in commerce. We have done the latter for LBB. Our mission is to connect users with great local businesses. For us, commerce is one of the ways to make that connect. We’ve used content as a lever to understand consumer mindsets- where they want to spend money, what they want to spend it on- and we’ve used this intel to mould our commerce strategy.

People use content for inspiration as well as information- you may not necessarily buy exactly what you’re reading/watching. instagram is incidentally crossing Amazon in the US for product search, just because of the volume of information that’s created (which relates, again, to buy versus shop, and thinking of shopping as an experience). in the context of content, it’s also important to note the difference in between merchant discovery and product discovery.

5: 2019 trends

Q: What is a large trend worth betting on in e-commerce for 2019?

Ashwin: “i think for me would it be, unbranded products and impulse buying, and the convergence of the two. Where we currently are in the consumption cycle, the mass market isn’t going to consume any more branded products, they are going online and will look for more unbranded products and i think price will obviously play a big role in this.”

Kartik: “if i had to make a large bet and qualifying that because startup owners can always make large bets. if i had to place a large bet, it would be on assisted sales. There are people who are used to doing sales, people who are probably not generating enough and are struggling with sales, or they have stores that are slowly declining. That’s where i would make a large bet.”

Suchita: “The 2 large bets that i would make is, firstly, a sum of parts: The future of e-commerce isn’t going to be that one thing to hit a home-run in terms of a business model or selection or a feature. Going forward, i think successful companies will be built on a lot of individual factors adding up vs. 1 big feature or selection or revenue stream leading to a home-run. Secondly, i would bet on brands. Now is a great time to launch a brand in india, and Shein, Club Factory, Bira etc have done a great job on that.

i would bet on LBB of course, but keeping us aside a model that’s a sum of parts and brands are the 2 broad themes i would bet on.”

From L-R: Gourav Bhattacharya (Director, Matrix india), Kartik Sheth (Entrepreneur & advisor), Ashwin Rastogi (Club Factory) & Suchita Salwan (Founder & CEO, Little Black Book)

We hope you enjoyed the discussion. We remain focused on e-commerce opportunities through 2019 and beyond. if you are building a company in this space or have a point of view on this, please write to us at commerce@matrixpartners.in