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Where is the Indian e-commerce marketplace headed?

21-May-2015
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Where is the Indian e-commerce marketplace headed?

As Flipkart’s 20-day #ShopSmartDays sale ended last night, one wonders how effective these flash sales are for e-commerce players. With one sale after the other by all players in the space, everyone is trying to come up with a new gambit with each new sale.

After its Big Billion Day sale fiasco last year, Flipkart came up with a new kind of sale format that was restricted to just one category at a day.

If market reports are to be believed, the sale elicited a better-than-expected response from shoppers across the country with a record 3 times growth in traffic and 7 times growth in sales during the period. The sale attracted more mobile app traffic compared to the website—60 per cent of the traffic and 50 per cent of the merchandise sales were via the Flipkart mobile app.

Be it Jabong, Myntra, Zivame or MakeMyTrip, all players have been relentlessly promoting sales. Are these tactics really working?

Numbers don’t lie

The year 2014 was termed “the year of flash sales”. Year-end 2014 reports had experts professing the trend as growing. No netizen could resist the discounts led by Flipkart, Snapdeal, Amazon India and Myntra.

However, going by the numbers, most e-commerce players are seeing their losses widening. Flipkart’s losses rose from Rs 344.6 crore in FY13 to Rs 719.5 crore in FY14, while Snapdeal saw its losses mount from Rs 120.1 crore in FY13 to Rs 270.7 crore in FY14.

There have been resounding concerns over a bubble of sorts in the sector, fuelled by the balance sheet status of these e-commerce players.

Granted that there has been a rise in valuations of top players like Flipkart and Snapdeal, the startup market is getting increasingly crowded all aspiring to become the next Amazon of the business.

However, the irony of the situation is that, of the 1.3 billion Indian population, only over 190 million access internet—the e-commerce businesses survival kit. Of this 190 million, only about 50 million are active users and only a fraction of this make purchases online.

What’s still driving them?

A Boston Consulting Group report pegs internet users to cross 550 million by 2018. Interestingly, rural consumer base is set to grow nearly five-fold from 60 to 280 million, while urban base will almost double from 130-300 million.

Forrester Research’s new five-year e-commerce forecast that the e-commerce industry will top the $300 billion mark in sales this year and keep growing to nearly $500 billion by 2019 — a slightly faster rate of growth than what was projected by Forrester in a similar study performed in 2010.

Five years ago, flash sale sites were an emerging e-commerce model, having “generated excitement and grown rapidly,” according to the 2010 report; Forrester predicted that the sites, which sell designers brands at marked-down prices for a closed window of time, would become a main fixture in retail over the next decade.

Today, the flash sale model has shown that it’s quick to gain momentum, but difficult to maintain.

Forrester also foresaw e-commerce cannibalizing in-store shopping, predicting that by 2015, 11 percent of overall sales would happen online. That prediction has proven accurate: About 90 percent of transactions are offline today.

Will they, won’t they?

Whether these predictions are to be believed or not is still the question. Well, businesses sure are putting all their bucks into the predictions, and hoping for the next financial year to be the what it’s predicted to be. As for the consumer is concerned, he sure is getting the best deal in this increasingly competitive space.
 

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