Indian e-commerce is projected to explode from $10 billion to $43 billion in the next five years, according to Nomura’s India Internet Report last month. There are 11 categories, and within them 42 players, that are poised to shape this blazing path.
The multi-category segment is on fire this year. The largest pie of the online retail ecosystem is drawing the maximum risk capital and eyeballs.
The top three players — Flipkart, Snapdeal and Amazon — are expected to do $4 billion in sales this fiscal. “Indians are horizontal bazaar shoppers and don’t have deep vertical buying experience offline in most categories,” says Suvir Sujan, co-founder of Nexus Venture Partners, an early investor in Snapdeal.
Today, all multi-category players are on the inventory-less marketplace model. They are all investing heavily in warehouses and delivery. They are making acquisitions. “You will see us do some very interesting and strategic acquisitions very soon,” says Kunal Bahl, cofounder and CEO of Snapdeal.
VC firm Accel Partners expects the product e-tailing market to expand from $2 billion in 2013 to $8.5 billion in 2016. And, for now, the focus is more on growth and less on profitability.
If the multi-product players have the largest share of eyeballs, the travel portals have the wallet. At around $8 billion, online travel accounted for 70% of the overall Indian e-commerce market in 2013, according to IAMAI. Three shifts are underway. One, with air tickets becoming a staple, travel portals are turning their focus to hotel bookings and travel packages. “Online penetration (of hotel bookings) is only around 7%,” says a recent Nomura research report.
“Commissions paid by hotels are nearly 3x those in the air (ticket) segment.” Two, there’s a growing emphasis on smartphone traffic and applications. “Mobile is the perfect channel for a travel company to provide real value to the customer and create higher engagement by enabling an easy travel-booking experience,” says Deep Kalra, founder & group CEO of Makemytrip, the largest online travel agency. Three, the segment has seen early signs of consolidation.
After electronics, fashion and lifestyle is the largest category in online retail, with a 25% share. But unlike electronics, it is more the domain of specialists than marketplaces. Myntra, part of Flipkart, and Jabong are the leaders, competing fiercely with discounts and for exclusive brand partnerships. Myntra, which is targeting sales of Rs 2,000 crore this fiscal, has raced ahead by launching several private labels, including Roadster and Dressberry. While external brands give a margin of up to 35%, in-house labels go up to 60%. Jabong, which has exclusive partnerships with international brands and designers, is also lining up its own labels.
Then, there are web-only brands like Fab Alley, Zovi and Yepme. And, lastly, there are the multi-category players. Large players could drive acquisitions. “Don’t be surprised, with the advent of online players like Asos and large Chinese players coming into India,” says Sudhir Sethi, founder-chairman of early-stage venture fund IDG Ventures India. “These players would not like to start ground-up but will look for an acquisition to be the base for their India entry.”
Furniture is tipped to become the third largest segment in e-commerce, after electronics and fashion/lifestyle. The value of goods sold by leading players is on course to increase 3-4 times this fiscal. What makes furniture an interesting category, says Niren Shah, managing director at Norwest Venture Partners India, is that it’s a $15-20 billion market but consumers don’t have many offline choices.
Pepperfry and Urban Ladder are the leaders, the latter recording average ticket sizes of Rs 18,000-20,000. Among marketplaces, Snapdeal has launched, and Flipkart and Amazon are exploring. But they might not find it easy, given that existing players took nearly two years to perfect logistics and supplies. “Furniture is different from all other categories,” says Ashish Goel, founder & CEO of Urban Ladder. “Players need to build a specialised supply chain and also help in building the manufacturer ecosystem.” Similarly, Pepperfry is working with manufacturers to build furniture that can be assembled on delivery. The pieces of this segment are falling in place.