Propelled By The Pandemic
Commerce keeps resurrecting itself, as different models go through their cycle of obsolescence and rebirth, with technology determining their fate.
This happens all the time, globally. For instance, in their quest for growth and customer stickiness, some of the most advanced native online brands are now trying out voice commerce, augmented realityenabled online-to-offline (O2O) experiences, and progressive web applications (PWA) that use smart mirrors, video games and live streams to push trade.
On the other hand, there are malls that are increasingly evolving into experiential destinations, and there are old-style manufacturers and FMCG companies that are selling direct-to-customer to boost growth. What has all along been offline is now being reborn online.
In India too, commerce had to reinvent itself in the wake of the challenges posed by the Covid-19 pandemic and subsequent lockdown.
The last few months have seen physical players joining the online bandwagon and online companies putting in place innovative models to deal with the surge in consumer demand and a breakdown of traditional distribution models. Brick-and-mortar Reliance Retail, for instance, formally launched its online grocery service JioMart in May 2020. It recently launched the JioMart app which reportedly crossed 10 lakh downloads within days of its launch.
The lockdown presented a whole set of challenges to ecommerce players who for the first two months of the outbreak were allowed to supply only essential goods. Specifically, the challenges included scaled-down operations as a result of social distancing and employee safety needs, depleting inventories due to supply chain disruption; workforce shortage; and vendor problems. Brands used these challenges as opportunities to reinvent themselves, which helped them emerge stronger than before.
A validation of this comes from Rajat Wahi, Partner, Deloitte India, according to whom the Indian etail market size is expected to grow to $100 billion over the next one year, from $27 billion at the beginning of 2020. “With the lockdown pushing business the e-commerce way, while we are still awaiting the June numbers, it looks likely that they could be 80 per cent upwards of pre- Covid-19 levels. Therefore, in effect, e-commerce could be at 10 per cent by next year itself,” he says.
At the moment, of the roughly $900 billion overall Indian retail market as per Deloitte, about 3 per cent is e-commerce, 88 per cent is mom-and-pop or kirana business and about 8 per cent is modern retail. “Pre-Covid, our expectation was that e-commerce would double in the next three to five years to about 7 per cent, and modern retail would go up to 17 per cent, while overall retail would grow from $900 billion to $1.2 trillion, eventually reaching $1.7 trillion by 2026,” says Wahi.
But what did the Indian ecommerce sector do to bolster itself during the pandemic? Here are some of the key action points that helped the e-tailers to overcome challenges thrown up by Covid-19 and keep their growth engines roaring while ensuring customer stickiness and an ethical image for their organisations:
Strategic Partnerships
Walmart-owned Flipkart partnered with cab hailing companies such as Uber and Meru to deliver essentials to a large number of consumers at the height of the lockdown, specially between April and mid-May. The partnerships reflect the agility of the systems built by Flipkart in reacting to the changing environment and in s u p p o r t i n g business goals. The company also forged multiple ecosystem partnerships with several brands including Vishal Mega Mart, Tata Consumer Products and Spencers for delivery of products.
Thanks to these partnerships, Flipkart was able to ensure next-day doorstep delivery of essentials for consumers from their nearest retail stores in a hygienic, fast and convenient manner through a safe supply chain. Says Kalyan Krishnamurthy, CEO, Flipkart, “Flipkart, as a committed corporate citizen, is constantly innovating to help fulfil consumer needs in these unprecedented times. Our teams are working relentlessly to understand the requirements of each region and forging strategic tie-ups to meet the same.”
Similarly, to beef up last-mile delivery, e-commerce platform Paytm Mall announced partnering with over 10,000 kirana stores, small shops and businesses for hyperlocal deliveries during the pandemic. These hyperlocal merchant partners were over and above Paytm Mall’s standard base of 100,000 merchants. Paytm Mall connected the kiranas to its logistics partners (GATI, Ecom Express, Delhivery, Bluedart, FedEx, among others) for seamless delivery.
Abhishek Rajan, COO, Paytm Mall says, “We provided thousands of kirana store owners with logistics and supply chain solutions by forming deep alliances with manufacturers, suppliers and warehousing players. We are rapidly signing up more supermarkets, large format retailers, and stores that are already using Paytm payment services.”
Rajan adds: “We have always advocated a 100 per cent marketplace model of operation against an inventory-led one as pursued by other major players. The success of our O2O model has been validated and we look forward to bringing many more offline kirana stores, small shopkeepers into the digital fold.”
Online marketplace Snapdeal, in addition to existing partnerships with sellers, created new ones to meet the immediate needs of its target audience. Says Kunal Bahl, CEO & Co-founder, Snapdeal, “Starting late March, our business teams launched an intense drive to sign up FMCG wholesalers, dealers from local grain markets, sellers in kisan mandis and medical equipment dealers to boost the availability of essentials. Moving away from automated onboarding for sellers, we launched assisted onboarding so that new sellers could go live within minutes.”
Snapdeal’s deep connect with the seller ecosystem and its reach allowed them to rapidly introduce new product offerings aligned with fast-evolving user needs. “We expanded our partnerships to include online pharmacy brands like Medlife, which allowed users across 400 cities to order medicines and avail health check-ups and diagnostic tests. Additionally, because of the disruption in the academic schedules at the school level and for those preparing for competitive exams, there is increased parental and studentdriven demand for supplementary learning solutions. In view of this and looking at the growing demand for digital learning, we partnered with various e-learning platforms like Toppr, Toppers Exam and Gradeup, among others.
Online grocery retailer BigBasket faced a huge problem when 60-70 per cent of its workforce left for their villages immediately after the lockdown was announced and there was a 5-6-fold surge in order overnight. Says Hari Menon, Co-founder & CEO, bigbasket, “We partnered with cab aggregators, retailers and almost 50 such partners to use their manpower. We doubled down on our recruitment efforts. We worked with government authorities to help ensure that our people could come to our warehouses so that our operations could run smoothly.”
BigBasket also benefitted from its “do more with less” philosophy. “We temporarily reduced our assortment to improve picking efficiency, and introduced community delivery to deliver more orders with the existing manpower. Equally important, the spirit of our warehouse and delivery staff kept us going,” adds Menon.
Concern for Stakeholders
The lockdown led to severe liquidity crunch for most businesses but it was more pronounced for small and medium businesses across India. Amazon, in an internal survey with sellers, identified some of the biggest challenges faced by them during the lockdown such as supply of raw materials, manpower, logistics and working capital. The company helped more than 6,00,000 sellers get back on their feet through key initiatives like special sale events for small businesses (where over 2,600 sellers received their highest singleday sales), enabling seller registrations and account management services in Hindi, ‘Local Shops on Amazon’ that helped bring local retailers from across India online and supplement their footfalls with a digital presence, a free health insurance for its sellers to help cover expenses related to Covid-19 hospitalisation and treatment.
In addition, the e-commerce major announced a number of fee waivers and relaxation measures to help its sellers hit by the pandemic.
Addressing the working capital needs of the seller community, Flipkart ran a special offer on loans through its Growth Capital programme for MSMEs that operate online. This programme makes credit available to sellers at competitive interest rates with an approval time of one day and disbursal within 48 hours. Also, besides a three-month moratorium on existing loans, it has allowed a six-month moratorium for any additional loan that is sanctioned during this period.
Online grocery delivery service Grofers too faced supply chain and workforce challenges at the beginning of the lockdown. Saurabh Kumar, Founder, Grofers says, “Over the last three months, we have employed over 3,000 staff at our warehouses. Besides, skilling of workers and being able to distribute goods and strengthen last-mile delivery have been our major focus.”
Procurement posed a major challenge for a B2B marketplace (for industrial goods) like ShakeDeal owing to cash crunch and manpower shortage during the pandemic. As a result, ShakeDeal had to rejig its relationship with manufacturers to tackle the crisis. Says Akshay Hegde, Co-founder & Managing Director, ShakeDeal, “Most of the manufacturers that we were dealing with were on certain credit terms. Due to the sudden pinch felt during the lockdown, we had to help manufacturers with supply chain financing in order to continue business. That changed the entire dynamics and finance started being counted within the procurement cost.”
Hegde also informs that the manufacturers on their part reduced the ‘minimum order quantity’ in order to fulfil orders during the lockdown. “Going ahead the focus would be on the disruption arbitrage rather than on cost arbitrage. For the supply chain the main focus was cost optimisation but now it will be managing all these disruptions as well. In doing so, digital adoption will be the first spike and alternative adoption models will have to come in with redundancies built in.
Caring Companies
As the lockdown is being eased across the country, it becomes imperative for companies to enforce social distancing norms to curb the spread of the infection. Effective safety, hygiene and sanitation protocols are being implemented by all e-commerce players as a priority right from the stage of accepting shipments to distributing parcels. Says Amit Agarwal, Senior Vice President & Country Head, Amazon India, “Creating jobs and providing a safe working environment is critical to helping our community and the economy at this time. We are happy to announce 20,000 additional seasonal roles for customer support service who will have flexible workfrom-home options.”
Online agri-tech platform Fraazo, which reported a rise in sales during the lockdown from 200 orders per day to 1,500 orders per day, has experimented with a ‘society stores’ model to reduce multiple handling and unhygienic treatment of fresh foods. “We are directly supplying to leading societies and apartment complexes in Powai and Andheri (West), thereby reducing touch points across the supply chain,” says Atul Kumar, CEO & Co-founder, Fraazo.
Similarly, online marketplace ShopClues is focused on practicing strictest hygiene and safety protocols for the consumers and staff alike. Says Sanjay Sethi, CEO, ShopClues, “At ShopClues, we are constantly evolving new distribution methods to enable a strong supply chain. We are providing OTP-based, real-time contactless deliveries.”
In June, online fashion retailer Myntra held a four-day sale event garnering more than 7 lakh new customers. Amar Nagaram, CEO, Myntra says, “Over 3.5 million customers shopped during the event, with about 13.5 million unique visitors, generating close to 120 million sessions. We have recorded an 86 per cent increase in the number of customers from tier-2 and tier-3 cities and beyond, the highest so far. Further, keeping safety as their guiding principle, our kirana partners are currently delivering 2.4 lakh items per day across the country.”
Focused on contactless deliveries from the get-go, online home essentials and grocery startup Milkbasket reported a profitable first quarter. Anant Goel, Co-founder and CEO, Milkbasket says: “The company has become the first online grocery startup in the world to become Ebitda-positive with the deployment of under $30 million and clocking an average revenue run rate (ARR) of over $90 million.
Digital to the Fore
Given the large-scale adoption of digital in the country during the lockdown, the massive shift in consumer preference towards online shopping is self-explanatory. Another discernible change is that online shoppers, especially in tier-2 and tier-3 cities, are increasingly becoming more comfortable with digital payments as against the cash on delivery option. This could pave the way for deeper financial inclusion in the country.
However, financial inclusion will be incomplete without ecommerce players having a strong last-mile delivery network in these cities. Therefore, the need of the hour is to strengthen the last-mile delivery network.
Manufacturers and traditional companies, especially FMCG companies, have not remained immune to expediency the lure of the digital, and are increasingly taking the direct-toconsumer route to make up for their stagnant in-store sales or fill gaps in distribution due to the pandemic. Companies like ITC, Hindustan Lever, Dabur, Proctor & Gamble, Colgate and Mondelez, among others, have started selling products directly to consumers from their portals by forging tie-ups with delivery startups. Going forward, they may have to pay attention to the efficacy of their online platforms.
An interesting outcome of this pandemic has been the focus on health and safety in the day-to-day scenario. In a country like India where tremendous disparity in education and wealth exists, the pandemic has ensured that the concept of hygiene is understood and adhered to in the remotest village as in the most opulent mansion. With a view to keeping employees and customers safe, we will see ‘health and safety’ become an essential part of public and private sector enterprise in the near future.
In the post-Covid scenario once things get back to normal, shoppers will go back to shops. Being cooped up at home for so long and the very fact that shopping is an experience will lead them back to stores. During the partial lifting of the lockdown, businesses saw revenge buying, which gradually tapered off as people went back to buying essentials. All the more reason for businesses online to pay attention to what they are saying to the consumer and how they are saying it to ensure customer stickiness. Further, they need to stand up for all the right things – ethics will come into play in a big way. This could be in terms of consumer data security or even day-to-day running of operations.
Dominance of Ecommerce
A Deloitte biweekly survey of consumers across 10 countries to map consumer sentiment during the Covid-19 outbreak found that while consumers globally now prefer buying discretionary goods online and visiting stores mostly for essential goods, in India, the e-commerce trend continues to be dominant, as a larger number of customers are still ordering their purchases online irrespective of the nature of the goods being purchased. The survey notes a greater willingness by Indian online shoppers to pay more for convenience. This has resulted in favourable growth in the e-commerce industry in India even after the easing of restrictions.
K i r a n a stores taking to e-commerce is still some way off, as the purpose of e-commerce is to have inventory in stock, and the kiranas, unfortunately, do not have the backup systems and the technology to do so at the moment. Having said that, many companies are partnering with kiranas today to l a u n c h l o c a l a p p s . Various models are starting to come up where in addition to partnering with larger brands, kiranas are taking care of the last-mile delivery and/or even working as the lastmile drop off point for orders placed with larger brands.
Companies have reduced the number of new products they want to launch right now, because there is
an issue with media. How much do you spend? How do you communicate? Therefore, new product launches have been pushed back and companies are looking at making basics available at the moment. Leading up to the Diwali, once markets open, there will be new product innovations and launches. Secondly, there will be a big pivot towards health, nutrition and hygiene products.
The pandemic has also spurred innovation in distribution models.
FMCG companies, for instance, are tying up with food delivery companies. Tie-ups with fintech companies are also taking place. There are a lot of innovative models around getting products to the end consumer. However, if these models are not sustainable, people will go back to the original model once the markets open up.
Right now, companies are not looking at expenses and just doing whatever it takes to get products to the end consumer, but at some point that will stop. Therefore, these models have to become sustainable, profitable and make sure they are costeffective.
And obviously technology is driving the whole play. In the larger platforms there has been a lot of investment and technology driven innovation and that’s where the action is going to be.
