What’s Next for India’s E-Commerce Leaders?

E-commerce shoppers today want the same things that shoppers have always wanted: wide selection, reasonable prices, and convenience. The same is true in India as in the rest of the world.

Nowadays, a handful of massive companies are, quite literally, delivering for those customers. And entertaining them. And managing their payments. And getting orders fulfilled with lightning speed.

Competition in Indian E-Commerce

Walmart, Amazon, Tata, and Reliance are fighting on almost every front in the Indian e-commerce theater, which means fierce competition not just to sell products to customers but also to keep people engaged. Each of the four companies runs a proprietary ecosystem that goes beyond just shopping to include entertainment and payments. They require a lot of computing power to operate and ample partnerships.

For instance, Amazon has a shopping marketplace that features not just Amazon goods but all sorts of categories and brands. The company also has an Amazon Prime program that offers free shipping, unlimited video and music content for entertainment, and a payment space, including wallets and UPIs.

Walmart is building up the payment side of its ecosystem through Flipkart’s PhonePe feature. On its entertainment side, Walmart has entered tie-ups with Hotstar and a few of the other music players.

Reliance is very similar. It has acquired start-ups like JioSaavn for music, among others.

Finally, Tata has made a few acquisitions in the last couple of years and recently launched a new app (Tata Neu) that it’s calling a “super app.”

Data-Driven E-Commerce

In return for their customers’ undivided attention, these companies learn quite a bit about buying behaviors. That knowledge allows them to quickly get items to customers through buy-online, pick-up-in-store (hybrid store/omnichannel), or same-day delivery, which is perhaps the ultimate convenience.

When it comes to quick commerce with swift click-to-deliver cycle times and reliable deliveries, companies need more than just infrastructure and people. Technology plays a significant role in understanding what kinds of products customers in different regions and markets will buy. Companies want to place products and inventory closer to customers at fulfillment centers and delivery hubs.

They don’t want to be out of stock, which is a big pain for the customer, or have excess stock, because it hurts financially for a company to write off inventory or have the unsold products take up space.

Meeting Demand in Indian E-Commerce

Typically, e-commerce companies in India run 70 fulfillment centers and 15,000 delivery hubs and, along with their partner network, can manage and service demand across 25,000 hubs. The complexity of forecasting demand and planning inventory for that many hubs with multiple millions of SKUs is astronomical.

To achieve this demand forecasting and inventory planning, companies need strong algorithms that use advanced analytics like AI and machine learning. Amazon has overtaken Google in India regarding product searches, so the scale is massive. The big data tools allow e-commerce companies to use search history, personalization, and historical demand for each SKU at their hubs and use that to come up with accurate demand forecasting, inventory planning, and placement models.

They also need to be able to share these capacity requirements and planning engines with the 3PL partners in their ecosystem. Their strategic partners use robust technology and infrastructure to manage very demanding SLAs across a wide logistics network while offering a seamless delivery experience to the end customers. The big companies have a considerable advantage because they can tap into big data tools.

That doesn’t mean that smaller players will be left behind altogether.

Vertical Sellers in Indian E-Commerce

The present and future of e-commerce are about mixing these big ecosystems with vertical sellers to provide customers the best choices and value through competition and innovation.

Amazon started its marketplace as a concept 20 years back when it challenged its own retail business by inviting third-party sellers onto its retail site. Amazon’s own team had to compete with these sellers. The idea was that healthy competition would deliver customers the best value and selection.

Strong vertical players that target consumers for a specific category continue to emerge. There are fashion brands like Myntra and AGIO. There are health, healthcare, and pharmacy verticals coming up. Beauty product verticals like MyGlamm, Nykaa, Mamaearth, and a few other notable names are big successes.

These smaller sellers grab new customers in the big marketplace and potentially convert them to direct-to-consumer sales if the products are good and unique enough. Mamaearth is a great example. Smaller sellers and brands enjoy the consumer awareness that comes from the marketplace, and the big ecosystem players get exclusive pricing, promotion, and launches of new products in return.

Brick-and-Mortar vs. E-Commerce

Ample opportunity exists for brick-and-mortar retailers in this environment as well. Each of the prominent e-commerce players is investing in physical store infrastructure, either through acquisitions into large, organized retail chains or by creating their own partnerships in this space through multiple retailers. For example, Amazon has invested in Future Group, as well as More Retail and Shoppers Stop. Flipkart made an investment in Namdhari in Bangalore. Tata has its own bunch of stores, which it has built. Against expectations, grocery stores are even turning a profit. Stores are doing quite well online and physically.

People like to have a seamless experience when they shop, and that looks more and more like a hybrid model where they can research it online and feel it in the store, get it delivered or pick it up. Convenience is key.

The pandemic marked an unprecedented time for e-commerce as a sector. A lot of first-time shoppers have come in and tried and tested the online shopping journey. Companies believe there are 100 million new shoppers to be had if they get the selection, pricing, and convenience right. The next few years will be a contest between their ecosystems and not between the individual companies.

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About Tejas Faldu

Tejas comes with senior leadership experience in e-commerce, retail, and the consumer goods industries in India (and recently Indonesia), where he has played a critical role in building and scaling supply chain operations while enabling business growth in highly competitive markets. His primary areas of expertise include supply chain strategy and planning, logistics and warehousing, inventory management and sourcing, seller experience and driving process improvement, and use of analytics in category management and merchandising.

About Aman Deep Lohan

With more than 20 years of experience largely in e-commerce and financial services, Aman is currently the managing director and CEO of Appario Retail Private Limited. Appario Retail — which sells goods across segments like smartphones, electronics, and other items — is a wholly owned subsidiary of Frontizo Business Services, the JV unit of Amazon and the Patni Group. Before Appario, Aman was business leader at Amazon. He was also the CEO – Financial Services for Future Group India.

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This e-commerce industry article is adapted from the GLG Roundtable “E-Commerce Giants —Way Forward.” If you would like access to this teleconference or would like to speak with e-commerce experts like Tejas Faldu, Aman Deep Lohan, or any of our approximately 1 million experts, contact us.