Softbank agreed to sell its whole stake at Flipkart (21%) fetching in around $4 billion, up from its initial $2.5 billion investment in the e-commerce giant. What does this mean for the e-commerce landscape in one of the fastest growing global markets?
E-commerce in India is set to hit $64 billion by 2020 and $200 billion by 2026. Experts suggest that it would surpass the United States as the second largest e-commerce market by 2034. This e-commerce push would also boost the Internet economy to $250 million by 2020, doubling its current value. Internet users would increase more than 70% to reach 829 million by 2021, carried by mostly Urban users and fueled by a fast-growing rural base.
The scenario is enough to tempt the best of them. Tencent is said it would hold on its Flipkart share even after the Walmart deal with hopes that the valuation would increase much further. But more importantly, it’s a foot-in for them in this growing economy.
Softbank is likely to pump their surplus earnings into Paytm Mall, further opening the market. A recent study found that Amazon India is valued at $16 billion with possibility growth to $70 billion by 2027 (gross merchandise value).
The report by Citi’s senior analyst Mark May and Hao Yan said, “We believe the India e-commerce market will grow at a 21% CAGR over the next 10 years to $202 billion, that Amazon could capture 35% of this market and that the company could generate more than $10 billion in revenue and nearly $1.5 billion in FCF (free cash flow) by 2027,”
These figures are more satisfactory than exciting since Amazon pumped in about a $1 billion in the Indian e-commerce market.
What to expect as an e-commerce consumer?
The key to making all this interest and investments valuable is to capture as much of the market as possible. One way to do this is to cut prices and give heavy discounts. The sales events have worked well across the globe. But it’s not just about the pricing. These stalwarts have realized that the South Asian markets have matured. Consumers are looking for better and consistent delivery experience.
It’s about quality value for money purchases delivered in a timely and pleasant manner. The solution to this is quality order fulfillment driven by tech-enabled logistics. Amazon has upped its total fulfillment centers in India to 67 and increasing its storage capacity by 1.5 times. Flipkart opened a state-of-the-art fulfillment center to scale its own delivery experience.
What lies at the crux here is simple. Discounts might bring in the consumers, but logistics optimization would keep them. Discounts are a double-edged sword as the value created isn’t sustainable. Consumers might just shift to the next big player giving the bigger discount. Moreover, they would be disheartened and disillusioned when their discounted orders come to them in a shabby manner. Great delivery experience is what would make them keep on coming back. It’s the only way that these players can sustain in the system for a long time.
The problem is that logistics is often a cost-guzzler. It takes up about 14% of the total cost of the goods. Unplanned and surprising fluctuations in logistics movement can have a huge impact on the cost structure. It’s critical to not just scale logistics, but to optimize it. When companies know exactly which routes and schedules work best for them giving them highest efficiency, lowest costs, and fastest deliveries, it brings in consistency and dependability. It also gives them more confidence to plan their discounts well.
A closing thought, we know that faster deliveries are the norm, but how fast is fast? It won’t take time for same-day deliveries to become a necessity, and then two-hour ones. To walk with the times and customer expectations, logistics optimization is necessary. If not now, then it might be too late.
kahani happens 