The Indian e-commerce market is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion as of 2017. This is aided by the increasing internet and smartphone penetration. For retail merchants, who only sell in their brick-and-mortar locations, trade via ecommerce can seem like an attractive option. Of late, significant changes have happened both on supply side and demand side to warrant a careful assessment before choosing the optimum business mode.
In order to boost trade and e-commerce, Government of India and several large MNCs (Walmart, Reliance, Amazon etc) have launched e-commerce marketplace in the last few weeks with an aim to get the small traders enlist on their online platforms and do business.
With the growth of internet of things (IoT) and its continued impact on e-commerce in 2020 and beyond it is predicted that over 70% of businesses will be using the IoT by 2021 to enhance the customer experience. With the IoT, companies can collect data faster for real-time responses on fast moving goods, changing consumer preferences, inventory availability, supply availability etc. Also significant advances in logistics, cold chain facilities and emergence of farm produce consolidators, ensured free movement of the goods/produce to all corners of the country.
With the fusion of technology and market, traders are faced with a plethora of opportunities and threats in moving the business online, which are discussed below.
– Reduction in acquisition costs: Consolidation of traders would provide better visibility on the demand to aggregators like Walmart, Amazon etc which in turn would enable them strike better deals with the manufacturers/suppliers and pass on the benefit to the end customers
– Rationalization of operational costs: End to end automation of check-out, billing, inventory management, payments, lesser store space requirements etc result in lower operational costs on account of reduced labour requirement, lower inventory holding cost, savings on account of power, rent etc
– Longer customer service hours: In India, e-Commerce provided a 24X7X365 access to market place as consumers enjoy online shopping because of its easiness and convenience. They are allowed to buy products or services from their home at any time of day or night
– Better working capital management: Online sales would result in quicker cash conversion cycle against the traditional buy-now-pay- later revenue model
– Targeted Selling: With IoT, analysis of data around consumer buying pattern, preferences etc. would help targeted sales of fast moving goods resulting in better revenue and profits.
– Security: Online portals are exposed to hacks by cybercriminals and hackers. The personal details of the consumers are also exposed to such security risks.
– Site crash: Traders have to ensure that their sites are up at all times. Frequent downtime would result in credibility and reputation issues.
– Increased competition: Consumers have a wider reach locally compared to the traditional business model
– Increased IT costs: Unlike big companies, traders and kirana shops might face challenges in affording proper IT trained people to take care of the security and network issues arising in the online business
– Lower customer satisfaction : Frequent delays in delivery, supply of defective products etc could result in lower customer satisfaction
Traders should consider the advantages and disadvantages of online marketplace and how they might apply to their current business goals and where they would want to see their retail business in the future. If we look beyond the border into China, we can see the turnaround that Baidu and WeChat have brought to day to day life of the small trader. Reliance and Facebook seem to indicate similar revolution through WhatsApp in the India scenario. Every decision comes with its trade-offs and risks. Traders should evaluate their business plan, company goals, and at the potential impact on bottom line to decide how the online marketplace could be right for them.