With 2016 projections of 67% year-on-year growth in e-commerce revenues and 11% year-on-year growth in number of mobile internet users, India is one of the hottest e-commerce markets at the moment. As ViSenze is working with renowned e-commerce players in India like Flipkart, Caratlane, Bluestone and Roposo, we’ve asked our Business Development colleagues, Vasanth Raju and Raj Sawhney, to help us build a full portrait of the local e-commerce market and the forces that drove its shaping.
A tech innovation DNA
According to a study by LinkedIn, San Francisco was not the only city experiencing a tech boom in 2013. In fact, four of the top five cities where technology professionals moved to in 2013 were in India: Bangalore, Pune, Hyderabad and Chennai. India has a strong culture of tech and innovation. It has lots of local technical talents, so there is no need to “import” foreign talents. All the opposite, the latest trend is the big e-commerce players in India bringing back home Indian tech talents that were living and working in reputable Silicon Valley companies.
What we also noticed working with Flipkart, Caratlane, Bluestone and Roposo is that these companies have a very data driven approach to launching features, handling projects and evaluating technologies. This tech innovation and data driven approach DNA is a massive advantage for the Indian e-commerce ecosystem and it is something that other countries are struggling to replicate to the same extent.
While our visual search technology is perceived as a nice to have in certain markets and the conversations take longer time, we noticed a massive traction in India because innovation is rapidly embraced. Even more, these Indian e-commerce companies are driving innovation for our technology as well, by requesting features to help them stay ahead of competition and change user behaviour, and by supplying data to us to be able to fine tune.
Organised retail was never a thing in India. Unlike the US market that has established retailers like Nordstrom, JCPenney, Walmart and more, India has no equivalents. The big retail chains have a small market share, while mom and pop shops are very popular. E-commerce came into the picture aggressively in the past decade, transforming the way people shop in India. The launch timeline of e-commerce platforms targeting the masses starts back in 2007 with Flipkart, then we have Snapdeal starting to challenge Flipkart as of 2010, and we have the late entry of Amazon in India in 2013. These big 3 changed consumer behaviour and made e-commerce become mainstream.
Then a new wave of more niched e-commerce platforms came into the picture, catering for the needs unsatisfied by mass e-commerce platforms. Jewelry e-commerce came into the picture in 2008 with the launch of Caratlane, followed by Bluestone in 2011. Home furniture and home decor e-commerce has FabFurnish setting its flag into the Indian e-commerce space in 2011. Roposo, the social fashion network app where people can share looks, was launched in 2012. Limeroad, the community-based social e-commerce offering image collages of fashion sets similarly to Polyvore, came into the picture in 2012. Voonik, the personalised shopping platform with stylists recommending looks, launched in 2013. And the list can continue.
The next wave, happening now, is all about hyperlocal. This is basically turning into an advantage the fact that retail in India is disorganised and not concentrated into big chains. While companies like Flipkart and Snapdeal act as a marketplace for merchants, hyperlocal e-commerce companies allow mom and pop shops to sell online.
And the biggest trend of all, noticed at global level, is that in India e-commerce leapfrogged the web and went straight into mobile. With 60% of its internet users being on mobile as reported in June 2015, and with mobile-only strategies from some of the biggest e-commerce players, Indian shoppers are used to shop from smaller screens and on the go. All in all, according to Goldman Sachs estimates in a WSJ article, the size of Indian e-commerce market will be 228B by 2030 - that is 10 times higher than its size today.
Being pioneers shaping the e-commerce space in India, or simply fighting the bloody competition war on the quest of getting the biggest market share, these companies faced many challenges and managed to smartly overcome some of them.
One of the biggest issues for e-commerce companies in India was the internet infrastructure. With more than 350M internet users out of which 60% on mobile at the moment, India is still running on 3G networks. Flipkart put lots of effort into providing the best experience even on a slow network - for example, pushing our visual search technology to have low latency, and introducing Flipkart Lite.
However, there is an ongoing implementation of 4G networks in India at the moment, which should lead to massive leaps in internet usage and e-commerce adoption. We expect to see richer shopping experiences becoming mainstream due to this, like virtual try-ons, visual search, video commerce etc.
Another big challenge is the fact that the Indian consumer is not typically a loyal customer, and with a fierce competition between the local e-commerce companies, there is an unsustainable use of discounts at the moment. As the market matures and consumers are allured with great experiences, discounts will probably fade away though. Quite notably, a combination between the lack of trust and of high digital payment penetration also raised another challenge. Cash on delivery policy came to the rescue, with Flipkart pioneering the model in India. Even nowadays, almost 45% of online shoppers prefer cash on delivery.
Visual search - a must have
As far as we can tell, India is the first market that enters mainstream adoption of visual search, with e-commerce companies treating it nowadays as a must have, and not a nice to have anymore. In 2015 we’ve seen a rapid rollout of visual search on quite a few big e-commerce players in India. We started with Caratlane in March 2015, and then added Flipkart to our customers list in July 2015. Since then, most local e-commerce players took notice and we’ve started working with Bluestone and Roposo as well, and we’re in discussions with many others.
We’ve actually even entered the next stage: innovating for the super competitive e-commerce players in India. Driven by the ambition to stand out, these customers are helping us improve our product and offer differentiating features.
We’re expecting to see much more e-commerce innovation coming out from India. With a tech innovation DNA, an upcoming 4G network penetration, and a fierce competitive landscape, will probably see lots of nice to have technologies elsewhere already entering mainstream adoption in India. Our bet is on augmented reality for mobile shopping and shoppable visual content (both images and video).