E-commerce industry to grow at 60% in 2018

India’s online shopping industry is estimated to grow at 60 per cent to about $28.5 billion in terms of gross merchandise value (GMV) in 2018, according to a report.

The e-commerce industry is expected to return to high growth next year as large players such as Amazon, Flipkart and Paytm Mall begin to look beyond the 20 million customers who shop online on a monthly basis. Industry analyst RedSeer Consulting pegs the online shopping industry’s growth at 23 per cent to $17.8 billion in 2017.

“Once Flipkart raised money, they began spending aggressively and going after market share growth, prompting Amazon to follow. If you see growth this year, it was much higher in the second half compared to the first half. This strong growth in the second half will be the base for growth next year,” said Anil Kumar, chief executive officer, RedSeer Consulting.

While Flipkart’s growth had slowed due to unavailability of funds in 2016, a bigger detriment to the industry growth was delivered by Snapdeal. The erstwhile number three player saw negative GMV growth, which pulled down the overall industry growth.

Entering 2017, this slow growth hampered the first half of the year, until Flipkart raised $1.4 billion led by Tencent and $2.5 billion from Softbank. Now with sufficient funds, the company is once again turning on the heat and is looking to expand the base of online shoppers in the country.

RedSeer estimates that only 20 million people in the country shop online on a monthly basis. That figure swells to 90 million if we look at the number of people who shop online at least once a year. Beyond this, there’s a base of about 150 million people who are connected to the internet but have not shopped online yet.

“If you ask me, the large e-commerce players will go after this untapped segment of buyers. What will they have to do to bring them online? They’re going to have to improve trust, provide the right value and have the right kind of products listed on their platforms,” adds Kumar.

Going after first-time buyers would supersede the need to get existing customers to buy more frequently in 2018, the contrary of what happened in 2017. While this doesn’t mean that Amazon and Flipkart would stop trying to get repeat customers, the amount of attention and resources spent on it would be far lesser than reaching new customers.

The top online shoppers in India continue to be locked in metros, but if these companies want to reach new customers they will have to invest heavily in logistics, warehousing and coming up with new models. In 2015 and 2016 e-commerce firms solely relied on discounting to get more customers to shop from them, but after experiencing the ills of that model of growth, none are expected to return to that.E-com industry to grow at 60% in 2018

How Indian E-Commerce Industry Plans to Overcome Existing Challenges in 2018

India's start-up unicorn list sees three e-commerce players marking their spot. They have played an important role in boosting the start-up ecosystem of the country. However, their growth stories are filled with twists and turns. Reports of losses even while they continue to grow, have had many experts question the journey of these start-ups.

The challenges faced by the Indian e-commerce industry are not new. Even then the segment caters to the second largest market in the world. As the players continue to grow, venturing into newer aspects and finding better avenues for customer acquisition, Entrepreneur India spoke to experts about how the sector plans to jump the hurdles that come its way in 2018.

E-commerce currently focuses on two major things for customer experience - offering the lowest prices and fastest shipping. However, factoring in both these elements also makes it difficult for e-commerce players to work towards profitability. Saahil Goel, CEO, and Co-founder, Kraftly, believes that while doing this, entrepreneurs often end up concentrating on a few thousand large distributors and manufacturers who eventually gain success or achieve their goals from online sales. He believes that in this rut, e-commerce players forget about the SMBs who hold an unique and diverse inventory. They could bring their entrepreneurial spirit to commerce and could offer a more direct and cordial customer experience. And that's where they need to focus on in 2018 - build e-commerce by enabling sellers from all available channels.

"There are new demand channels such as Facebook, Google, and Whatsapp that house the next 100M digitally enabled Indian consumers. By enabling long tail sellers to reach these new set of buyers, e-commerce players can create a new wave of trade that currently happens largely through traditional channels," said Goel.

Customer Acquisition With Unique Offerings

The Indian e-commerce users still prefer cash-on-delivery for most orders. But with demonetization and GST has come the increased drive for digital payments. More and more consumers from beyond Tier I and Tier II cities will look at digital transactions for their online orders. Sujayath Ali, CEO and Co-Founder Voonik.com, believes that 2018 will see a higher number of prepaid offers as compared to the previous years. "The overall increase in the prepaid percentage will improve the experience for the customer and will reduce a lot of wastage for ecommerce players. Now, all we need is to be prepared for the transition by providing smooth checkout processes and having better payment processes," said Ali.

But there's more to e-commerce than just the payments. The payment comes right at the end of the user's complete shopping experience, what the user also needs is an easier interface to shop online. Ali believes that they can make the experience better by making it language-agnostic. "A new customer from a rural area should be able to easily understand the offerings, compare the prices and place an order," he said.

Agreeing with Ali, Goel too believes that one of the biggest challenges of e-commerce business is ensuring customer loyalty and driving repeat purchases. Goel goes on to say that e-commerce companies should focus on creating unique experiences for their buyers and offering a core value proposition - either by way of unique inventory, a hyper-personalized buying experience, opening new categories, or by introducing whole new ways of shopping online. "While commoditized-need-based products have dominated a large share of GMV in the last few years, a huge unstructured lifestyle catalogue is yet to be discovered online and will set the trends for shopping in the years to come," he said.

Greater technology could come of use in this subject, believe most experts. Arup Das, Manager Ecommerce, RIVERSONG, said that the e-commerce segment will see more and effective use of Artificial Intelligence. This will help brands to reach out to a targeted audience, with lower bid prices.

Cross-border Business Will Grow

Given that India is the second largest market for e-commerce, globally renowned players have been making their way into the country. This has resulted in a higher competition between foreign players and the homegrown entities. Goel believes that there is also a benefit to this. "Companies can focus on creating a bridge between the massive supply available overseas and the sellers in India," he said. According to him, there are several areas such as logistics, imports, payments and multi-channel marketing that will create win-win opportunities for all stakeholders in inward cross-border trade.

Ecommerce plays a major role in making India the only market of growing paper consumption

Come New Year, MNM Triplewall Containers, maker of packaging boxes, will set up the third of its series of unique warehouses. The USP — catering to a single customer in a single industry, ecommerce. 

This dedicated warehouse is located next to one belonging to an ecommerce giant, though Manish Gupta, director of the 25-year-old Bengaluru-based firm, shies away from sharing client identity. 

Triplewall’s 10,000-sq feet Hyderabad store opened six months ago — again next to the warehouse of the same ecommerce major — and ships 5 lakh boxes a month. The boxes come in all shapes and sizes — to fit mobile phones, laptops, microwaves, large screen TVs, cricket bats, quilts, pen drives…you name it. “Every product that is shipped by ecommerce has to be repacked, both with paper bills and boxes. We make the boxes,” says Gupta. 

His company supplies 2 million boxes a month to online marketplaces. Another company, Oji India, part of Oji Holdings Corp, a $13-billion Japanese maker of paper products, started operations in India in 2012. From January 2018, Oji India will start making boxes for the ecommerce sector.Major suppliers aside, there are hundreds of smaller players too making boxes for ecommerce. 

Industry estimates suggest Amazon and Flipkart — top two players in the $17-billion ecommerce sector — consume 1,200-1,400 tonnes of paper that goes into making boxes and printing bills. And the future looks bright — “Demand for paper and boxes will grow in tandem with growth of ecommerce,” points out AS Mehta, president, JK Paper. 

Sanjay Singh, divisional chief executive, paperboards and specialty papers, ITC, says, “Even though ecommerce is transacted electronically, it cannot be envisaged without use of paper and paperboard for actual delivery.” Singh affirms that demand is growing rapidly but says it’s difficult to put a figure to it. 

LET’S BOX IT Large suppliers such as ITC and JK Paper do not directly cater to end customers as corrugated boxes need to be customised and sold, a process undertaken by firms such as MNM Triplewall, Coropex (near Jaipur), Shailaja Papers and Oji India. 

For customised boxes, smaller firms buy raw material, kraft paper, from large suppliers such as Ruchira Papers or Astron Paper and Board Mill. (Astron’s public issue closed on December 20). These suppliers, in turn, get imported scrap from Europe and the US and mix it with the locally procured version — crushed and converted to pulp — to make paper board. 

According to Kirti Patel, CMD, Astron, there are 250 carton makers with automatic machines and 10,000 with semi-automatic presses. “Ecommerce comprises 12-15% of demand, which was practically non-existent five years ago,” says Patel. Driven by ecommerce growth of around 15% a year, India is the only market where paper consumption is increasing — 6-7% annually. “This is not seen in any other large economy on a sustained basis,” says ITC’s Singh. Paper and carton demand will expand as etailers multiply, concurs Jatinder Singh, chairman, Ruchira. 

For Amazon and Flipkart, the demand for paper has almost doubled in the past three years and will see similar growth in the next three to five years. Flipkart works with 40 carton suppliers and, despite a focus on going paperless, it expects demand for boxes to keep growing. Amazon declined to share supplier details, but its spokesperson says, “We procure cartons from the closest point possible, which helps minimise transport time and costs and grow ancillary industries around our place of business.” 

Paytm, Myntra, Jabong, FreshMenu, BigBasket, Grofers and the innumerable other such firms have seen significant demand uptick for brown bags, boxes, paper. 

packaging, which it shares with carton and paper suppliers to improve quality. Besides, it supports vendors with data analysis, which helps them design for multiple SKUs across 1.6 million products on its marketplace. The customer is not charged for packaging; neither does the marketplace pay. It’s the seller who bears the cost. So, a laptop’s packaging could be Rs 35-40 and a power bank’s around Rs 10. 

Even for bills, white paper is bought by ecommerce companies via resellers. “Ecommerce companies buy separately so we can’t pinpoint demand. But they have contributed significantly to growth. In fact, to cater to billing needs, we introduced A5 paper (half of A4 size) about six months ago,” says Mehta. 

PACK IT UP Proximity to ecommerce warehouses is a key to tap this growing opportunity. Ergo, not all carton suppliers are able to benefit from online shopping. For instance, Delhi-based Shailaja Papers didn’t find it viable due to logistics issues — there’s no ecommerce warehouse close by. On the other hand, for Neemrana-based Coropex, run by Ashok Chaudhary, about one-fourth of box demand comes from ecommerce, doubling from a year ago. Other paper and carton buyers include FMCG, automobiles and electronics companies. For Triplewall, online marketplaces are its second-largest customers after FMCG companies. 

According to IIFL research, the Indian paper market will outpace the global industry. It notes that over FY17-21, industrial paper, recycled fibre-based packaging boards and copier paper segments are expected to witness healthy performance. The packaging boards segment, especially, is expected to post robust volumes on account of increasing demand from ecommerce and FMCG. Kraft paper or cardboard volumes are expected to increase from 4.8 million tonnes in FY17 to 6.7 million tonnes by FY21. 

ITC’s Singh also sees India’s per capita consumption of paper increase from 13 kg to 17 kg in the next few years, though it’s still far below the US and Europe average of 56 kg or Asian average of 22 kg. “Increasing demand for packaging materials such as cartons and envelopes will enhance sectoral prospects,” adds Singh of Ruchira Papers. 

There’s plenty of headroom for paper growth, as ecommerce is less than 4% of the $500-billion retail and more shoppers are coming online. New, ecofriendly packing of online orders may not be far way. As consumption increases (like in the US or Europe), people end up discarding their own weight in packaging every 30-40 days, notes to a Stanford University study. That’s a great outlook for paper box makers — at least till the environmentalists come knocking. 

‘E-commerce market may cross $50 billion mark in 2018’

While 65 per cent of online shoppers are male, 35 per cent are female. File photo

In 2017, 82 per cent of shopping queries were made through mobile devices, according to Assocham-Deloitte study.

MUMBAI, DEC 25

The digital commerce market in the country is expected to cross USD 50 billion in value by the end of 2018 from the current level of USD 38.5 billion, on the back of a growing internet population and increased online shoppers, says a recent study.

The digital commerce market in India has grown steadily from USD 13.6 billion in 2014 to USD 19.7 billion in 2015, as per a joint study conducted by Assocham and Deloitte. The increasing mobile and internet penetration, m-commerce sales, advanced shipping and payment options, exciting discounts, and the push into new international markets by e-businesses are the major drivers of this unprecedented growth, it said.

Banks and other players in the e-commerce ecosystem are providing a secured online platform to pay effortlessly via payment gateways. However, it pointed out that the Indian e-commerce sector is heavily dependent on the cash on delivery (CoD) mode of payment as it is the most preferred choice for Indian consumers due to lack of trust in online transactions, limited adoption of credit and debit cards, and security concerns, among others.

“More than 50 per cent of online transactions are done on cash on delivery method and it is available across 600 cities and towns of India,” the joint study pointed out.

increase in revenue

On the increase in preference of mobile transactions, the study said one out of three customers currently makes transactions through mobiles in tier-1 and tier-2 cities. In 2017, 82 per cent of shopping queries were made through mobile devices, compared to 76 per cent in 2016, added the study, indicating the increasing mobile transactions.

The survey highlights that 28 per cent of regular shoppers are in 18-25 age group, 42 per cent in 26-35, 28 per cent in 36-45 and 2 per cent in the age group of 45-60. While 65 per cent of online shoppers are male, 35 per cent are female. "The products that were highest sold in 2017 included mobile phones, apparel, food items and jewellery, among others," it said.

As per the study, there would be more than a seven to ten fold increase in revenue generated through e-commerce as compared to last year with all branded apparel, accessories, jewellery, gifts and footwear available at cheaper rates and delivered at the doorstep.

New norm for e-commerce firms to sale products kicks in from Jan 1

The government on Friday said all e-commerce entities will have to display the exact Maximum Retail Price (MRP) of their packaged products such as mobile phones, electronic goods and other consumer durables and non-durable items from January 1 both on the online platform and on the products as well.


They will also need to mention the name of the country where the products are manufactured or assembled. “The e-commerce companies will have to comply with the new rules. They are free to offer discounts. But the declarations have to be transparent for consumers to get the details,” consumer affairs minister Ram Vilas Paswan said on the sidelines of an event marking the National Consumers Day. 

A ministry official said these norms have been made mandatory after receiving complaints that some of the e-commerce companies don’t show the exact MRP while offering huge discounts to attract consumers. “There are cases of e-commerce companies in mobile phone sector not providing items such as earphone while selling their items. The MRP quoted on the website will have to be mentioned on the packets as well,” he added.

The consumer affairs department has brought in amendments to the Legal Metrology (Packaged Commodities) Rules, which also bans the practice of dual MRP for the same product for all packaged items.

The companies can put barcode or QR code and e-code for net quantity assurance. They are also free to use government initiatives such as Swachh Bharat on the labels of their products.

“We had given have six months time to companies to put things in place. However, after getting representations from industries that they have huge inventories of old labels, we have allowed them to exhaust their stocks by March. The relaxation is only for them. E-commerce companies will have to follow the new norms from January 1,” said consumer affairs secretary AK Srivasatava.

DHL's e-commerce logistics arm to start India operations soon

Deutsche Post DHL’s (DPDHL’s) dedicated ecommerce logistics arm is starting operations in India, two people in the know said, as a booming online retail industry, the implementation of goods and services tax and the recently given infrastructure status to the logistics industry promise massive growth potential. 

DHL eCommerce, which has made investments in India since 2014 through parent DPDHL’s Blue Dart Express subsidiary, will now have its own presence here. 

“DHL eCommerce is actively hiring for the top management in its planned India team. The CEO has been hired. Another 4-5 positions have been filled. The company aims to launch its India operations by March,” one of the people said. It hired Reliance Jio Infocomm’s former chief marketing officer, Neeraj Bansal, as the local chief executive. Before Reliance Jio, Bansal was regional sales head at Google. Most recently, he was managing director of India and South Asia at AdParlor. “In India, DHL eCommerce will work with Blue Dart rather than competing with it. There is enough space and segments in the ecommerce industry for them to coexist,” said another person. Both people insisted anonymity. 

Post-ecommerce-parcel is one of the four key divisions of DPDHL, the world’s biggest logistics company. The other three are express, global forwarding and supply chain. DHL is the only major global company to have a dedicated, separate entity for ecommerce logistics. 

“India is an important and strategic market for DHL and we will continue to invest and transform our logistics presence to keep up with the growth momentum we see. We are constantly looking for ways to grow our service offerings for our customers, and will be happy to share details when new developments arise,” said a company spokesperson. 

DPDHL's plans can be seen as part of its efforts to step up business in this segment — its fastest growing — outside of the company’s stronghold in Europe. 

“Ecommerce activities were stepped up outside of Europe, in part through logistics centres in the United States, Mexico and India and through last-mile delivery in Thailand,” DPDHL said in its earnings release for 2016. 

The ecommerce industry in India is estimated to grow at a compounded annual growth rate of 30% to $200 billion by 2026 in terms of gross merchandise value (GMV), according to a recent report by Morgan Stanley. GMV is the total value of goods sold. 

Efficient logistics, supply-chain management and transportation are key to the success of the ecommerce industry. 

Logistics companies in India are expanding their ecommerce arms fast to cater to the growing demand and in some years aim to exponentially grow their revenue from this segment. 

The firms are also facing tough competition from ecommerce giants such as Amazon and Alibaba that are spending billions in setting up their own logistics and supply chain network. 

Two government moves this year are expected to give a fillip to the logistics industry. 

The government made a historic tax overhaul from July 1 that replaces several indirect tax heads, including countervailing duty, special additional duty of customs, excise duty, service tax, central sales tax, value-added tax, octroi and state cesses with one tax on goods and services. 

The government also conferred infrastructure status to the logistics sector on November 21, which means any more investment in infrastructure — like warehouses and cold-chain storage — would get cheaper financing from banks. 

The Bonn-based group posted revenue of €57.3 billion, of which post-ecommerce-parcel contributed the biggest chunk at €16.8 billion. The division was also the highest contributor to earnings before taxes, even as ecommerce revenue grew at the fastest at 12.5%. 

The group is planning a four-year investment of more than €250 million in India, its biggest bet yet on the world’s fastest growing major economy, CEO Frank Appel had told ET in an interview earlier this year. 

Appel had said the investment would be made in various tranches and in all its four business segments. 

India Submits Formal Document Opposing Ecommerce Talks At WTO

India has for the first time submitted a formal document opposing any negotiations on ecommerce at the World Trade Organisation (WTO) to be held next week in Buenos Aires.

Quoting an undisclosed official close to the development, an ET reportstated, “We didn’t have an official stand in writing. Now, India has clearly stated its consistent stand that it is not in favour of doing anything beyond the work programme.”

The country has said that it would “continue the work under the Work Programme on electronic commerce based on the existing mandate and guidelines”, referring to the programme on ecommerce adopted by the WTO countries in 1998.

India has maintained that ecommerce per se may be good for development but it may not be wise enough to begin talks since many countries don’t fully understand the implications of negotiating binding rules.

India’s submission comes ahead of the key ministerial conference of the WTO next week where it is expected to face pressure from many countries to begin talks to open cross-border digital trade.

Ecommerce entered the WTO in 1998, when member countries agreed not to impose customs duties on electronic transmissions. That moratorium has been extended periodically. But since last year, many countries have made submissions on various aspects of digital trade such as cross-border data flows, server localisation, technology transfer, source code, consumer protection, intellectual property rights and trade facilitation aspects of ecommerce.

So while the US last year made a proposal on ecommerce prohibiting digital customs duties, enabling cross-border data flows, promoting a free and open Internet and preventing localisation barriers, China wants easier norms for goods ordered over the Internet but physically delivered. Similarly, the European Union, Japan, Korea, Pakistan, Nigeria and Singapore too want outcomes in ecommerce disciplines.

Thus few countries are pushing to secure a mandate to initiate comprehensive negotiations on ecommerce. In the run-up to the WTO conference next week, some countries want to convert this temporary moratorium on customs duty on electronic transmissions into a permanent one. As per an undisclosed official, this could result in loss of revenue as more products and services get delivered through electronic transmissions. Additionally, absence of customs duty could adversely impact the domestic manufacturing sector. As per a recent report by Morgan Stanley, the ecommerce market in India is poised to reach $200 Bn by 2026, expanding at a compound annual growth rate of 30%. According to data provided in the report, the country is currently home to 100 Mn online shoppers, a figure which will see 50% increase in the nine years.

Amazon India Reports Over 105% Revenue Growth In FY17

At a time when Flipkart’s valuation has been marked up by one of its investors Morgan Stanley, the Indian arm of global ecommerce behemoth Amazon has reported over 105% growth in revenue in FY17.

As per filings with the Registrar of Companies (RoC), Amazon Seller Services posted a 41% increase in earning to $485.4 Mn (INR 3,128 Cr) during the said period. Amazon Seller Services currently earns through commissions, advertisements and shipping fees.

Recently, in the third week of November, Amazon India issued paid-up capital of $2.7 Bn (INR 17,839 Cr) towards its marketplace arm Amazon Seller Services, as per its regulatory filings.

Commenting on the feat, a spokesperson for Amazon said, “Comparing like-to-like, the Amazon Marketplace revenue in India grew by 105% for the year ending March 31, 2017. The Annual Returns filings include other line items.”

In addition to earnings from the marketplace and seller commissions, Amazon India currently generates revenue from its Seattle-headquartered parent by way of advertising fees, royalty on sales of Amazon’s in-house brands like Kindle and other transactions.

As per industry experts, the ecommerce giant’s impressive growth can be attributed, in part, to demonetisation which was instituted in November 2016. Speaking on the matter, an online seller on Amazon requesting anonymity said, “Last fiscal, the impact on Amazon was across categories -smartphones to electronics to apparel. These are the largest selling and fastest growing segments in e-commerce.”

According to some, however, Amazon’s growth in sales slowed down considerably after the Indian government’s Department of Industrial Policy and Promotion (DIPP) cautioned online marketplaces against deep discounting in April 2016.

A report by Hong Kong-based Counterpoint Research, for instance, states that the online sales of smartphones and other gadgets stagnated last fiscal after a three-year period of steady growth. Online smartphone sales increase merely by one percent to 32% in 2016, which the study ascribed to demonetisation, lower discounts and uniform pricing across online and offline platforms.

Another factor that has contributed to the slowdown pertains to the new FDI guidelines issued by the DIPP last year. Formalised in March 2016, the stricter guidelines on ecommerce dictate:

• An ecommerce entity would not permit more than 25% of the sales effected through its marketplace from one vendor or their group companies.
• Ecommerce entities providing marketplace would not directly or indirectly influence the sale price of goods or services and shall maintain level playing field.

Consequently, Amazon India’s biggest seller Cloudtail stopped the sale of mobile phones on its platform in September 2016. Prior to that, smartphones contributed towards a significant portion of Cloudtail’s revenues. As per the earning report posted recently, Cloudtail recorded a 24% jump in its revenue for FY17, showcasing a net revenue of $883.1 Mn (INR 5,688.7 Cr).

However, this is significantly less compared to the 300% surge to $712 Mn (INR 4,586.9 Cr) the vendor reported in FY16. Cloudtail currently competes with Flipkart’s biggest vendor WS Retail, which posted a net revenue of $2.16 Bn ( INR 13,921 Cr) in 2016. The financial report for FY17 has not yet been filed by Flipkart.

Most recently, with the implementation of Goods and Services Tax (GST) in April 2017, Amazon India also had to suspend its invite-only Platinum Seller Program (PSP).

While changing regulations are making it more difficult for ecommerce platforms to sustain business growth, Amazon remains focussed on its aim to capture the Indian market. To that end, the online marketplace recently doubled its authorized capital to $4.74 Bn (INR 31,000 Cr), matching its earlier capital commitment of $5 Bn made in June last year. With the goal of getting ahead of rival Flipkart, the company is also doubling down on its efforts to diversify its business.  On the one hand, it is getting ready to enter the online food retail and grocery market, while on the other hand, it is eyeing a piece of the Indian digital payments pie with Amazon Pay. The strategy seems to be working, given that it clocked over 105% growth in FY17.

Strict FDI rules take a toll on Amazon’s largest seller Cloudtail

Amazon India’s largest seller Cloudtail crossed the Rs 5,000 crore sales mark in the year to March but growth tapered off significantly, indicating its fading role as the company seeks to comply with foreign direct investment (FDI) rules on marketplaces.

The government said last year that it will not permit a single vendor to account for more than 25% of sales on an online marketplace that has overseas investment.

Cloudtail, a joint venture between Amazon Asia and Infosys founder Narayan Murthy’s personal investment vehicle Catamaran, posted over a 24% jump in revenue to Rs 5,688.7 crore in FY17, according to its annual return. 

That’s against a 300% surge to Rs 4,586.9 crore in the previous year when it accounted for over a third of the sales on Amazon's shopping platform in India. 



“With the restriction, it was very clear that growth had to be moderated. But Amazon would still prefer to channel their goods through a seller where they can control margins and inventory,” said Devangshu Datta, CEO, Third Eyesight, a consultancy firm. Amazon India declined to comment. Cloudtail didn’t respond to an email. 

Cloudtail's numbers pale in comparison with Flipkart's biggest seller WS Retail, which posted sales of Rs 13,921 crore for the year ended March 2016. It hasn't filed a financial performance report for the last fiscal yet but Flipkart has also been reducing its dependence on the seller, in which its founders used to own a stake.

After the government's guideline, which ecommerce companies had to comply with by March 31, 2017, Cloudtail almost stopped selling mobile phones a year ago but continued with Amazon private labels in India. Smartphones constitute the largest category of India’s ecommerce sales and formed a big part of Cloudtail’s overall sales in previous years.

“With the smaller pace of growth by exiting smartphones, Cloudtail will surely comply with the FDI norms of one seller accounting for 25% of total transactions at Amazon last fiscal itself,” an executive said.

Another seller said Cloudtail’s gaze is on consumables such as FMCG, nutrition, apparel and televisions, which are the next focus areas for Amazon. Personal care, baby care and nutrition are also of interest. It currently sells Amazon exclusive television brands like TCL, Sanyo an .. 

India for status quo on e-commerce negotiations at WTO

In a move that formally counters efforts by members such as the EU, Japan, and Canada to push negotiations on e-commerce at the World Trade Organisation’s ministerial meet in Buenos Aires, India has circulated a draft ministerial decision stating that work should continue as per the current work programme based on “existing mandate and guidelines’’.

“India decided to be pro-active by circulating its own draft on e-commerce ensuring no changes in the current structure of discussions. This was needed to counter several developed members, including the EU and China, that are trying to move beyond the existing work programme and setting the tone for commencing negotiations,” a government official told BusinessLine.

Last month, a group of countries, which included the EU, Canada, Australia, Chile, South Korea and Paraguay, circulated a draft declaration seeking to establish a working party at the Buenos Aires meet and authorising it to conduct preparations for and carry out negotiations on trade-related aspects of electronic commerce on the basis of proposal by members.

“There is no way we can allow negotiations on e-commerce rules to begin at the WTO. It could be disastrous for our country as it could lead to goods coming in without duties through online trade. We want status-quo on e-commerce and that is what we have sought,” the official said.

The eleventh Ministerial Conference of the WTO in Buenos Aires from December 10 to 13 will be attended by Commerce and Industry Minister Suresh Prabhu.

In its draft ministerial decision on e-commerce circulated to all members recently, India has clearly indicated its opposition to move away from the current work programme and the existing mandate under which e-commerce discussions are taking place.

It also instructs the General Council to hold periodic reviews in its sessions in July and December 2018 and July 2019 based on the reports that may be submitted by the four WTO bodies entrusted with the implementation of the Work Programme and report to the next session of the Ministerial Conference.

“We have no issues with discussions continuing on e-commerce as originally mandated and our draft declaration reflects this position,” the official said.

A draft declaration is a proposed agreement that could become an actual declaration if enough members agree with it and relevant changes are made to it to suit all. India’s position is shared by a large number of developing countries and LDCs, including the African Group.

India has also said that a call on the moratorium on electronics transmission should be taken based on the moratorium on TRIPS Non-Violation and Situation Complaints. While the moratorium on electronics transmission allows duty-free imports till the period continues, the one on TRIPS Non-Violation disallows disputes to be filed if TRIPS provisions have not been violated. So far, both moratoriums have been given extensions together.

“Both the moratorium on e-transmission and TRIPS runs out this December. We can support extension of the one on e-transmission if there is no objection to the extension of the moratorium on TRIPS Non-Violation,” the official said.

Global investors heading to India are beginning to make a stopover at Bangladesh

When Waseem Alim, a Wharton graduate, decided to move back home in 2013 and launch an ecommerce company, there was zero buzz around startups on the streets of Bangladesh. Alim hoped to change that. “I realized I had skills that could be used to start a technology-based company in my home country,” he recalled.

From studying online retailers in other countries, Alim realized discounts were a major driver in convincing people to shop online. That, however, would mean high cash burn, not something an internet company in Bangladesh could afford.

So Alim decided to instead start an e-grocery company, which he named Chaldal. “Grocery demands loyalty because of its nature of repeat purchases,” said Alim. Given capital Dhaka’s notorious traffic, a grocery-delivery business made immense sense.

Since then, Chaldal has been a part of the prestigious startup incubator Y Combinator and received an investment from early-stage venture fund 500 Startups. The company’s current annual gross sales, or gross merchandise value, are estimated at $5 million, growing at over 100% every year. 

The rollout of 3G internet in Bangladesh 3-4 years ago led to rapid adoption of online shopping there. The country’s e-tailing sector is expected to grow 70% in 2017, according to RedSeer Consulting. Internet penetration to 40% of Bangladesh’s 165-million population has bolstered the growth of local ecommerce, F-commerce (merchants conducting online business through Facebook pages) and e-grocery startups.

Rocket Internet-backed online marketplace Daraz, Foxconn-backed e-retailer Pickaboo, and Chaldal are among the leading startups in this fairy nascent ecosystem. The size of Bangladesh’s ecommerce market is estimated to be $110-115 million this year, which is a mere 0.7% of the country’s total retail market, according to RedSeer Consulting. To put that in perspective, India’s ecommerce market is estimated to cross $17 billion this year.

The size of Bangladesh’s egrocery market is much smaller at $4-5 million, or about 0.03% of the country’s overall grocery market. Even so, analysts are predicting that Bangladesh’s ecommerce market will surge to $20 billion by 2020, by when, according to Goldman Sachs, India’s online retail market is expected to reach $69 billion.

Bangladesh’s ecommerce market is “nascent but growing— similar to what India was probably seven years ago. It’s a good time for ecommerce players to be entering,” said Shalini Prakash, venture partner at 500 Startups, which has invested in more than 50 companies in India since 2011.

“We are a global fund. So we are looking at founders and startups that are looking to solve interesting problems across the globe for the local market.”

Daraz, founded in 2014, dominates Bangladesh’s ecommerce market, selling electronics, mobile phones, large appliances and apparel. The company is growing at double-digit percentages every month, supplying to customers in neighbouring markets Pakistan, Sri Lanka, Nepal and Myanmar as well.

The opportunity in Bangladesh prompted Delhi-based digital marketing company MoMagic Technologies to launch Pickaboo there last year. “The Bangladesh ecommerce market is close to five years behind the Indian ecommerce market and is around 10-12% of the size of the Indian ecommerce market,” said Arun Gupta, chief executive of MoMagic. “We identified Bangladesh as a potential opportunity and decided to launch Pickaboo.”

Pickaboo, which clocks monthly revenues of $600,000, mostly sells electronics on its controlled marketplace and has plans to add leather accessories shortly.

“When Flipkart was launched, they started selling books first— a category where what you see on the marketplace and what you receive is the same. In today’s world, electronics fall under this category with the probability of difference being low,” said Gupta, adding that Pickaboo has a 20% share of Bangladesh’s ecommerce market. 

International Finance Corporation (IFC), the private sector lending and investment arm of the World Bank, has been tracking Bangladesh’s entrepreneurial ecosystem the past year and is bullish about the market.

It has shortlisted and is actively monitoring 43 startups, including Chaldal topping the list as a potential investee company. 

Chaldal, somewhat similar to India’s largest e-grocer Big Basket, delivers groceries using a network of small warehouses spread across Dhaka. “We launched Chaldal because we felt that there was a need to offer more variety of groceries to our customers,” said CEO Alim. “As the country develops there is a need to provide services that save time for the growing middle class.”

Chaldal competes with Direct Fresh and Meena Click, the online extension of Bangladesh’s 15-year-old supermarket chain Meena Bazaar. Specialising in groceries and personal care products, Meena Click was launched three years ago. The company, which handles 4,000-4,500 orders a month in Dhaka and the port city of Chittagong, said it has doubled its business over the past year.

“The grocery market is huge with limited superstore penetration and we feel that the online model would help us achieve scale that no other player in the market has,” said Alim. The online grocery startup reached out to its counterparts across the world, including Indian companies Big Basket and Grofers, to exchange notes. “The learning has mostly been around what (Big Basket and Grofers) think is important to customers— tradeoffs between quality, speed, etc.,” said Alim.

This also led to a realization that despite the geographical proximity, Bangladeshi startups operated in a different environment.

“Indian players have been able to use capital to get a starting boost. Grofers, for example, for fast-growth by spending on marketing, while Big Basket invested heavily in operations and getting quality right,” said Alim. 

Another aspect about this nascent ecommerce market is that of the total online spending by customers, which is estimated to be about $50 million, 40% of the transactions are through 15,000 small merchants selling through their Facebook pages.

Bangladesh’s ecommerce “ecosystem, instead of developing around one or two big players, has several smaller merchants who sell online,” said Ruchira Shukla, regional lead, South Asia, venture capital, at IFC, which is also an investor in India’s biggest online grocer Big Basket.

Due to Bangladesh’s rapidly growing economy and urban population, IFC believes now is the right time to make some early bets in the country’s startup ecosystem. “The metrics point to healthy growth in Bangladesh… We are looking at some earlierstage investments than what we do in India—most likely at the series-A level financing along with other investors,” said Shukla. 

Bangladesh also has the advantage of a large and homogenous population of 165 million. Because of this, “once the business model is figured out, it can be scaled across several cities and the entrepreneur doesn’t have to worry about differences in language or culture,” Shukla said.

That said, Bangladesh has fewer large and dense cities when compared with India, which poses tough limitations to growth by expansion. 

The market is fraught with several other challenges too. “Logistics and the transportation system are still challenges in Bangladesh,” said a spokesperson for Daraz, which said it has the largest delivery network in the country, with its own fleet operating in 20 cities. “Also, the stagnant traffic hampers fast delivery of products.” 

Educating customers is also an uphill task. Alim recalled being at the receiving end of “a lot of snarky remarks related to a Wharton education going to waste on becoming a grocer. People still think that I might end up doing something ‘real’ later in life.” Consumer brands, too, used to be skeptics. “When we started Chaldal, we could not find good pictures of the products we were selling (for a catalogue) and companies like Unilever were not helpful in providing us with pack shots,” said Alim.

Then, he had his light-bulb moment.

The Chaldal team rented out a small grocery for two hours to click pictures of all the items it stocked to build their online catalogue.

“Basically, we paid some money to keep the store open for an extra two hours and set up a photo studio inside. The pictures looked horrible but at least we got them up on a website.” 

Another big challenge lies in how to turn around the market despite a shortage of capital. This has forced some companies to resort to capital-efficiency to survive.

“Part of the capital-efficiency comes from us having very little capital available in the ecosystem— we have had to innovate significantly beyond the practices in the Indian market,” said Alim, who took inspiration from Big Basket’s warehouse to start their own in Dhaka. Chaldal now has five small warehouses and one sourcing hub in Dhaka.