Friday 23 February 2018

B2B ecommerce: How wholesale trade is getting disrupted in India with these startups

Online retail has changed the way urbanites shop in India. But the local kirana or cloth retail shop which used to consider e-retail as a rival is now logging on to the internet to buy their own wares.
The startup ecosystem has woken up to the huge potential of a USD 100 million addressable market for digitising the supply chain and procurement cycles of unbranded neighbourhood stores, wholesalers, and manufacturers.
Companies such as Wydr, ShopX, and lately the Jaipur-based B2B ecommerce startup WholesaleBox are building data-driven intelligence around the existing wholesale ecosystem, which is helping manufacturers and shopkeepers simplify processes, reduce costs, and widen discoverability across the nation.
These companies offer their marketplace to manufacturers, wholesalers, and retailers, across categories like fashion, home, automotive and electronics.
While Wydr has spread across multiple categories, ShopX deals with daily need products at kirana stores. WholesaleBox, on the other hand, deals only with fashion and lifestyle products.
“Shopkeepers have to be on top of latest fashion trends, ensure uniqueness of designs, and take care of prices. This creates several procurement problems like sourcing from different manufacturing hubs, buying bulk in credit because of limited cash flow, which leaves a lot of unsold inventory at the end of the cycle,” WholesaleBox founder Rohit Dangyach said.
Jaipur-based WholesaleBox caters primarily to the unbranded and regional brand goods market, which accounts for 90 percent of the market, and claims to procure goods at 25 percent lesser cost.
Incepted in 2015 by former IIT Roorkee-IIM Bangalore alumnus and a former CarDekho employee, Rohit Dangyach, WholessaleBox acts as a bridge between manufacturers and the shopkeepers, delivering products at their doorstep at 30% lower prices.
Mobile-based B2B marketplace Wydr, which recently raised an undisclosed amount in a fresh round of funding from its existing investors, is also strengthening its seller base, setting up pan-India offices and is looking at improving its product and technology stack to penetrate deeper in the Indian wholesale market.
“With a platform like Wydr retailers are no more restricted to the local wholesale markets. Neither do they have to travel a long distance to source directly from hubs. Sourcing in bulk from hubs and wholesale markets takes a lot of time and is an expensive affair,” Devesh Rai, founder and CEO of Wydr said.
Wydr was founded in March 2016 by Devesh Rai G, the former founding team member at ShopClues; Hitha Uchil (ex-JWT), and Varun Kumar (ex-Shopclues). It has over 10,000 registered wholesalers and manufacturers across categories with a catalogue size of over 700,000 products.
In a typical offline scenario, merchandise passes through several layers, each adding their own margins leading to an increase of 15-25 percent in prices at which a retailer will procure it.
This escalation of cost also makes online commerce such as Flipkart, Myntra, and Amazon unviable for the small retailers.
Convenient shopping and attractive prices are two arguments in favour of e-commerce.
But with high procurement costs, sellers find it difficult to reduce prices to match the lowest priced product online, without compromising on margins.
“They are forced to keep separate inventory for online and offline. Products that will give higher margin will land up online, compromising on quality. Many e-commerce players started with 10-15 percent margin, and now command about 40 percent, leaving no room for cost manoeuvring. Economies will not support in the long run,” Dangyach of WholesaleBox says.
That probably explains why Dangyach met with immense resentment from sellers and retailers in his first attempt to approach them to read the market. “The moment we would pitch WholesaleBox as an online entity, they would want to disengage. We had to work around our wording to convince them about our product,” he says.
Instead of creating a new infrastructure for the small sellers to create an online presence, strengthening the back-end supply chain and procurement cycles through technology is far more sustainable, according to Amit Sharma, co-founder and CEO of ShopX.
“The front end of small sellers and retailers has to be dealt differently. Force fitting a business that has no digital experience, onto a digital platform, will not work for them. We are building a digital layer around the existing set up and creating a shared economy scenario,” he adds.
Singapore-based Shopmatic, for example, has integrated several digital layers including FB messenger, WhatsApp, e-mail marketing, shipping, accounting, and consumer engagement tools, all in one app to create an online presence at the store level.
“Discoverability and customer loyalty are the two things that will make his cash flow sustainable. First, we make sure their listing is visible across several marketplaces. On the consumer front, we have enabled them with simple chat services for easy conversations,” Anurag Avula, co-founder and CEO of Shopmatic said.
These companies are also helping small sellers and retailers discover trade deals and new product information nationwide, which in turn helps them negotiate better prices, and be in tune with the trending products.
The wholesaler and manufacturer also have a lot to take away from companies such as Wydr and WholesaleBox.
With over one million retailers, Wydr provides wholesalers with an exposure to a bulk buyer base. Manufacturers and wholesalers are not restricted to their own region for business. They can sell to any part of the country without having to invest in sales.
“Manufacturers and wholesalers often sell on credit because of cash flow restraints of small retailers. This creates delays in payment cycles, which is a big pain point for them. There is also a lot of unused inventory lying with manufacturers which is eventually sold at throwaway prices, increasing overheads,” Dangyach of WholesaleBox says.
The company, including its peers, ensure a steady 15-day payment cycle to manufactures and wholesalers and maintains an active inventory listing online which is updated with each sale to avoid pilferage.
Manufacturers can also read simplified analytics on which geographical location is showing the most traction for which colours and patterns, and so on.
It's a win-win for manufacturers as they get visibility of cash flows and reduce risk of unstructured credit, thereby lowering costs and even improve their realizations.
Shops also get doorstep delivery, small and frequent supplies, trade assurance and tools to ramp up their offline sales.

Private labels pushing e-commerce firms to profitability

E-commerce firms such as Pepperfry, Myntra, ShopClues, Flipkart and Amazon are directing their focus towards private-label brands to garner higher margins and to fill gaps in customer needs, as revealed by search query algorithms on their platforms.
Online shoppers are lapping up these private labels, as evident from its increasing contribution to total sales, ranging from 12 per cent to over 50 per cent, in some cases.
Pepperfry, which has over the last five years built a portfolio of 9 private-label brands that contribute to nearly 55 per cent of its overall sales, has forayed into the 6,000-crore mattress market in India with the launch of Clouddio, its 10th private label – it has other sub-brands such as Stratus, Cumulus, Nimbus, Altus and Cirrus.
Hussaine Kesury, Chief Category Officer, Pepperfry, said rising demand for mattresses prompted the company to introduce its own private label to cater to the diverse consumer requirements in terms of the material, price, comfort and convenience.

‘Key pillar’

Private-label brands are usually more profitable as it gives e-commerce firms total control over the product design and specifications, sourcing, manufacturing, pricing, marketing and distribution. This, in turn, allows them to be made at lower costs, and as a result, be made available to customers at prices that are 15-20 per cent lower than products of well-known national and global brands.
Fashion and lifestyle e-tailer Myntra’s private-label portfolio of 13 brands, including Roadster, HRX, All About You, Mast & Harbour and Dressberry, deliver about 23 per cent of its business at present. Myntra CEO, Ananth Narayanan, in an earlier interaction, said its private-label portfolio is a key pillar of the company’s strategy to building differentiated offerings.
The e-tailer expects its private-label brands to contribute 35-40 per cent of its business in the next 12 months.
Beginning mid-2017, ShopClues launched four exclusive labels, including home and d├ęcor brand HomeBerry, fashion and accessories brand MEIA, men’s footwear brand Baton and electronics brand Digimate, which already contribute to 10 per cent of its total orders and 12 per cent to its revenue share. While e-commerce market leader Flipkart is looking to increase the contribution of its private labels to sales in the categories they are placed in, from 10 per cent to 22 per cent in the next five years, Amazon is preparing to unveil a range of private-label products that will take its total tally to 100,000 SKUs from 5,000 SKUs at last count during the festival season.

Way forward?

Is building a private-label portfolio the way forward to profitability for e-commerce firms?
“No, says K Vaitheeswaran, co-founder of India’s first e-commerce company and author of Failing to Succeed: The Story of India’s First E-Commerce Company.
“Private label is a great PR story. In reality, the impact of private labels are minimal, much like airline loyalty programmes, which only need to be reasonably successful. Because if they are highly successful, it means sales are down, which is not good for the airlines.
Harminder Sahni, founder and MD, Wazir Advisors, said that private labels should be introduced only when certain SKUs at particular price points are missing in an e-tailer’s marketplace, or when there is hardly any differentiators between brands that customers are paying for.
“For instance, private labels can be introduced in products like hand wash where there is hardly any differentiator or in spices and condiments where there are very few brands,” he said.

Tuesday 20 February 2018

With e-commerce coffers full, GMV is no longer ‘vanity’ metric

E-tailers stopped talking about Gross Merchandise Value when they realised the targets were not achievable’

Gross Merchandise Value (GMV) as a key metric of the e-commerce industry’s valuation and performance is set to stage a come back after a two-year break, on the back of strong industry growth numbers.
Flipkart owned fashion e-tailer Myntra will be among the first to announce that it has achieved $1.2 billion in GMV this fiscal.
GMV or gross revenue in e-commerce jargon, refers to the sale price charged to the customer multiplied by the number of items sold, and does not include discounts, cost of returns and other costs.
Three years ago, e-tailers who were flush with funds from global investors, deep discounted their way to brisk sales quarter on quarter. However, after the money in the bank dried up and the funding environment turned hostile, leading to declining sales month-on-month, Snapdeal’s co-founder CEO Kunal Bahl was the first to label GMV a “vanity” metric, in April 2016, and said he preferred to chase profit, which he referred to as “sanity”. This, coming from a man who claimed Snapdeal’s $4-billion GMV in September 2015 was set to overtake Flipkart’s GMV by March 2016.
Even Flipkart, which took on Snapdeal’s claim and revised its earlier target of $8-billion GMV to $10 billion by March 2016, dropped out of the GMV game in mid-2016 as it struggled to raise fresh funding as growth tapered off. Instead, it turned its focus to cost cutting, profitability and customer retention.
Amazon quotes customer traffic on desktops and mobile browsers, and app downloads as key metrics to determine its leadership. It recently hit the 3 lakh seller milestone vs Flipkart’s 1 lakh seller count, and claims to have acquired over 1 million new customers, of which 85 per cent are from tier II and II towns, during its January sale.
“E-tailers stopped talking about GMV when they realised their targets were far from achievable,” said Anil Kumar, CEO, RedSeer Consulting. “Companies, as a basic principle, will only talk about the metric that project them in the best light. As long as their GMV was on the fast track, they openly talked about it as a key metric of performance. If they achieve operational profits, they will choose to talk about that and when they have nothing else to talk about, they will talk about a new business model.”
Stating that all that is about to change, Kumar said GMV will be back as a key performance metric this year because the e-commerce market has bounced back to tremendous growth in the second half of calendar year 2017 with annualised GMV for Q3 at $20.8 billion and Q4 at $19.9 billion vs $14.7 billion and $15.6 billion in Q1 and Q2, respectively.
The growth is fuelled largely by the top two e-tailers — Flipkart which has become aggressive backed by its huge fund raise of $4 billion and Amazon which continues to keep investing.
RedSeer expects the $55-billion e-commerce market which registered 22 per cent growth in calendar year 2017 to register 30 per cent growth this year to hit $72 billion.
“GMV was always a vanity metric that e-tailers used when they had money in the bank from investors. When there is no money in the bank, they start talking about achieving profitability,” said K Vaitheeswaran, co-founder of India’s first e-commerce company and author of Failing to Succeed: The Story of India’s First E-Commerce Company.
The only financial metric that matters, according to him, is a company’s gross margins. “If a company’s gross margins are growing faster than the company’s losses for the last four quarters, it indicates that at some stage, gross margins will overtake losses, revealing that the company is doing well.”
Anil Talreja, Partner, Deloitte India, feels it is okay for e-tailers to drive sales by deep discounts, promotions, etc, provided it results in positive gross margins.

Friday 16 February 2018

5 E-Commerce Challenges And How You Can Overcome Them!

How To Overcome E-commerce Challenges
Success comes right after you have overcome a challenge. Well, at least in most cases it does.
Through the rainy mornings of Cherrapunji and the scorching afternoons of Jaipur, neatly packed products are delivered to the customer’s doorstep. This undeterred convenience, often termed as luxury shopping was possible because of the vast reach of e-commerce in India.
Over a 100 million Indian consumers shop online every day making India a host to some of the largest e-commerce marketplaces. This is the width of the impact e-commerce has had on Indian businesses thus far. So, if you are wondering what could possibly be a challenge for this rapidly growing industry, you are probably not the first.
From regular interactions and anecdotes received from online sellers across the country, we have shortlisted the following five:

Fear Of Too Much Competition

Very often, sellers and business owners are clouded with the misplaced fear of losing their customers to excess competition online. It is true that more and more people are realizing the promising potential of Indian e-commerce, but there will always be more customers to buy from you.
There has been a 50% rise in the number of people choosing online retail over traditional shopping and one of the major reasons leading to it is the lack of product availability locally. When you sell online, you don’t just sell within a geographic confinement. You become a national player and more often than not, your products are in demand throughout the year.
A good example would be a wool seller from Delhi who may lose out on business during summer but not if he is selling online. The need for wool in Kashmir, Himachal or Uttarakhand will seldom cease. Also, in a country where the population exists in billions, it is rare to experience a dearth of customers.

E-commerce Platform-Related Issues

Whether you own an e-commerce website or have registered yourself on one of the leading online marketplaces like Amazon, platform related challenges can grow to become a huge deterrent. The usual concern of your products not getting enough visibility, buyers visiting your product page and exiting without buying from you or in some cases when your products are simply parked in the cart but not purchased, have an easy solution.
Think about the keywords that you have used to write the product description and the product title. A simple and precise product title will attract the buyer to your product page and a well-detailed product description will help relevant products show up accurately in the search results.
Once a customer has discovered the product they want to purchase, you need to ensure that your product is priced competitively. Overpriced products with high shipping and delivery rates can lose your customer interest. Also, in case a customer decides to come back and buy the product later, they should find the product at the same price. Regular price fluctuations can delay a purchase decision giving the customer hope that the cost will come down.

Regulatory & Taxation Concerns

Owning a business doesn’t seem as taxing as filing for taxes does. It almost feels like a whole different world where you have to first file for your own tax liability and then again for your business. But, with the latest and improved tax regulations in place, your online business taxation process can take place online.
That’s correct! There is an option for e-filing your taxes which accepts scanned documents and digitally signed signatures.
You can also get all GST (Indirect taxation system in India) related information from the A to Z GST guide launched by Amazon in an attempt to help business owners’ transition smoothly but is now regularly being updated with the latest GST regulations and requirements.
Basically, even though the payment of taxes happen through a simpler process you can still seek assistance at really nominal costs and relax.

Is Online Selling A Sustainable Model?

To answer this, you must know that in today’s world nothing comes with a guarantee. But, if you have ever wanted to own a business, beat the traffic and work from home, spend more time with family/friends, work within your own terms or simply just evade that job interview, online selling is a great alternative.
The online selling model is as sustainable as any other business model. However, because setting up an online store in an online marketplace is free & it doesn’t require an investment and it makes online selling a preferred choice for many business seekers.
Thousands of customers have already taken to online shopping and are now heavily dependent on it replacing offline retail more rapidly than ever. It has helped manufacturers overcome the challenges they faced in the hands of middlemen and therefore gained business owner loyalty across the country.
Online marketplaces like Amazon also ensure that you get timely payments without you having to follow up and thereby not blocking a large portion of funds.

Customer Loyalty

Human behaviour tends to link loyalty to popularity. This is also why large corporations continue to invest in traditional display ads that cannot provide substantial proof on ROI but you can witness impact on sales. A customer needs to feel secure while making a purchase, but if you are a new brand they feel sceptical.
Therefore, if you have an established online store on a popular e-commerce marketplace, the chances are that your customers might eventually start buying directly from you (your own e-commerce website). You can also gradually see a drop in early cancellation rate once a customer starts buying from your regularly.

Tuesday 13 February 2018

Amazon India Claims 160% Growth In Industrial Supplies Category In 2017

At a time when categories like smartphones, electronics, and accessories are seeing a huge growth in India’s $33 Bn ecommerce market, Amazon India has surprisingly seen growth in one of the most untouched categories so far: the industrial and scientific supplies.
As revealed by an Amazon India spokesperson in an exclusive email interaction with Inc42, the industrial and scientific supplies category witnessed a 160% Y-O-Y growth in 2017, thus indicating the increasing adoption of ecommerce solutions amongst small-scale industry owners and businesses.
As claimed by the spokesperson, Amazon India also witnessed a 200% increase in its user base in this particular category last year.

Amazon India: Key Growth Trends Shown In 2017 For Industrial And Scientific Supplies Category

  • Selection grew by over 100% in 2017 as against 2016, mainly driven by tools, instruments, occupational health and safety products and lab and scientific products
  • Professional tools as a sub-category  grew by over 160%; occupational health and safety by 180% and lab products by 150%
  • Demand is dominated by states like Maharashtra, Karnataka, Delhi, Tamil Nadu and UP
  • Top metros as per demand: New Delhi, Bengaluru, Mumbai, Hyderabad, and Chennai
  • Top five tier II and tier III cities: Noida, Gurugram, Ghaziabad, Thane, Jaipur
In January 2017, Amazon India also came up with Amazon Business Services, targeting business customers and enterprises who make bulk purchases in the similar categories.
So far, not many major ecommerce players including Flipkart, and Snapdeal, amongst others have entered this domain. Interestingly, Alibaba-backed Paytm Mall is offering a range of products under industrial supplies category.
Also, there are players like IndiaMart and Power2SME who are active in this segment along with a number of small category specific platforms like Labbazaar, Supplify, Technokart, IndustryKart, IndustryBuying and more.

Amazon India: Factors Driving Growth Of Amazon Business Services

Industrial and scientific supplies is traditionally popular as an offline category with specific enterprises dealing with a fixed set of clients as part of a long-term association.
However, Amazon India believes that “customers across the country deeply care about massive selection, great value, and fast and reliable delivery.”
“From lakhs of genuine business and industrial supplies all under one roof, we also offer our customers the convenience of hassle-free payment options via Amazon’s trusted payment methods and comfortable doorstep delivery across the country,” added Amazon India.
The company further believes that with its extensive delivery network across over 19,000 pin codes in India, the category is making branded and quality goods easily available even to Tier II, and Tier III towns and cities.
Also, the increasing Internet and smartphone penetration in the country is bringing onboard consumers from Tier IV cities, which are essentially small cities with a population in the range of 10K-20K.

Plans Ahead For Amazon India In 2018

Amazon India is currently offering over 160 Mn products on its platform in a wide range of categories, serving its mantra of becoming an ‘everything’ store for the Indian consumer.
Similar to other ecommerce platforms, while smartphones, fashion, and FMCG have usually been the traditional top categories for Amazon India, it also claims to have witnessed phenomenal growth across all key categories.
Going ahead, the company aims to continue with its vision of transforming the way India buys and sells.
“We are constantly looking at increasing our selection to encompass all products relevant to our customers including the industrial supplies selection,” the spokesperson added.

Tuesday 6 February 2018

E-commerce in India has touched $20 billion, says RedSeer study

The gigantic rate of cash burn and the mounting losses for billion-dollar e-commerce companies such as Flipkart and Amazon India seems to be benefiting India’s e-commerce sector after all. Advisory firm RedSeer Consultancy has found that the online retailing industry had a very positive OND-quarter (October-november-december), with the gross merchandise value (GMV) touching nearly $20 billion.
The study states that this development is primarily driven by the increase in the number of shoppers from tier 2 cities and beyond. A press release from RedSeer Consulting says,
Going forward, we feel that these new shoppers who have found value in online shopping will continue to shop online and more new users who have come online powered by Jio will adopt online shopping.
For online and offline retail in India, Q3 is usually the best time of the year, as customers tend to spend the most around Diwali. Without fail, festive season sales are aggressively promoted by physical stores, national and international brands, local sellers, as well as their online counterparts such as Flipkart, Amazon, ShopClues, and Paytm Mall.
Since organised retail in India is yet to reach tier 3 cities and beyond, online commerce gives the customers in those regions an opportunity to buy off their wishlist during festive season sales, often at better prices since these online giants often provide discounts. This trend is sure to grow too. According to RedSeer,
In fact, residents from non-metro towns will account for 55 percent of all active online shoppers, with overall 185 million active shoppers in 2020.
The same firm had said a few days ago that online retailers saw 33 percent rise in monthly active shoppers in 2017 from 15 million in 2016, to 20 million last year. It added that shoppers in Tier 2 and smaller towns grew three-fold compared to metro shoppers, and accounted for nearly 41 percent of the overall online shoppers in 2017.

Thursday 1 February 2018

Has Budget 2018 done anything for E-commerce? Find out

Union Budget 2018: E-commerce, defined to mean business activities carried out by digital means, is largely in the realm of non-tangible goods and services provided through the internet. It does however encompass e-tail activities, which mean selling goods and services ordered online.

FM Arun Jaitley presents Union Budget 2018 today.Union Budget 2018: Significant economic presence would be created if the aggregate payments from India for download of goods and services in India would exceed a certain amount to be specified later.
Union Budget 2018: E-commerce, defined to mean business activities carried out by digital means, is largely in the realm of non-tangible goods and services provided through the internet. It does, however, encompass e-tail activities, which mean selling goods and services ordered online. In case of a foreign company engaged in selling goods and services in India, so far, the position has been that it would be taxed in India on this business income provided the company either had a dependent agent in India who habitually concluded contracts for it in India and/ or the foreign company had a physical presence in the form of an office or place of business through which the business was carried out. In case of online business, where goods are ordered on the internet without the foreign company having any presence in India or having an agent who concluded the contracts in India, there would not be a business connection in India and the foreign company’s income would not be taxable in India.
The Base Erosion and Profit Shift programme of the OECD identified this as one of the issues which needed to be addressed and proposed certain alternative options which the countries negotiating treaties would bilaterally agree to resolve it. While the bilateral tax treaties that India has entered into would need to undergo re-negotiations to address this situation, the Finance Bill introduces a new provision in the Income Tax Act under the definition of ‘business connection’. It clarifies that ‘significant economic presence’ of a non-resident in India would constitute business connection in India. The existence of business connection would enable India to tax non-resident’s business income.
Significant economic presence would be created if the aggregate payments from India for download of goods and services in India would exceed a certain amount to be specified later. Also, it would be created if there is systematic and continuous soliciting of business activities or engaging and interaction with such number of users as would be prescribed. This provision would enable India to tax such income of a foreign company under the Income Tax Act, only if the foreign company is from a country with which India does not have a tax treaty. In case of foreign companies coming from treaty countries, this provision would need to be incorporated in the treaties to become effective.
This does indeed open a hugely complex issue of tax deduction at source. It also needs to be ensured that there is no overlap with the payment of ‘equalisation levy’ on online advertisements, which was introduced by the Finance Act 2017. One is apprehensive about the implementation of this provision. The fact that certain notifications are awaited before this provision becomes effective and implemented, one hopes that there will be more clarity on its implementation.