The big consumer internet players have refueled with funds raised in 2018 and are expected to outspend each other in increasing marketshare by targeting existing customers and spending more on acquiring new customers. Entering new product categories and geographies is also going to be a key theme for 2019. Forrester sees the following trends in Indian ecommerce in 2019:
Flipkart will move out of comfort zone
This is the year for Flipkart where more than the competition with Amazon the company will face internal challenges to align itself with the Walmart vision. Flipkart will have to move from a startup mode where growth at any cost was the priority, to a growth with profitability mindset. Amazon is already preparing for this battle with heavy investment in the offline grocery category.
Flipkart will have to move out of the comfort zone of selling mobile and fashion and fight Amazon in these new categories. 2019 will also test the attractiveness of FlipkartFirst vs Amazon Prime to become the default online retailer for Indian households. A lot will depend on the continuous focus on customer experience to sell categories like grocery and furniture. If Flipkart loses this battle of FlipkartFirst vs Amazon Prime, they will find it very difficult to get hold of premium online buyers once again.
E-commerce battle shifts to long tail
In 2018, 65% of India’s online retail spending came from consumer electronics, computers, and fashion products; smartphones alone accounted for half of all online spend. In order to increase the wallet share at household level, online retailers are expected to focus on the long tail – sell a large variety of low-volume but high-value niche products instead of just a few varieties of high-volume but lowvalue mainstream products.
With Walmart acquiring Flipkart and Amazon continuously increasing Prime membership, the battle is going to be in the long tail, with Paytm Mall, Snapdeal and Shopclues also pitching in to remain relevant in 2019. We are still not sure if Alibaba will take a call on taking India seriously in 2019, but Paytm Mall will have to figure out what value proposition they are offering to customers. Currently, they are confused on what exactly they want to do.
End of pure play online grocery
Since 2014, online grocery companies in India have experimented with multiple business models. Starting from hyperlocal and 90-minute deliveries, to setting up dark stores, scheduled delivery slots, micro delivery (including milk), contract farming of organic vegetables, and pivoting to become FMCG players. Still, online grocery remained around $1.1 billion in sales in 2018. With online spending per buyer of $238 in 2018, Indian buyers will take more time to buy grocery online, as compared to South Korea, where the corresponding amount is $2,000 and where online grocery penetration is around 15%.
Meanwhile, Amazon swiftly moved to acquire More in 2018 and is looking to buy a stake in Future Group. With Flipkart expected to enter this category in 2019, we expect pure play online grocers to pivot into investing in offline channels to remain competitive and raise the next round of funds.
Food delivery companies will remain in spending mode
We expect food delivery exited 2018 with a run rate of 50 million orders per month, driven by the massive spending on discounts and scaling up by food tech companies. Delivery cost, especially last mile delivery, which accounts for around 40-50% of e-commerce transport, remains the biggest challenge for online retailers and food delivery companies. We expect companies to keep up the spending in 2019 to add more buyers and at the same time experiment with other revenue models, including subscription, cloud kitchen and using the delivery fleet to deliver other goods during the lean times. All this, along with the addition of new cities, should be able to push food delivery to touch the 100 million order run rate by the end of 2019.
Cab hailing hits a road block
Increasing fuel costs and declining growth in rides took a toll on the customer experience promised by cab hailing companies like Ola and Uber in India. Both Ola and Uber saw drivers going on strike for better incentive structure to cover for the increasing cost but just offering additional incentives to drivers won’t solve the problem of customer experience for these companies. Booking a cab on these apps is becoming unreliable with drivers cancelling trips at will. The quality of cars and the behaviour of drivers are also growing issues. To compensate for the slowdown in growth, cab hailing companies are looking to expand into new geographies (Ola entered Australia, New Zealand and UK) and entering food delivery via Foodpanda and UberEats. We expect them to provide additional last mile delivery services to businesses and customers to ensure growth.
In general, we expect that in 2019, the consumer internet sector will attract more funds from investors and will see more aggressive investment by key players. This will ensure that the industry’s loss figures remain high for the next few years.
Flipkart will move out of comfort zone
This is the year for Flipkart where more than the competition with Amazon the company will face internal challenges to align itself with the Walmart vision. Flipkart will have to move from a startup mode where growth at any cost was the priority, to a growth with profitability mindset. Amazon is already preparing for this battle with heavy investment in the offline grocery category.
Flipkart will have to move out of the comfort zone of selling mobile and fashion and fight Amazon in these new categories. 2019 will also test the attractiveness of FlipkartFirst vs Amazon Prime to become the default online retailer for Indian households. A lot will depend on the continuous focus on customer experience to sell categories like grocery and furniture. If Flipkart loses this battle of FlipkartFirst vs Amazon Prime, they will find it very difficult to get hold of premium online buyers once again.
E-commerce battle shifts to long tail
In 2018, 65% of India’s online retail spending came from consumer electronics, computers, and fashion products; smartphones alone accounted for half of all online spend. In order to increase the wallet share at household level, online retailers are expected to focus on the long tail – sell a large variety of low-volume but high-value niche products instead of just a few varieties of high-volume but lowvalue mainstream products.
With Walmart acquiring Flipkart and Amazon continuously increasing Prime membership, the battle is going to be in the long tail, with Paytm Mall, Snapdeal and Shopclues also pitching in to remain relevant in 2019. We are still not sure if Alibaba will take a call on taking India seriously in 2019, but Paytm Mall will have to figure out what value proposition they are offering to customers. Currently, they are confused on what exactly they want to do.
End of pure play online grocery
Since 2014, online grocery companies in India have experimented with multiple business models. Starting from hyperlocal and 90-minute deliveries, to setting up dark stores, scheduled delivery slots, micro delivery (including milk), contract farming of organic vegetables, and pivoting to become FMCG players. Still, online grocery remained around $1.1 billion in sales in 2018. With online spending per buyer of $238 in 2018, Indian buyers will take more time to buy grocery online, as compared to South Korea, where the corresponding amount is $2,000 and where online grocery penetration is around 15%.
Meanwhile, Amazon swiftly moved to acquire More in 2018 and is looking to buy a stake in Future Group. With Flipkart expected to enter this category in 2019, we expect pure play online grocers to pivot into investing in offline channels to remain competitive and raise the next round of funds.
Food delivery companies will remain in spending mode
We expect food delivery exited 2018 with a run rate of 50 million orders per month, driven by the massive spending on discounts and scaling up by food tech companies. Delivery cost, especially last mile delivery, which accounts for around 40-50% of e-commerce transport, remains the biggest challenge for online retailers and food delivery companies. We expect companies to keep up the spending in 2019 to add more buyers and at the same time experiment with other revenue models, including subscription, cloud kitchen and using the delivery fleet to deliver other goods during the lean times. All this, along with the addition of new cities, should be able to push food delivery to touch the 100 million order run rate by the end of 2019.
Cab hailing hits a road block
Increasing fuel costs and declining growth in rides took a toll on the customer experience promised by cab hailing companies like Ola and Uber in India. Both Ola and Uber saw drivers going on strike for better incentive structure to cover for the increasing cost but just offering additional incentives to drivers won’t solve the problem of customer experience for these companies. Booking a cab on these apps is becoming unreliable with drivers cancelling trips at will. The quality of cars and the behaviour of drivers are also growing issues. To compensate for the slowdown in growth, cab hailing companies are looking to expand into new geographies (Ola entered Australia, New Zealand and UK) and entering food delivery via Foodpanda and UberEats. We expect them to provide additional last mile delivery services to businesses and customers to ensure growth.
In general, we expect that in 2019, the consumer internet sector will attract more funds from investors and will see more aggressive investment by key players. This will ensure that the industry’s loss figures remain high for the next few years.
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