Sunday 18 August 2019

Start-up Saturday: Bite at multi-billion dollar pie; how not to choke

Harsha Razdan, KPMG
Harsha Razdan, KPMG(HT PHOTO)
     
The Internet is the market place - startup, or global mega-corps. Sell online or die.
According to Forrester Research, CAGR (compounded annual growth rate) for e- commerce in India (for 2016 to 2021), growing faster than any other Asian country, is at 31.2%; while China and Japan are at 9.9% and South Korea at 13.2%. Amazon India posted sales (according to a Barclays report) of Rs 7.5 billion for 2018, while Flipkart was at Rs 6.2 bn.
Harsha Razdan, partner and head – Life Sciences, consumer markets and internet business at KPMG, is very much at the heart of business models being prepared, and/or adapted, in India for (r)etail.
What is the scale of e-comm in India?
The sector grew at a CAGR of 25 per cent in the last three years, to reach a market size of $40 billion (source: Crisil). It is further expected to grow at a CAGR of 23-28 per cent in the next three years. This comprises players who sell products or services either through inventory-based, or marketplace, or a hybrid model. Broadly classified into e-retail, online ticketing, and online deals segments, including niche segments such as online grocery, jewellery and furniture. This does not include B2B.
What is it that makes an individual seller successful in the e-marketplace? How should s/he choose a platform?
Well I think that every startup should follow the golden rule of marketing – differentiation. How do you differentiate from the others in the same space? What is your value proposition? There are several companies that sell, say, women’s clothing. How are you different from the others? What does your brand stand for? Why will someone choose you and not some big established brand? While choosing a platform you need to clearly understand platform dynamics. Often, these platforms are just enablers where they will list you and once a consumer chooses to buy your product then you are responsible - how will you deliver, your payment systems, everything that will make the consumer experience seamless. In case it is an established platform that does even the delivery, then you need to know inventory, storage, delivery - because it’s your brand that will be judged.
How do startups negotiate the commission hurdle with platforms?
Look at the flip side. If it weren’t for them (platforms), how would you be able to access such a large customer base? Some years ago it was impossible for a small retailer to be able to sell across the country, and world, even without setting up proper distribution channels. In fact, globally it is a well-known phenomenon that the big players are not able to increase their market share as uniformly as they used to. This is on account of several small players who are competing with them. Even if commissions are huge, there are benefits. I think it is up to the founder to be able to negotiate.
Start ups and SMEs bring flexibility to the marketplace where they can soon customise according to consumer needs whereas a large company cannot do so as swiftly and in smaller scales. Then of course one has to bear in mind the CX customer experience, it should be convenient, easy to use, glitch free and have a secure interface, so as to provide buyers with a seamless buying experience.
Retailers should also note ecosystem partners. There is also a need for appropriate supporting partners, when it comes to technology for logistics, marketing and others to support the scale of operations and aspirations.

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