Ecommerce: Time for change in focus, not conviction
Originally published by Kunal Bahl on LinkedIn: Ecommerce: Time for change in focus, not conviction
The pace and trajectory of growth of the ecommerce sector in India has been breathtaking over the past three years. Poised to be worth more than $103 billion by 2020, ecommerce is scripting the next chapter in India’s robust consumption story. In the process, it has introduced dynamic new business models, spurred domestic innovation, created unprecedented choice for the consumers and massive reach for the small and medium businesses. Its impact on job creation is less spoken about, but is perhaps the most important--it has created millions of jobs, across cities big and small and spanning the entire continuum from high technology to last-mile logistics.
The digital commerce industry is at the early stages of long-term growth that will continue across decades, similar to the telecom and IT revolution. As the Indian economy grows at a steady clip, growth for ecommerce will come from many fronts, increasing Internet and mobile penetration being the most important. Morgan Stanley’s India Technology Report in February 2016 indicates that percentage of internet users shopping online will grow from 12% in 2015 to 40% in 2020. Favourable demographics, growing acceptance of online payments, a supportive policy framework and improvement in physical infrastructure will accelerate this growth.
Growth when it happens at such pace, comes at a cost. This cost is largely driven by significant forward-looking investments in technology, infrastructure and people. When these investments are leveraged appropriately, they yield significant results in delivering a great customer experience in the future while driving sustainable growth for the company.
In the US, Amazon lost $2.8 billion in the first seven years of its existence before it posted its first ever quarterly profit in 2002, as they were investing ahead of time in building the required capabilities for the US market. Needless to say, not all investments made are as efficient as they could have been. However, it would be unfairly speculative to paint a picture of doom and gloom without trying to understand the deeper and more positive trends at play here.
In 2014-15, the focus was on achieving scale to demonstrate that this industry can deliver a needle-moving impact in terms of the quantum of merchandise that can be sold through the online channel. Now that the scale and impact of ecommerce has been clearly established, the focus has turned towards achieving efficiency in operations. This is a natural cycle for any business—rapid period of growth followed by a measured, sustainable progress.