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Bharat: The next big opportunity in Indian e-commerce

09 November 2019

Flipkart CEO, Kalyan Krishnamurthy discussed the growth of the Indian e-commerce at TechSparks 2019. Exploring new theories of ‘Bharat’ and ‘India’, the two different sides of the Indian Internet market, he gave insights into how e-commerce will be dependent on Bharat for future growth.

Here are the key takeaways from his dialogue with the founder of YourStory, Shradha Sharma:

Adoption of e-commerce in Bharat versus India

The adoption of e-commerce happened quickly in the top seven or eight cities of India. But that doesn’t represent the consumption in the country. This year, product e-commerce is going to be anywhere between $27 billion to $30 billion; five years from today, it would touch $80 billion. And 70 per cent of that increase would come from Tier II and III towns. The growth in transactions from the non-top eight cities was 3x of the growth of the country’s top eight cities.

There are several implications on us from these data points, but one big thing is we keep calling them tier 2 and tier 3 markets but it’s not like that, that’s the real market.

Consumer e-commerce and transaction players started in India because adoption was higher in the top 7-8 cities in India but that’s not the representation of consumption in India.

If you look at the US geographic spread versus its people spread, 11 per cent of its landmass sees 75 per cent of the local demand coming out of it. Even in China, roughly 75 per cent of its demands comes from its 30-35 per cent of its landmass. In India, 70 per cent of consumption comes from 55 per cent of the landmass. India is really a distributed country.

The need for an R&D push in India’s 1 trillion-dollar economy

Consumption – from the starting point, i.e. device, UI, UX, whether it be in the form of language or in the form of speech, the way customer support happens, the way payments and logistics happen – each aspect of these issues has to be solved and built. So far, technologies and e-commerce have been solved for the top eight-ten cities.

There are a few ways in which this could happen: 2-3 companies that are players in this market could solve it. Or the whole ecosystem solves it. The whole country must get together. The government must partner with us. We must partner with the government. Everybody must come together and solve this.

And it will be a cycle, the more investment that goes in, the more talent development there will be, and they will solve these problems. And this will become a cycle over time.

E-commerce in India: The way forward

I still think e-commerce in India has not been fully solved. If you look at the consumption patterns in India today, it’s 80% grocery. Grocery e-commerce is much less than 1% in India. If you just look at real India, take fashion as an example – an 80 to 90 billion-dollar commerce market. The ASP, average ticket price, for the consumption of fashion in India, is 250-300 rupees.

As and when e-commerce gets into that level of consumption, the belly of the market, the biggest question is ‘Will e-commerce companies be able to sell those products to the customer and yet not lose money?’. To me, once we can solve for these kinds of constructs, real India constructs – grocery, low asp fashion, low asp consumption – that is when I would say e-commerce has been solved for. Today, categories like smartphones, consumer electronics, have a penetration of anywhere from 15-20% to 40% but if you look at categories like grocery, low asp fashion, the penetration is anywhere from 0.1% to 2%. Solving for this is solving for India.

Conclusion

The future of Indian e-commerce is expected to grow at an exponential rate in the next few years. Product e-commerce is projected to be worth $80 billion in another 5 years. This growth will be driven by ‘Bharat’, as the penetration of e-commerce saturates in the top 8-10 Indian cities.

While the statistics look promising, there are still issues that need to be addressed and resolved. In the coming years, the entire e-commerce industry needs to work with the government to ensure that these are resolved for smooth growth trajectories.

As Kalyan Krishnamurthy rightly said, Indian e-commerce can only flourish when it truly solve for ‘Bharat’.