[The Outline By Inc42 Plus] Ecommerce Puts On Festive Wear

“Great Indian Festival is Bharat’s biggest “sellerbration” on Amazon ever!

Myntra sets record with ~100% growth in orders over the previous edition of Big Fashion Festival; 4 million customers shop during the event

Flipkart’s The Big Billion Days brings festive cheer like never before for MSMEs  and Consumers across India”

Dear shopper,

Just like most things this year, everyone’s festival shopping in India happened online, for the most part. This naturally meant a big spike in online shopping volume, as predicted by many much earlier in the year. Ecommerce giants have reported 2x growth in orders and customers as compared to last year. Interestingly, a good chunk of this is from Tier 2 and beyond cities.

During the 7th edition of its Big Billion Days (BBD) sale, Flipkart saw 52% of platform visits coming from Tier 3 and beyond cities, out of a total of 666 Mn visits over the six days. Paytm Mall and Nykaa also had similar tales to share, while Flipkart-owned Myntra also said it saw 2X growth compared to the previous year.

Naturally, to meet the growing demand from smaller towns, ecommerce companies, big and small, have invested in strengthening their supply chains across the country. Ecommerce players had already been working towards expanding warehousing capacity and fulfilment centres due to the Covid-led reprioritisation of distribution, and with the festive season, this has been ramped up further with deeper presence.

“With hyperlocal deliveries becoming the new standard, packaging concerns, return of items and payment inconvenience, opaque last-mile delivery still continues to be a daunting challenge for ecommerce players whether big or small,” said Harsha Razdan, partner and head, consumer markets and internet business at KPMG India.

In preparation for the festive season, Amazon claims to have added 200 delivery stations across the country, including the ones operated by delivery partners to increase its direct reach. This includes stations in remote northeast Indian towns such as Champhai, Kolasib, Lumding and Mokokchung, along with additional units in Tamil Nadu, Uttar Pradesh and other states to increase storage capacity in the region. Similarly, Flipkart expanded its wholesale unit to 12 new cities to support local kirana stores and other MSMEs.

Entering Uncharted Territories

Flipkart recounted the experience of delivering orders to the Naliya Air Force Station in Gujarat, near the Indo-Pak border. The company noted that delivery executives from the company’s hub in Gandhidham travelled 200 Km to make the deliveries. This eight-hour journey took their staff through jungles and deserts, running parallel to the India-Pakistan border to finally reach the base in the morning.

“Considering this long route is serviced just once a week, the executives are given a half day off the next day to take rest. Other remote locations where Flipkart delivers include Ladakh, Bishnupur (Manipur), and Dimapur (Nagaland),” a company spokesperson added.

Of course, this is not the only instance of isolated towns and regions in India getting touched by ecommerce. Other companies have taken different approaches to reach these disconnected regions.

To speed up deliveries in smaller towns and cities, Amazon India strengthened its partnership with the Indian Railways. Further, the company added close to 200 new Amazon-operated delivery partner stations across states to expand its reach. It currently has 1700 delivery stations across India.

Razdan added that ecommerce players have now started outsourcing their supply chain to third-party logistic providers in order to shorten delivery timelines. Myntra’s head of business, Ayyappan Rajagopal also noted that the company has put a surface line haul in place to fulfill orders in 27,000 postal codes itself and through third party networks.

The need to provide faster deliveries with low overhead costs is also one of the major reasons why Amazon and Reliance Retail have been fighting over the assets of Future Group. Experts believe that the future of ecommerce will be spearheaded by seamless integration of online commerce and offline distribution.

Reaching Bharat Digitally

Besides widening their logistics and warehousing capacity, ecommerce companies also have had to innovate on the marketing front to capture this new wave of shoppers.

Shudeep Majumdar, cofounder and CEO of influencer marketing platform Zefmo Media, said the company saw strong traction for ecommerce in smaller cities and towns of India. Influencer marketing trends have followed this distribution in the last quarter as well.

The continuing rise in the adoption of social media across India also led to the emergence of more and more social media influencers creating content around various topics of interest. Flipkart and other ecommerce companies claim to have leveraged the reach and popularity of such influencers to engage with diverse sets of audiences. The company said it also used regional language social media to connect with the masses.

Similarly, Myntra’s marketing efforts have focused on driving conversations through celebrity brand ambassadors, who have a wide appeal in Tier 2 and Tier 3 markets. Overall festive season promotions by Myntra included associations with 16 Bollywood celebrities, 21 regional celebrities and influencers, and 25 social media influencers.

It partnered with popular YouTuber and creator Bhuvan Bam, who has a great recall in the core audience in small town India. The company also partnered with three Indian Premier League (IPL) teams to reach a wider audience. Further, in the case of Nykaa, the company took its offline marketing efforts online through exclusive digital masterclasses and expert-led online beauty bars.

Majumdar added that Zefmo noticed a renewed thrust among ecommerce companies to tap the Tier 2 and 3 markets. “Interestingly, we are also witnessing not just the push of affordable items but also a deliberate strategy on behalf of the brands to offer premium products to this largely untapped market segment,” he added.

Diwali On Credit

Online selling in the times of pandemic is not just about having the right network or product lineup or even catchy marketing. With economic recession, consumer spending for discretionary categories has fallen and even Diwali is not reason enough to break the bank for some in these tough times. Indian shoppers love discounts, but ecommerce companies are also increasingly providing access to credit or short-term loans to create loyal customers, either through fintech partners or NBFC and banking companies.

Simpl is one such fintech startup that is targeting consumers at the checkout stage. Cofounder and CEO Nitya Sharma believes the product embodies philosophy of credit or ‘tabs’ at traditional kiranas or retail stores, which Indians are very familiar with. Simpl’s pay-later product offers a pre-approved credit line to consumers starting from as low as INR 5,000 to INR 20,000. It claims to have integrations with over 2,000 merchants, which has grown by almost 10X after the lockdown in March.

Simpl currently claims to have anywhere between 350K to 400K users transacting on its platform every month. The CEO added that recently several direct-to-customer (D2C) brands such as Licious, Freshtohome, Mamaearth among others have adopted the pay later model especially as brands move away from ecommerce marketplaces to native websites with payment gateways, where Simpl is pitching to be an option. In fact, pay later is a popular option for ecommerce platforms — Amazon has a native Amazon Pay Later product besides EMI tie-ins with banks.

Flipkart said that EMI options and pay later were an important enabler of credit for customers during the most recent sale, with pay later customers clocking in 7X higher spends and EMIs showing 1.7X higher adoption this year. Similarly, Flipkart-owned Myntra witnessed a 16% growth in revenue contribution from pay later instruments and a 5.48% growth in revenue contribution from EMI instruments compared to the pre-festive period of August and September.

“Our partnership with Axis Bank for a co-branded credit card also witnessed huge adoption with the transaction on the co-branded credit card going up 5X vis-a-vis TBBD 2019,” a company spokesperson added.

Amazon’s Simpl competitor Amazon Pay Later witnessed 4X growth during the festive sales in October, while credit based purchases saw a 1.5-2X growth in the same period. Amazon claimed that Pay Later has offered more than 10 Lakh loans with customers using it for daily needs as well as for EMIs for large value items.

“In response to the increasing preference of such instruments, especially for non-credit card customers, Amazon has invested heavily in making their discovery and purchase experience frictionless and seamless. This reflected in a recent awareness and preference survey for debit EMI conducted by Nielsen where 58% customers mentioned that Amazon offers the best debit EMI options which was 20% higher than other online competitors,” an Amazon spokesperson claimed.

UPI Puts On Festive Wear

Mimicking online shopping growth, India’s digital payments flagship UPI saw a record-breaking month as far as transactions go. After breaching the 1 Bn transactions mark in the first 15 days of October 2020, UPI reached a high of 2.07 Bn transactions with a total processed value of INR 3,86,106 Cr in October, the highest ever since launch in 2016. 

This skyrocketing growth was followed by the government announcing a cap on the transaction share of UPI apps. NPCI said in a statement that UPI transactions on all third-party app providers (TPAPs) will be capped at 30% of the total volume of transactions processed. The decision will come into effect from January 1, 2021 and is expected to be a major hurdle for UPI payment apps such as Google Pay, PhonePe, Amazon Pay and Paytm as well, to a certain extent. 

Under the hood of this bittersweet development, a new digital payments player has entered the game. WhatsApp Payments has finally got the green light in India after a tough two-year tussle with government agencies and policy makers. The Facebook-owned platform has claimed that India is its largest market with more than 400 Mn monthly active users. The cap on UPI payments transactions is said to be in large due to this very fact.  

While the festive season was a success for Flipkart in terms of reviving sales, the company is also continuing to build its super app chops. Flipkart acquired mobile gaming startup Mech Mocha to strengthen its gaming vertical, to go along with the Flipkart Videos and Ideas section in the race to build a super app for India.

Startups Put On Festive Wear 

Just like ecommerce marketplaces, many other B2C startups had to change gears in the post-pandemic world to keep up with the changing demands. This means new opportunities for innovation and growth for those products that crack the market. Every month, we bring you 30 such innovative startups that have made their mark in the post-Covid world. 

Edtech has continued its march since the lockdown and in our list for October 2020, eight out of 30 startups operate in the edtech sector. Startups from the enterprise tech sector, which have gained prominence after the pandemic, also stood out among the 30 startups. The two other major sectors are fintech and agritech, contributing five and three startups respectively to our list.

The featured companies have been forerunners of new business models and have survived through the crisis or have helped companies navigate the new market in a better way. As ever, early-stage startups in India have shown the agility to react to market changes and tailor their products to cater to the new and emerging needs of the Indian market. 

While our lives changed in the past seven to eight months, we also emerged wiser and more mature. And so happened with the business world as well. Some sectors sunk while others boomed to new heights. As we near the end of this stagnant yet eventful year, there might be an equilibrium on the horizon. 

Until Next Week,

Yatti Soni and Salman S.H.