Indian retail e-commerce is becoming a highly competitive space. Read more about how consolidation has replaced growth in the segment
Amazon v/s Walmart
While we are talking about e-commerce, US markets have been the prime influencers for the industry until recent times. Amazon has been the torchbearer and has led to many innovations. Walmart and Amazon both command maximum of the retail business in the USA. However, this control is by focusing on their strengths. Amazon commands close to half the market share online, while Walmart enjoys a similar benefit in the offline channel.
In the Indian scenario, however, we observe that both are pitted against each other in an online channel. Wal-mart tried to play the offline card in India. which failed on multiple fronts. Amazon and Flipkart (Walmart), both target similar audience with close to the same demographics, Electronics and apparels segment are the major revenue generator for both these giants. As of now, both retail giants are neck to neck and are yet to find that niche for themselves. This is one of the primary reasons why they are spending extravagantly on customer acquisitions.
Why Business Niche
Retail as a business in itself is a cut-throat business. Those players who have survived had made it big in retail. Though to survive they had that one strategy or that one niche which was their strength. This strength not only helped them sustain businesses but also over a period become cash cows. If we look at the examples of Walmart, they had the mission to sell products at the cheapest possible rates through economies of scale. In the e-commerce space, Alibaba created a marketplace for whole-sellers and was one of a kind. Hence having one business niche in retail is important to create your position. Over a longer period, this business niche shall support easier customer acquisition and cheaper customer retention. However, note that cost may not be the only advantage. Let’s look at some emerging business Niches within Indian retail e-commerce
Emerging Business Niches
The Salt to software conglomerate decided to foray into e-commerce somewhere around 2015. Competition from Amazon and Flipkart was at its prime. Tata had a unique advantage of the presence in offline stores through Croma and Westside. With the introduction of the online channel, they opened up yet another avenue for sales. This would help not only increase sales in offline retail, but also address the biggest concern of inventory management.
Firstcry also adopted a similar offline and online hybrid model, though targeting a specific segment. Clear benefits of the hybrid models are
- It helps the customer have quicker delivery if needed
- Customer can get the touch and feel before buying
- Little or no cost in reverse logistics.
A very unusual name to make it to this list. Avenue supermarkets (parent company of D-mart) when went public, enjoyed an amazing bull run. This was backed by some very solid numbers, Company enjoys maximum revenue per employee and customer as compared to any competition in India. The interesting fact, however, is the online model they have adopted. D-mart never wanted to invest heavily in reality in prime areas of Tier 1 cities. They, however, wanted to tap this market, since this segment had great potential.
They created a simplistic Delivery store. Customers need to download their apps, place order and collect these orders from the defined nearby collection store. This was backed by a strong supply chain network and good in-house products. This model is loss-making and yet to scale, but has tremendous potential to grow.
Some clear benefits in this model
- Tap the most prime areas of Tier 1 cities with minimal cost
- Convenient delivery model
Reliance is expected to make a grand entry in Indian markets. In recent times they have disrupted markets by splurging money and following economies of a scale model. As per various news sources, Reliance is planning to tap the small to mid-scale shop owners and form a new network in itself. The idea of connecting the non-digital locsl Kirana stores could provide some amazing rewards to Reliance. Reliance still enjoys a distinct advantage since they own some big brands and have a franchise for some other fashion houses. Success or failure, their strategy would definitely set a new ball rolling in Indian retail segment
A Note of Caution
Some businesses have already tried these emerging business models like Shopclues and Paytm (through PayTmall). These investments are yet to be fruitful and can hardly be termed as success stories.
Eventually businesses will need to find that business niche to sustain in this highly competitive space.