[Outlook 2020] Here is why Mukesh Ambani is excited about offline-to-online commerce

Despite competition from the likes of RIL, Amazon, Flipkart, and others, a breed of startups have found their own niche in this space. So much so that experts are saying that it is the time for ‘Bharat’ commerce

8th Jan 2020
  • +0
Share on
close
  • +0
Share on
close
Share on
close

Last week, Reliance Industries Limited (RIL) launched its ecommerce venture called JioMart. Operated by Reliance Retail, the retail arm of RIL, it will offer a portfolio of over 50,000 grocery products along with free home delivery against no minimum order value, no questions asked return, and express delivery promise, as highlighted on the official JioMart website that specifies the venture as “Desh Ki Nayi Dukaan” (the country's new shop). 


reliance industries mukesh ambani

Mukesh Ambani

In August 2019, during the company’s 42nd Annual General Meeting, Mukesh Ambani, Chairman of Reliance Industries (RIL), talked about a ‘new commerce’ venture that aims to "completely transform the unorganised retail market, which accounts for 90 percent of India's retail industry". He said that Reliance’s platform will modernise even the smallest neighbourhood kirana shop to become a “future-ready digitised store". 


JioMart explores the offline-to-online (O2O) model, which creates a system to entice consumers within a digital environment to make purchases of goods or services either from physical businesses or in an online setup.


But, why is the man behind Jio so excited about this market? At the time, Ambani had said that “new commerce” is a massive new business opportunity worth $700 billion.


Mukesh Ambani said, “The three crore merchants and kirana shop owners, who generate direct and indirect livelihoods for over 20 crore people, form the backbone of India's commerce ecosystem. These highly energetic and self-motivated entrepreneurs have suffered in recent years because of their inability to invest in technology and infrastructure.”


In fact, it is not only RIL that is eyeing India’s O2O opportunity, but several startups are also bullish about this space. Despite competition from the likes of RIL, Amazon, Flipkart and others, a breed of startups have found their own niche in this space. So much so that experts are saying that it is the time for ‘Bharat’ commerce.


We take a look at how 2020 looks like for retailers and startups in this space.


Amit Sharma, CEO and Co-Founder of ShopX, says that “pure online” or B2C ecommerce has several constraints and bottlenecks in a country like India, and therefore, makes up only about three percent of the overall $700 billion consumption space.


shopx

Amit Sharma, CEO and Co-Founder ShopX


“With 1.2 million small retailers in India, the omnichannel play has never been more relevant than today in India and for online ecommerce led players to grow into Tier III and IV cities. They realise the power of the distribution network that kirana stores provide. In addition, no amount of convenience can replace the local trust and the ability of a consumer to directly see a product before a purchase,” he adds.


Founded by Amit and Apoorva Jois in 2015, Bengaluru-based ShopX works with brands across FMCG, electronics, and lifestyle sectors and is keen to build a scalable operating system for retail to power merchants and customers. The startup already covers 1,50,000 retailers across 400 towns in India, claiming to have recorded a gross merchandise value (GMV) of $1 billion in the last five years.

Immense opportunity

Anurag Avula, Co-founder and CEO of Shopmatic, says that the O2O market is immense, both in India and across the globe. He estimates that online sales only account for nearly 12 percent of the total retail sales in the world.


“The gap represents the O2O opportunity, a fertile common ground of opportunities where offline and online retail can easily merge to unlock greater success. By adopting an omnichannel approach, offline businesses will enjoy a unique vantage point to growing sales through 24X7 accessibility and up-selling opportunities,” he says.

 

Based in Singapore, Shopmatic is an ecommerce enabler that helps small businesses and aspiring entrepreneurs with services like a customised web store, payment gateway integration, logistics and shipping support, digital promotions, and insights from big data analytics.


The startup has its presence in India, Hong Kong, China, Malaysia, the Philippines, and the UAE. It is bullish about this space despite competition from retail giants. Anurag tells that mergers, acquisitions, and industry-wide partnerships help Shopmatic consolidate its position as an ecommerce leader and the go-to resource for omnichannel growth and success of aspirational businesses. Over 330,000 merchants are listed on Shopmatic.


Anurag highlights that a majority of offline businesses in India have aspirations to not only integrate online sales but also digitise operations. “However, they may lack access to superior technology and means of doing the same,” he points out. 

 

Solutions like cloud-based retail management will enable offline businesses to synchronise inventory, on-board customers through a mobile platform, offer loyalty points, and support customer promotions. They can also enjoy real-time visibility into sales, the performance of staff, and inventory, enhancing the business efficiency. 

Rural opportunity

Further banking on the offline to online transition is CoutLoot, a social O2O commerce platform hosting more than 375,000 sellers with over 10 million products on its platform. It enables rural entrepreneurs and sellers hailing from India’s hinterlands to sell through WhatsApp and Facebook Messenger.


The startup has its own proprietary Artificial Intelligence (AI) model that automatically scans and lists a seller’s products. This helps offline players, who are selling online for the first time, by automatically cataloguing their inventory and providing logistics, payment, and reconciliation support.

 

Jasmeet Thind, Co-founder of CoutLoot, says that India’s lifestyle offline market is worth $350 billion out of which 90 percent is still offline.


“The whole offline to online transition is the need of the hour and offline sellers are proactively looking to sell online to grow their business and give a boost to the current market to grow into a $1 trillion lifestyle market by 2025,” he adds.

Street vendors

NeoMart, developed by Gurugram-based Phantom Codes, found its opportunity in local shops and even street vendors. The startup’s platform helps merchants get their own e-store on their mobile phone screens. Launched in November 2017, NeoMart helps vendors and retailers display the availability of products, their selling price, and generates e-bills without PoS or software. Consumers can connect with local retailers via NeoMart where they can order groceries, stationery, medicines, etc.

 

neomart

Ashwini Kharbanda, Founder of NeoMart  


“India, with a retail market of over $700 billion comprising food, grocery, clothing, etc., has only 10 percent of the market in modern trade while the rest 90 percent of traders are small retailers and vendors who cannot afford or do not have the technical knowhow to have e-platforms,” says Ashwini Kharbanda, Founder of NeoMart. 


Currently available in Gurugram, the startup has more than 100 registered merchants and more than 500 customers. For the next two years, it wants to focus more on the Delhi-NCR region so that small and economically weaker retailers can boost their revenue with the help of NeoMart, adds Ashwini.

A simple business model

Cracking the business model in O2O space might not be as hard as ecommerce. It is simply based on a commission business model. For instance, Shopmatic has tied its business success with that of the merchants on our platform.


“Thus, under the latest transaction offer, we charge an annual hosting fee of Rs 50 and 3 percent of each successful transaction while giving merchants access to the full-spectrum of omnichannel features to help them grow their business. Furthermore, we also provide merchants with subscription plans ranging from a month, half-year, and to annual subscriptions,” says Anurag.

 

Similarly, CoutLoot’s business model is pretty simple. Co-founder Jasmeet Thind explains the startup helps offline sellers list their inventory online and generate a store link. The sellers can then share these links through WhatsApp, Facebook, Instagram, etc., and get more buyers. Once a product is sold, CoutLoot also helps in payments, logistics, and other management services, and charges an undisclosed percentage commission for the services it provides.

 

Jasmeet says that CoutLoot has over 380,000 sellers on its platform and claims that the startup is growing at close to 35 percent quarter-on-quarter.

Trends of 2019 and what to expect in 2020

Anurag says that F&B, clothing, fashion, and home decor were some of the most trending categories in 2019. Shopmatic has also been adopted by people with unique business concepts and even those toying with the idea of turning their hobby into a self-sustaining career.


“Thus, Shopmatic hosts bakers, soap makers, painters, artisans, people selling unique products from the Himalayas, offering a complete backpack kit for hostellers moving into new accommodation, amongst others,” he adds.

 

For CoutLoot, fashion was the largest category followed by accessories, beauty, and electronics. “Young India needs good clothes to wear, a phone to use, and some money in their pocket and CoutLoot plays in these categories with a focus on Tier I, II and III towns,” says Jasmeet.


He adds that the current average ticket size on CoutLoot is close to Rs 550 with a 75 percent contribution to the fashion category.

 

For NeoMart, which currently focusses on food and grocery, pharmacy, fresh and vegetables, and stationery categories, food and grocery, and pharmacy are the most used categories, says the Founder.

 

The players in this space predict that 2020 will be the year of solo entrepreneurs. Anurag says that within retail, these solo entrepreneurs will diversify the sector with niche offerings.


“The future belongs to individual entrepreneurs, including mompreneurs, student-preneurs, and home-preneurs, who would create – perhaps handcraft – unique products to sell,” he adds.

 

On the other hand, Jasmeet says that since more Indians come from lower to mid-middle-class categories, consumption of lifestyle is bounded to upgrade, and hence household items, beauty, and electronics, etc, are going to see high growth.


Only time will tell if O2O is a game for these ambitious startups or just another playing field for the biggies.


(Edited by Saheli Sen Gupta)


Want to make your startup journey smooth? YS Education brings a comprehensive Funding Course, where you also get a chance to pitch your business plan to top investors. Click here to know more.

  • +0
Share on
close
  • +0
Share on
close
Share on
close