Why e-commerce majors are getting hyper about hyperlocal space

Hyperlocal is the next frontier for e-commerce companies to bring massive scale and deliver goods instantly. While we see the rise of on-demand startups like Grofers, Peppertap and Jugnoo among others, e-commerce giants Flipkart, Amazon, Snapdeal and Paytm see hyperlocal as the next avenue to accelerate scale.

Flipkart announced ‘Flipkart Nearby’ to cater to hyperlocal needs like grocery, FMCG goods this month and aspires to offer supermarket experience to customers in Bengaluru. Amazon launched ‘Amazon Kirana’ to deliver grocery and essentials in Bengaluru within two to four hours while Snapdeal is piloting Snapdeal Instant in select cities. It also led USD 36 million round in on-demand grocery platform Peppertap to ramp up its hyperlocal stake.

More recently, Paytm rolled out its hyperlocal platform and expects half of its sales coming from hyperlocal business by 2016. So why have these e-commerce majors turned hyper towards hyperlocal space? Indian digital commerce businesses are trying to emulate Alibaba’s consumer facing marketplace Taobao which leverages network of retailers for product procurement and delivers using thelogistics arm of Alibaba.

Emulating the Taobao model

On the lines of Taobao’s B2C marketplace Tmall, Indian peers are eyeing the USD 18-billion hyperlocal market. Currently, after order confirmation from consumer side, these companies collect the product from the warehouse and then ship it to the customer using third party or their own logistics.

However, it’s easier for them to collect goods from retailers close to the delivery address and fulfill it. Importantly, hyperlocal fulfillment weeds out pain related to intra-city logistics. Last-mile delivery becomes the only focus for e-commerce companies while dealing with existing retailers to procure and deliver goods.

Money chasing hyperlocal space is a big concern for e-commerce majors

This year, hyperlocal startups have outnumbered all other sectors in terms of raising VC money. According to YourStory research,hyperlocal startups have secured over USD 170 million risk capital from investors so far and this appears to be a concern for these unicorns. Until this year, only e-commerce majors had theability to raise rounds over USD30-million mark.However, Grofers and Peppertap had closed rounds to the tune of USD 40 million. Peppertap had secured USD 36 million last month and Grofers is in advance talks with Softbank for a USD 100-million round. Jugnoo is also expecting to gobble abigger round for expansion.

Experts believe that e-commerce majors will either invest in growth-stage hyperlocal startups or acquire them to make their business attractive for more VC capital. We have witnessed the first strategy by Paytm and Snapdeal. The former had pumped in money in Chandigarh-based Jugnoo while the latter had recently invested in Peppertap. According to some reliable sources, Grofers was in talks with Flipkart for possible acquisition but it didn’t work out.

On the lines of VC funding, we see there is a sense of fear of missing outamong e-commerce players as far as hyperlocal sector is concerned. E-commerce majors have realised the potential of hyperlocal and are now ramping up their stakes via investment and acquisition.

Growth stagnation and massive scale are driving e-commerce majors towards hyperlocal

While e-commerce still has to find strong inroads in smaller cities, its growth in metros and Tier I cities is ushering in stagnation. This seems to be one of the biggest drivers for e-commerce companies to go for hyperlocal segment. Hyperlocal startups are scaling up quickly and could be the next sector to bring massive scale to e-commerce majors. According to an industry estimate, the current market opportunity of the space is about USD 16 billion, much bigger than e-commerce and it’s expected to grow to USD 80 billion by 2020.

E-com’s Diwali dhamaka: while customers splurged, here’s how it went for e-commerce players

Compared to last year, e-commerce platforms seem to be better equipped at handling the incredible scale of Indian consumers this festival season. With app only sales, new offers on an hourly basis, and offers catering to night owls at midnight, e-commerce platforms have mostly hit all the right notes to keep a variety of consumers and their sellers happy this festival season. Here’s a status check on how some of the major players did.

Snapdeal

Jayant Sood, chief customer experience officer, Snapdeal reported, “We have seen 17x surge in order volume on the first day. All our efforts for this sale has paid off – 85% of orders placed yesterday have already been shipped out, and the rest 15% today.”

Snapdeal saw air-conditioners, washing machines and geysers selling the most. From today till the 17th, they are holding a Diwali sale across all categories and are expecting a hike in sales across these items.

ShopClues

ShopClues claimed that during their #ekzerokum ‘Diwali Se Pehle Dhamaka’ campaign their GMV peak run rates shot upto 4x (almost 2.5 – 3 lakh units expected to be sold on day one), spiking up the orders to around five times, compared to regular days. Shopclues’ top selling categories has been Mega Deals along with Diwali Flea Market. While their unstructured portfolio across fashion, home and general merchandise categories has been a hit, mobile and electronics deals continue to stock out at super value price points. “We expect the response to snowball to even higher figures as the campaign unveils. It’s a testimony of the deep connect we have with our consumers,” said Nitin Kochhar, AVP – Categories, ShopClues.com.

Flipkart

Flipkart claims to have sold one million units in the first 10 hours of the sale and had 20 million total visits in 19 hours since the event opened on midnight.

Amazon

Amazon.in claims that the first day of ‘The Great Indian Festive Sale’ was the biggest day in their history. For comparison it was two times bigger than their previous ‘Great Indian Freedom Sale’ and four times bigger than the peak of last Diwali.

Amazon saw thousands of customers placing orders every minute for over 10 lakh products that were up for order. On the user experience and technical front they said that they had no technical glitches with their website or app.

Amazon saw customers across all channels across PC, app, and mobile web. But the traffic from mobile accounted for 70 percent. They also saw lakhs of new customers coming from cities like Aurangabad, Malappuram, Dhanbad, Kannur, Tiruchirappalli, Jamshedpur, and others. Amazon claims that on the first day of Navratra, small and medium scale business sellers on their platform saw 8-10 times jump in their daily sales.

Amazon saw orders from grocery and gourmet grow by 3X in unit terms as compared to their previous biggest day and 5X compared to the pre-sale period. They also saw products such as chocolates, Indian sweets, beverages, and organic staples with brands like Ferrero Rocher, Nestle, Haldirams, Bikano, Tetley, and 24 Letter Mantra contributing to 50 percent of overall units sold in this category. The standout though was Ferrero Rocher gift packs, which emerged as the most popular brand, accounting for 22% of units in the category.

Health and personal care witnessed a 4X growth in terms of overall units with FMCG brands being the top drivers. Surf Matic product range and feminine hygiene products were the top selling products in this category.

Apart from the major e-commerce platforms, the smaller, more niche platforms, and price comparison portal too witnessed growth.

Abhinav Choudhary, Co-founder Smartprix.com, an online price comparison portals and affiliate website, said, “We are already seeing more than 40 percent increase in visits of consumers on our portal for price comparison for Flipkart, Amazon, and Snapdeal due to festival times on day one.  More than 300 percent increase than last year’s festival time day one and 200 percent increase in traffic too.”

While e-commerce and mobile is flourishing, manufacturing is languishing,” says Shaurya Himatsingka

 “We need to step out of just business and look at nation building,” words from a young Shaurya Veer Himatsingka, who serves as the National Chairman of Young Indians (Yi), a wing of Confederation of Indian Industry (CII).

The team of YourStory was at Yi’s entrepreneurship summit called #GrowthHack to understand more about the initiatives the industry body is taking to foster entrepreneurial growth.

Talking about Young India, Shaurya tells us that it is a nation building forum, standing on three pillars of – Nation building, Youth Leadership, and Thought Leadership with various verticals of entrepreneurship, innovation, etc. He says

“It’s about taking up projects and translating them into the development of a stronger India while creating a sustainable ecosystem. Our vision is to be the voice of young Indians globally and our mission would be to build the young India of our dreams.”

While speaking about what he thinks of the entrepreneurship ecosystem, he comments it is quite sector dependent. At one end there is excitement around e-commerce and mobile in Bangalore, but on the other he thinks while being based out of the eastern part of the country the sector of manufacturing is languishing behind.

So what steps should the government take to foster this ecosystem? Shaurya comments, by saying the ease of doing business.

“It really summarises what has been missing in India. Coming from a manufacturing background, I often see that our biggest concern is not the project economics, but about getting the land and pollution clearances. This takes away an immense amount of mindspace for an entrepreneur. You got to let him or her focus on the business and not let them get stuck with issues which are peripheral.”

Moreover, individuals who don’t have that amount of rigour are just pushed out of the ecosystem, breaking them. Thus, according to this National Chair ease of business of not just reducing clearances from 50 to 40, but also receiving the right financial and other support.

How Yi collaborates with the government

Speaking from a thought leadership perspective, Shaurya says Yi plays a role in advocacy and policy with the government. Trying to create two page powerful and impactful papers on topics of importance like traffic law, etc., this industry body petitions the government to enact these policies for the betterment of the nation.

The organisation also aims to work with the government actively to see and hope that within 12–18 months the policies suggested by Yi have been implemented by the government across sectors.

Advice to entrepreneur

Being an entrepreneur and angel investor himself, Shaurya urges individuals who are starting up to go for it. He thinks that quite often one gets stuck in analysis and paralysis, with too much analysis. Calling it a great danger, he says founders shouldn’t get caught in the melee of great valuations and funding coming in. One really needs to ask themselves if they see a market five years down hence.

Hence, a healthy balance between being a dreamer and pragmatists is really important to make things successful. As an angel investor, Shaurya looks at great teams. Concluding he comments

“At the end of the day, you invest in people. Moreover, it’s about basics. Whether a market exists for the product and unit economics is becoming important. That is very important and a very healthy thing.”

Courtesy : Yourstory.com