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INTRODUCTION
Rise of e-Commerce: The Impact on Indian SMEs
From retail, banking and education
Clearly in years to come online com-
to transportation and hospitality, on-
merce will change the way India lives
line commerce is changing the face
or conducts its business.
of most sectors in India.
According to a report by BCG, overall
internet economy in India is expected to double to USD 250 billion by
2020. This will open immense opportunities for entrepreneurship across
SMEs and create disruption across
sectors.
While urban taxi market has already
been disrupted by the arrival of cab
aggregators such as Ola and Uber,
merchant payments has been disrupted by e-wallets.
Restaurants are moving to cloud
based kitchens while India’s largest
budget hotel brand Ginger has been
toppled by an online startup called
Oyo Rooms.
2
HOW SHOPX IS EASING PROCUREMENT
FOR KIRANA STORES
IN INDIA’S SMALL
TOWNS
Bangalore-based startup ShopX is an unusual competitor
to the ecommerce unicorns of India.
ShopX, which digitally connects
For scaling up, the startup is target-
mom-and-pop shop owners with
ing over 12 million of those mom-
FMCG brands, has created an e-com-
and-pop stores spread across the
merce model that can potentially
country, instead of banking on the
compete with the large e-commerce
online adeptness and purchasing
chains of India in reaching the last
power of India’s urban users.
mile.
“All the digital startups and e-comStarted in 2015, ShopX has brought
merce companies we see today
over 50,000 such kirana stores on-
chase the same 40-50 million users
board its digital platform that allows
who are used to online shopping.
the shop owners to directly order
The bigger market, however, is be-
products from the brands.
yond that. Over 400 million residing
in the tier 2 and 3 towns, as well
3
as villages, rely on neighbourhood
ized surface transport companies to
shops for every need,” Amit Sharma,
take the goods to remote areas.
co-founder and CEO of ShopX said
The advantages of this are in cost
during an exclusive chat with Money-
savings.
control News.
ShopX claims that its transportation
Other firms that operate in the B2B
costs are one-tenth of an Amazon
commerce space include StoreKing,
that uses air shipping for its deliver-
and Snapbizz.
ies. For warehousing, ShopX has tied
up with Fedex and BlueDart.
ShopX connects the small neighbourhood shops, kirana stores, pan
For last mile delivery, ShopX works
kiosks, etc to major brands. These
with local distribution partners who
shopkeepers can browse through
manage and monitor shop owners
a digital catalogue of major brands
in their stipulated area.
such as Unilever, L’oreal, Patanjali,
Micromax, and order any product
That cuts down the need of recruit-
directly from the sellers.
ing delivery boys or of owning vehicles.
A structured progress
ShopX claims that it has seen the de-
ShopX’s role in this long process is
mand for premium brands increas-
to provide the necessary technology
ing in Tier-2 and Tier-3 towns.
for seamless operation.
One such example is the launch of
The retailers in turn subscribe for it
iPhones on the technology platform
at Rs 1,000 per annum.
in January, this year.
Using a proprietary technology platThe company claims it sold more
form, ShopX brings retailers onto a
than 300 units of iPhones, out of
nationwide distribution network that
which 70 percent of the shipments
allows them to benefit from technol-
were for iPhone 5s.
ogy, and offer an array of products
and services.
The logistics is taken care of by
Retailers earn anywhere between
ShopX that leverages the unorgan-
4
30-40 percent as margin on the
According to Ken Research, majority
products, much more than the tradi-
of online sales in FY16 came from a
tional retail model that offers about
clutch of eight metro cities.
20-30 percent depending on the kind
“Mostly it is the last-mile logistics
of product.
that keeps the major sellers away
For brands, it means they can ex-
from smaller towns. Even if they rely
pand their product offerings while
on air shipments, costs are higher,
various aspirational brands are able
which they can’t pass on to the us-
to strengthen market outreach.
ers,” Sharma explains.
The benefits for the retailer are low
But in recent times, various interna-
investment, zero stocking, and in-
tional aspirational brands have ag-
crease in income opportunities.
gressively focused on strengthening
their reach beyond metro markets.
Layers of service
The digital offline model of ShopX
The ShopX platform also has a con-
has offered a win-win situation for
sumer facing app that user of a par-
both brands and the retailers.
ticular shop can download, browse
through the multiple brands availa-
The company has raised about USD
ble, and order directly.
9.8 million from ex-Infosys CEO
Nandan Nilekini, who owns a strategic stake in the company.
The product will be delivered to that
shop, where the user can pay and
ShopX plans to break even by 2018
collect the product.
on the back of its frugal cost strucIn a developed market like the US, al-
ture. The company has also roped
most 85 percent of the retail supply
in Jagdish Kini, former CEO of Airtel
is taken care of through large ware-
(South Region) and former Aadhaar
houses.
chief architect Pramod Varma, as
mentors.
In India, while e-commerce is catching up rapidly, it contributes only
By end of next year, the startup
1.5 percent to the 650 billion dollar
wants to reach about 1 million shop-
economy.
keepers.
5
The startup has also added a formal
credit option in its platform that allows shopkeepers to avail loans from
a clutch of partner banks and NBFCs
such as FlexiLoans and CapitalFloat.
It claims to have disbursed about Rs
20 crore of loans in three months
since its launch. In the pilot stage,
ShopX claims that it has seen a 100%
repayment track for such loans.
6
WHY HOTEL STARTUP
TREEBO IS BETTING
BIG ON IOT AND
BOTS?
The next time you visit a Treebo Hotel, an engagement bot
might greet you at the reception.
Bangalore-based Hotel aggregation
Speaking to Moneycontrol, Sidharth
startup, Treebo is experimenting
Gupta, co-founder, stated that
with engagement Bots and devices
technology would be at the heart
based upon Internet of Things (IoT) in
of Treebo. “In today’s world of
its hotels for guests to interact with
technology, it is hard to predict
and access customised content. The
what will happen in ten years. But
company has aggregated about 250
I can certainly tell you that we’ll be
hotels on its platform, so far.
using cutting edge technologies for
managing quality at our properties
Released on a pilot basis, the bots can
and a bunch of other functions as
detect the number of people, profile
well,” Gupta said.
them, roughly calculate their age,
and based on this display customised
While automation has already become
content.
a reality with cleaning bots doing the
housekeeping in various hotels across
7
the world, Treebo wants to use tech to
Brand endorsement with Irrfan
monitor hotel operations. Gupta said
Khan
that the company would be working
Treebo re-built its web app recently
on getting hotel appliances like air
which claims to load fast on even weak
conditioners and hot water geysers
network connections was featured
equipped with sensors to remotely
as a case study in Addy Osmani’s
monitor them.
(Engineering Manager at Google)
discourse about the future of PWAs.
The company claims to provide a
30-minute service guarantee and fix
Treebo is also looking forward to
dysfunctional appliance essentials
expanding its corporate clientele. And
within minutes of getting reported.
for that, the company announced its
With these IoT-based sensors, Treebo
tie up with Travelport, a global travel
plans potentially solve such issues
commerce platform, last week.
even before a guest can report it.
“Corporates like us. We have about
“We can also have something for
3,000 corporate relationships, and we’ll
controlling the electricity supply of
continue to develop our corporate
the room. We can link the electricity
clientele,” Gupta said.
supply of the room to the property
Treebo also launched its new brand
management system,” Gupta added.
campaign with Irrfan Khan as its brand
ambassador last week.
Started in 2015, the company is
funded by SAIF Partners, Matrix
Partners India, Bertelsmann India
“We stand for a practical brand;
Investments, Innoven Capital and has
we stand for a brand which has an
raised USD 22.6 million so far.
absolutely unprecedented value for
money. We stand for a brand which
In comparison with Treebo’s 250
is catering to a wide cross-section
properties, its bigger competitor Oyo
of travellers. Irrfan has a universal
claims to have about 7,000 hotels
appeal. He has a no-nonsense,
under its belt. Another rival, Gurgaon-
practical kind of a personality. And
based FabHotels claims to have about
this exactly what Treebo stands for as
150 hotels.
well,” Gupta said.
8
Going by the numbers, Gupta claims
that the brand campaign has been a
success.
“Primary objective is to drive
awareness, and the one way to
measure that is to look at the traffic
on the website. We were expecting a
2x-2.5x jump in the traffic, and we saw
2x jump after the campaign,” he said.
9
GOVT TARGETS USD
1 TRILLLION DIGITAL
ECONOMY IN INDIA
BY 2025
Over the last 2 years, I-T dept has hastened pace of seeding
PAN with Aadhaar that contains citizens’ biometric & other
details.
At a meeting of the Indian
Delhi on Friday lasted for over
technology industry’s stalwarts, the
two hours and was attended by
IT minister Ravi Shankar Prasad
names such as Infosys co-founder
called for greater cooperation
Kris Gopalakrishnan, Wipro’s chief
between the government and
strategy officer Rishad Premji,
industry and proposed setting up of
Google India managing director
special innovation zones to support
Rajan Anandan, Hike CEO Kavin
startups better.
Bharti Mittal, Practo CEO Shashank
ND, among others.
The government estimates the digital
economy to surpass USD 1.115
The round table was organised by
trillion by 2024-25.
the Ministry of Electronics and IT
(MeitY) to discuss “Developing the
roadmap- 1 trillion dollar digital
The industry consultation in New
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economy”.
The minister said the industry as well
as the government agrees that India
has the potential to surpass USD 1
trillion target in the next few years.
The participants discussed ways in
which Indian startups can contribute
to the economy, proposing a
framework for promoting startups
through a “startup cluster policy”.
The minister said that MeitY would
be coming out with a new electronics
and software products policies, as
well as a framework for data security
and data protection in the country.
Item
2016-17
2024-25
IT/ITeS
$ 160 Bn
$ 350 Bn
Electronics
$ 100 Bn
$ 300 Bn
Telecom
$ 80 Bn
$ 150 Bn
E-Commerce
$ 30 Bn
$ 150 Bn
Digital Payments
$ 3 Bn
$ 50 Bn
Cyber
Secutiry
$ 18 Bn
$ 35 Bn
IoT
$ 6 Bn
$ 20 Bn
Sharing
Economy
$ 1 Bn
$ 30 Bn
Digital Skilling
$ 15 Bn
$ 30 Bn
Total
$ 413 Bn
$ 1.115 Tn
He further said that an intersection
The industry also spoke about the
of Digital India and Startup India
great potential for low cost cyber
programmes needs to be explored,
security products in India.
especially in the agriculture,
education and healthcare domains.
On layoffs in IT Sector
The minister said that MeitY would
The minister downplayed concerns
work closely with the respective
about IT layoffs and said the IT
ministries in these fields.
industry has ample employment
opportunities. He said that a big BPO
Here are Government’s estimates of
market stands untapped in India,
sectoral breakup of India’s ‘trillion
and that the industry is a net hirer of
dollar digital economy’ by 2025:
talent.
He further said that the industry and
the government will work together
on digital skill development.
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Speaking on the sidelines of the
event, Kris Gopalakrishnan told
Moneycontrol, “We haven’t seen
mass layoffs. The business is usual. It
is a transformation stage that every
industry goes through. The industry
has ample resources to re-skill
manpower.”
Rishad Premji said that all
organisations are looking to hire
more people locally in the different
geographies they operate in.
12
LENSKART IS
DISRUPTING THE
INDIAN EYEWEAR
MARKET WITH
ONLINE-OFFLINE
STRATEGY
Ratan Tata-backed eyeware retailer Lenskart plans to
invest over Rs 100 crore on business expansion, including
opening of 400 stores, in the next two years.
The company, which has a strong
stores,” Lenskart CEO Peyush Bansal
online presence, is eyeing a total
told PTI.
of 700 stores by March 2019 by
targeting small towns, tier II and III
The current Lenskart stores in over
cities.
80 cities are based on franchise
model, he added.
“As of now we have 300 stores
across India and in the next two
When asked about investment for
years we plan to open another 400
the expansion, Bansal said the
13
company will be putting in capital
In September last year, the company
primarily around building back-end
had raised an undisclosed amount
supply chain, while franchises would
from Premji Invest -- the investment
invest in opening stores.
office of Wipro chief Azim Premji.
“For us the total investment would
run to around Rs 100 crore primarily
to build supply chain, to be able to
service all our stores and also train
staff,” he added.
Elaborating on the company’s
expansion strategy, Bansal said it so
far has received good response from
the tier I cities and was looking to
expand its footprints in small towns.
“We have started entering some of
these small cities. We have opened
a store in Lucknow, one will soon be
opened in Bareily,” Bansal said.
On expenditure on brand marketing
and advertising, Bansal said: “We
would be spending close to Rs
140 crore in brand marketing
and advertising over the next two
years, apart from the back-end
expenditure.”
Lenskart has raised over Rs 700
crore from investors, including
Ratan Tata, IFC (venture capital
arm of the World Bank) and Kris
Gopalakrishnan (Infosys co-founder),
among others.
14
BANGALORE BASED
BYJU WANTS TO
CHANGE HOW
STUDENTS LEARN
MATHEMATICS AND
SCIENCE IN INDIA
Online learning startup Byjus’ expects to break even and
turn profitable in the fiscal year 2017-18, just two years
after it launched its popular learning app in August 2015.
Byjus’ turned profitable in the
“We are growing at an exceptional
quarter ending March, recording a
rate. We have also cut down our
revenue growth of 150 percent to Rs
losses. You will soon see a unicorn
260 crore, compared to Rs 115 crore
company in Byjus’. We are excited
in the same month last year.
because there is a huge addressable
market left for us to explore. We
Founder Byju Raveendran in an
have cracked just 1 percent of the
interaction with Moneycontrol
potential market,” Raveendran
claimed that the company may also
added at an event where Byjus’
join the unicorn club soon.
launched a separate app for parents
15
called ‘Parent Connect’ to monitor a
accounts for over 90 percent of its
child’s progress.
revenue.
The startup provides a K-12 learning
Byjus’ has been a favourite of the
app which offers learning programs
investor community, making it the
for students in classes 4-12 and
highest funded startup in the Indian
those preparing for competitive
ed-tech space.
exams such as IIT-JEE, CAT, IAS, GRE
Its method of teaching of complex
and GMAT.
subjects through diagrams and
The company now plans to go
visuals has led investors including
vernacular and is already working
Chan Zuckerberg Initiative, IFC and
on a Hindi app. “We will add other
Innoven Capital to back the company
languages soon,” Raveendran said.
with over USD 200 million in last four
The purpose of adding languages
years.
to the Byjus’ platform is also to
go international. The startup is
The startup has also added
exploring international markets in
enhanced capabilities of analytics
South Asia, besides the Middle East,
that will monitor the complete
especially Dubai.
learning path of a student.
It will help the app create tailor-
Byjus’ has also identified three
made lessons for students,
companies in the South Asia market
identifying and bridging the loose
for acquisition, the company said.
ends in a learning curve.
“We will look at some interesting
product companies which cater to
The parent app will be a separate
students studying in Class 4-12,”
product from the learning app. To
Raveendran said.
date, Byjus’ has had over 8 million
downloads and over 400,000 paid
students on board.
The company started as an offline
tutoring startup five years ago but
launched the current form of online
The company estimates that
teaching only in 2015.
targeting the parents of existing
users alone will give at least 8 million
more app downloads.
Currently, the online medium
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The company is also working on
an internal project to incorporate
advanced technologies such as
augmented reality and virtual reality
in its learning videos.
“We are working on various cases for
below sixth standard students, for
high school students and exploring
immersive experiences that work for
each bracket,” Ranjit Radhakrishnan,
Chief Product Officer of Byjus’ told
Moneycontrol.
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WITH GST ROLLOUT,
E-COMMERCE SECTOR
TO BENEFIT FROM
FASTER DELIVERY AND
TRANSPARENCY
India is set to roll out the Goods and Services Tax (GST)
from July 1, which is expected to pare the costs borne by
logistics and e-commerce startups face in India.
The e-commerce players that
delivery and subsume the entry
depend heavily on third-party
tax introduced on e-commerce
logistics firms to transport goods to
shipments by some states,” a
the customer’s doorstep have largely
spokesperson for Amazon India said.
welcomed the new GST regime,
Apart from easing the hurdles in
which they say will ease the hassle of
transporting goods across states,
inter-state ferrying of goods under a
the uniform tax will also bring down
centralised tax regime.
costs of warehousing. There will be
a move to create bigger distribution
“We believe GST is good for the
centres, as Indian companies would
e-commerce industry as it would
now need fewer warehouses.
eliminate hurdles in inter-state
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“The barriers at state borders will
reduction in transportation costs, he
ease. The complexity of paying
adds.
different taxes in 29 different
state territories will also ease.
Flipkart, which owns logistics startup
Warehousing will become more
EKart, and Snapdeal that runs
integrated. We won’t have to set up
Vulcan, did not comment on the
warehouses in different states,” TA
impact the new GST rates, will have
Krishnan, CEO of logistics firm Ecom
on their operations.
Express said.
Currently, online marketplaces
Trouble at Source
and logistics companies have set
One direct provision in GST that
up warehouses in different states
is expected to directly impact the
in order to avoid tax burden of
online retailers is Tax Collection
different regions.
at Source (TCS) by marketplaces.
Although the TCS is set at its lowest
According to Care Ratings, the GST
at 1 percent, the levy ignores the
is expected to trim logistic costs by
pleas of e-commerce players who
up to 20 percent from the current
have been lobbying against it.
levels.
The GST regime has mandated all
“The cost of logistics is currently
online marketplaces to deduct 1
very high in India, costing about 15
percent tax from the proceeds given
percent of GDP. In mature markets,
to merchants and suppliers, which is
it stands at about 8 percent. With
expected to impact the cash flows of
GST, multiple layers of tax will
the sellers.
reduce thus bringing down the
overall cost. In the long-term, it will
This provision is specific to electronic
also help reduce the unorganised
commerce and doesn’t apply to
element in the logistics sector,” Neil
brick-and-mortar retail outlets.
Shah analyst with Counterpoint
At the moment, e-commerce sector
Research says.
in India is at less than 2 percent of
the entire retail segment.
This will boost demand for high
tonnage trucks and lead to overall
19
In February, the online retail players
of BCG Consulting Group says. “A lot
had argued that TCS would result
of e-commerce sales are attractively
in a capital lock-down of about
priced because they get pricing
Rs 400 crore per annum and may
benefit from merchants based in
discourage merchants, especially
states that have lower VAT rates.
small-scale sellers, from selling
This helps online marketplaces
online.
compete better with local retail
across India.”
Amazon had also argued against
TCS saying it can put up to 1.8 lakh
Mobile phones, for instance, attracts
jobs in the industry at risk, where
a tax rate of 5 percent in Karnataka,
small and medium retailers using
while in Maharashtra it is at 13.5
the marketplace will be the worst
percent. So an online buyer sitting
affected as the lock-in will impact
in Mumbai can buy a cheaper phone
their working capital.
from a seller in Karnataka. However,
the e-commerce players will lose
According to analysts, it could
that advantage under GST, in any
also lead to procedural hassles
case.
for e-commerce companies who
will now have to follow additional
On the positive side, merchants
compliance.
evading tax payment on their online
sales can be detected easily.
Industry body FICCI also spoke
against the TCS levy saying that
Transparency in online marketplaces
90 percent of the suppliers on
Under the new rules, details
e-commerce marketplaces are small
furnished by e-commerce companies
and medium enterprises hence
will be verified against the details
it would be challenging for them
provided by the merchants, which
to comply with these reporting
can reign in discrepancies in
requirements.
payments.
If the TCS deduction discourages
It also mandates that all merchants
sellers from retailing their products
supplying goods and services to
online, it could be a problem for
online marketplaces to register
e-commerce players, Abheek Singhi
under GST, irrespective of their
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threshold.
Post registration, merchants will
have to report sales from online
channel separately from their offline
sales.
The marketplaces are also required
to disclose sales and returns data
along with merchant details in their
filing. This would make it difficult for
sellers and online marketplaces to
misrepresent their book of accounts.
The e-commerce players are also
suggested to maintain internal seller
rating, which will help them identify
merchants who are diligent in
making their tax filings.
This, says Shah, will improve the
quality of sellers on their platform.
For e-commerce platforms, this can
be a positive given the constant
tussles with sellers.
The new system will introduce
effective tracking and ensure that all
supplies are captured within the tax
system.
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