The Future for Ecommerce and Consumer Internet Sector in India - EY Report
India currently has 430 million internet users, however digital transactions is still low and this provides massive oportunity for growth and expansion for ecommerce and consumer internet companies according to an EY Report. The future outlook for most of the sectors in this domain looks bright. A detailed analysis of each sector can be seen in this article.
With diversification on the cards in the hyperlocal market the existing players will be seen foraying into different products. As the barrier to entry is low, newer players will be seem entering the market. Consolidation seems to be the way forward. As the market grows there will be consolidation, with two or three major players emerging. The companies will continue to use Machine learning (ML) and Artificial Intelligence (AI) on solving the key issues in the sector.
Travel and Hospitality
Lack of structure in the space will lead to challenges. Competition from offline players is also a concern. However this sector is poised for continued growth.These can be mitigated through innovation in business both at the front end and at the back end. With Indians looking at international holidays as an option, companies will look at launching global brands by either entering into partnerships or by acquiring new brands. The existing brands may also look to diversify the existing portfolios.
Companies are looking to launch their own online first brands to build customer loyalty. With an increase in the number of online buyers coming from Tier II, III, IV cities the competitive market is set to grow. Companies may need to divide the customers into various micro segments. The ecommerce segment in India lags behind US and China due to lack of unified government policies, lack of knowledge of return policy, post sales service, concerns in terms of fitting in fashion etc. Due to these factors customers are taking time to adopt the online model. But companies should find ways to navigate through these hurdles to retain current online customers and also attract new customers.
According to a report by NSSO, India is home to the largest after-school tuition market in the world, with over 7.1 crore out of the 30-crore school-going students take supplementary coaching classes every year. The high growth potential of this sector will continue to attract investors. The offline market is increasingly trying to add online as a part of their offline content. In the coming years Artificial Intelligence (AI), Machine learning (ML), Virtual reality (VR), game theory, gamification, local language content will become a part of the online learning phenomenon.
Payments and Wallets
Smaller gateways and wallet companies may mushroom as the rural and the retail sector accepts these companies. Digital transactions are set to increase in both volume and value as the formal sector is digitized and the informal sector is brought into the formal economy. Innovative solutions will be provided by companies as opposed to just commoditized solutions.
There is a very high ratio of risk and reward associated with this sector. The reward mainly revolves around rapid innovation and the risk is the massive infrastructure cost. Two important future trends could be adoption of electric vehicles and offline model for cab companies to cater to tier II cities. Future trends seem to be better travel time prediction, increase in eco-friendly transportation etc. These days due to alternative means of transport owning a cab is no more a necessity. As companies achieve economies of scale the unit economics will improve as the recall value is high.
The sector will have high investor interest especially with cutting edge technology and economics of cost. Smaller players will have to come up with better offerings if they expect to raise capital. Further, they will look to consolidate. There will be increased traction in B2B loans, B2C loans and insurance space. Companies with quick turnaround, good local presence, and distinct business models will thrive in the unstructured space. However too much regulations is a cause of concern and increases the cost of implementation.
Discovery driven shopping in social commerce rather than search based shopping will bring the second wave of online customers. Social commerce is set to grown in India. It is at a budding stage in India. There are estimated 18 lakh women selling goods worth US $ 8 billion through social platforms. With the growth of social platforms in India and overall internet penetration the sector will naturally see growth.
Even though a large part of business is in apparels, in the future the demand for other segments will increase. There will be an upsurge in user generated content marketing. Moreover voice and vernacular will help in deeper penetration in the segment. There are still spaces in this sector for more companies to enter.
The gaming sector is set to see good growth in the coming years. Localization in the Indian context is likely to push greater adoption, engagement and monetization. Actual money games such as ‘Rummy’, ‘Teen Patti’ is set to see exponential growth both in terms of revenue and number of users.
Fantasy games focused on cricket and kabbadi are expected a stronger adoption and usage. There is a very high level of fans engagement with the sport in these games. Indian digital fantasy gaming industry is expected to grow exponentially.
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