SME Editorial
A report published by Grant Thornton India LLP and the Confederation of Indian Industry in 2016 titled M-Commerce: The Next Generation Commerce states:
In the first week of November 2016, Prime Minister Narendra Modi announced demonetisation of INR 500 and INR 1000 notes. While the objective has been curbing black money in the context of counterfeiting, tax evasion, corruption and terrorism, this development has brought to the forefront the need and the opportunity to become a “cashless” society in the near future. M-Commerce is right in the middle of this transformation and has a pivotal role to play as a catalyst in the transformation to a “cashless” society. This period is the inflexion point for M-Commerce, which has already been making long strides on the back of increasing internet-enabled and affordable smartphone base and improving telecom infrastructure.
Earlier in 2015, mobile retail e-commerce sales in India amounted to USD 6 billion and are projected to reach USD 37.96 billion in 2020, when total retail e-commerce sales are set to generate USD 79.41 billion in revenues. In 2017, India overtook the US as the world’s second largest user of smartphones, China being the first one. This was also the year Reliance launched Jio and added 160 million users within a year of its launch. According to the 2017 ASSOCHAM-Resurgent India study, Indian e-retail was expected to touch $17.52 billion in the year. Add to that the government’s planned investment of $75 billion in road, rail and port connectivity programmes, and we have the mobile commerce ready to take off in the country.
What Drives M–Commerce in India
Technology, lifestyle, regulation and funding for telecom infrastructure and smartphones have been the key drivers for the emergence of m-commerce in the country. But, the rate at which India has caught up with the technological developments elsewhere has been impressive. According to the Internet and Mobile Association of India (IAMAI), the internet penetration in India was estimated at 462 million users in 2016, out of which 371 million were using mobile internet. The latter category is growing at more than 50 per cent year-on-year.
While urban India factors for 71 per cent of the internet penetration, rural India is catching up on the back of affordable smartphones and increasing coverage of 3G and 4G networks. The improvement of telecom infrastructure and the spread of smartphones have facilitated the transition of Indian consumer to mobile computing. “India will completely leapfrog the desktop/laptop computing stage to move directly to a mobile-enabled digital era,” Dipanjan Purkayastha, a co-founder of omni-transport platform Tygr and Hyperxchange, a refurbished gadgets marketplace. He feels that this jump is set to push mobile commerce in the country.
As the counsumer behaviour matures in the country, another factor comes into force. Lifestyle changes, where people not only demand better products and services but also expect personalised shopping experiences, have also contributed to the spread of m-commerce.
Another vital driver in this growth story is how well-funded are market leaders of m-commerce. Emphasising the role of private equity (PE) firms and venture capitialists (VCs), the M-commerce: The Next Generation Commerce Report says, “The reach and scale of telecom and the affordability of smartphones resulted in either creating innovative businesses disrupting the market or made traditional businesses transition to online/digital businesses. PE/VCs have played a key role in funding and backing these businesses (US$ 4.21 bn in 2014 and US$ 6.16 bn in 2015). Hence, the start-up ecosystem was vibrant (44 per cent and 74 per cent of the above investment values) and we witnessed several unicorns emerging.”
Add to these factors, the favourable regulations – mainly demonetisation, but also the initiatives by the government to push e-governance – being promoted by the government, and we have a ready blueprint for stupendous growth of m-commerce in the country.
The East as Mobile First, Mobile Only Market
A lot of these factors are visibly at play in the digital commerce segment in eastern India. Primarily, the large gaps among its urban, semi-urban and rural demographics and a lack of wired connectivity mean that wireless will be the mode of digital growth in this part of the country. This also means that the computing device of choice for the real India needs to be portable, durable and cheap. The smartphone is the only option that fits these criteria.
“With smartphone becoming the device of choice, mobile commerce in eastern part is emerging as a predominant reality. Hence, it is now critical for marketers of this region to create mobile-first and, in some cases, mobile-only business models,” said Purkayastha, who has spent over 20 years in the US and India helping tech businesses scale up from scratch to more than $100 million in revenue.
Subir Dutta, the president of the Eastern Chamber of Commerce, feels that with the rapidly changing technology as well as governance standards, it is becoming increasingly important to integrate e-commerce with m-commerce. “Such integration is of utmost importance, since from the end user’s perspective, it saves time and cuts down a significant amount of bureaucratic red-tapism that exists. From a transactional perspective, it leaves a very clear audit trail, which is easy to track from end to end. This would also enable the government to track all transactions that take place on this platform with significantly low overhead costs,” he elaborated.
E-commerce transactions still lag behind in the eastern part of India, and m-commerce is no exception to this trend. One reason why the east lags behind is economic: this region contributes less in retail consumption than every other region of the country. Thus, lagging behind in e-commerce and m-commerce is part of this larger trend. This slower economic growth of the region also builds inertia, where users feel safer sticking to traditional offline channels of business and retail.
Eastern India has several locations situated in difficult terrains, where there is a challenge in accessing mobile networks. In addition to this, the region also has significantly lesser industrial activities as compared to other regions in the country, as a result of which the extent of m-commerce transactions is lower here.
The m-commerce in West Bengal is mainly done by consumers living in Kolkata. The city of art enthusiasts is passionate about buying art-related goods online as compared to consumers in other cities. Male buyers also have a keen interest in games- and fitness-related equipments, like protein bars and protein shakes, while female buyers love to splurge on photography equipment and accessories, followed by weight-loss gear.
The surprise factor, however, is the Northeast, which is recording one of the fastest growths in mobile phone adoption across India. This is also reflected in the increase of m-commerce in that region. The Northeast is also fashion conscious and trendy. This accounts for the disproportionately high percentage of sales experienced by fashion and eyewear retailers in that region. Hyperxchange sees more people buying its premium smartphones in the Northeast than in West Bengal.
How Ready are Eastern SMBs for M-Commerce
Businesses and consumers in eastern India are changing, but perhaps at a slower pace than the rest of India. This could prove to be a challenge or an opportunity, depending on how entrepreneurs respond to this reality.
Hyperxchange is an east-India-based business that sells refurbished premium phones, laptops and cameras through offline as well as online stores. This ensures the company is able to address both customers who are comfortable buying directly from their mobile phones, as well as those who are more comfortable with the high-touch environment of a retail store. “In the last one year since launch, Hyperxchange has scaled across more than 10 retail stores in east India and sells thousands of phones every month to consumers in this region. Almost 75 per cent of our revenue today comes from B2B customers in this region,” says Purakayastha, an alumnus of National Institute of Technology, Kurukshetra, and angel investor who is advising several start-ups.
In Dutta’s view, SMEs of eastern India can integrate e-commerce with m-commerce provided there is adequate infra-structure available to support the adoption of such technological integration and is there is a sufficient volume of business transactions. “There are already several niche players which are working on such integration platforms for this region,” enthused the industry veteran with 24 years of experience in assurance, management consulting and human resource consulting assignments spanning throughout the world.
High-Growth Areas
Mobile commerce is a high-growth area for retail as well as agri-based businesses, as mobile connectivity enables the rural sector in the east increase smartphone usage there. Purakayastha maintained that the east is also rich in its diversity of languages and cultural heritage – one high-growth area for the region would be vernacular services, like news and literature. “The east has the lowest penetration of movie theaters in India. Streaming entertainment content on mobile phones could be a big-growth area for the semi-urban and rural areas,” he suggested.
“The SMEs which are in the service, trade and retail sectors of this region have the potential to accelerate growth through mobile commerce,” added Dutta.
The Future Roadmap
With the second largest consumer market and the stable economic indicators, India is expected to see a revolution in the way business is conducted in the coming years. Introduction of 4G services (which would increase the mobile internet penetration), planned implementation of the GST (which is expected to simplify indirect taxation) and the policy focus on electronic payment systems are expected to facilitate the next level of growth of m-commerce in the future.
The business community from eastern India is also gearing up to seize this opportunity by innovation and implementation of digital business ideas. “This part of the country has seen quite a few successes in this space and they are just getting started on this path. Demonetisation and the entry of new service providers, such as Reliance Jio, will fuel the growth of m-commerce, and I think most of the retail commerce from eastern India will shift to m-commerce in the foreseeable future,” said B L Mittal, founder, SastaSundar, India’s leading digital network of healthcare. SastaSundar manages pharma and wellness products’ supply chain and connects doctors, diagnostic services, healthcare clinics and health information services.
“SastaSundar leverages knowledge and digital connectivity to reduce cost and provides high-quality medicines, healthcare products and services. Knowledge and digital connectivity enable us to diminish price and create ease while offering superior quality drugs, healthcare goods and services,” shared Mittal.
Like Mittal’s approach, start-ups and smaller businesses in eastern India are banking on affordability and improved services to the consumer to carve a niche in a market which is conservative in its buying habits.
