By Anup Pai
Various market research agencies have pegged the global e-Commerce pegged at $2,837 billion in 2022. This is slated to grow by at least 12% over the next twelve months to touch $3,183 billion, in spite of the macroeconomic factors impeding global GDP growth. At the current rate, this could touch $4,902 billion by 2027, thanks to the gradually rising internet penetration and the growing use of smartphones.
Research also suggests that total internet users across the world is currently pegged at over 5.07 billion while the number of smartphone users has touched 5.48 billion (both figures recorded at the end of 2021). These two growth numbers have put to rest the argument around consumer preferences definitively shifting towards digital retail, known in a more informal way of speech as online shopping. While these growth numbers signal continued growth in the global eCommerce business, it needs to be juxtaposed with the low coverage that most digital platforms continue to report. For example, the big platforms in India are reaching barely 7% of the customers. This, in spite of the big tech companies spending huge ad dollars and boasting of an exhaustive array of SKUs on their catalogues.
So, where does the problem lie and what could be the solution for future growth. To get a handle on the matter, we need to recognize the basics – that every enterprise is meant to generate profits. And these profits are meant for the producer as well as those that have invested funds and faith in them. These profits grow when consumers spend money and buy their products, doing so at a price point that offers the producers a margin. This essentially means the selling costs should be higher than what it costs the producer. There is no rocket science in this as trade has always been done this way from time immemorial.
However, the one aspect that got pushed into the background is that producer costs include a variety of components. And one of them is the price of transportation of an item from the producer to the consumer. The longer the distance between them, the more the components that get added under this cost head, resulting in an increased probability of added wastage. Since margins are crucial to business success, the producers would be forced to cut costs elsewhere. This means the consumer gets lesser value.
What came about as an innovation in the e-Commerce era might prove to be the biggest bottleneck in their expansion. This centralized approach has caused an opaque wall to sprung up between the producer and the customer. While ordering food from a restaurant, the big tech platform identifies them by a unique ID, which tracks user preferences to offer them more of the same. Based on early successes, this is what the government’s Open Network for Digital Commerce (ONDC) protocols would bring as a game-changer.
And the first and most immediate outcome would be expansion of hyperlocal commerce, also known as L-Commerce. By chunking down the entire e-Commerce operations playbook into four distinct businesses, government has created the contours of a digital marketplace where buyers can choose the seller, the payment node and the delivery partner – all of it at the local level and that too with the added convenience of a dozen buyer apps, which in future could also include hyperlocal Super Apps.
The game changer in this digital architecture is the direct connection between the producer and the consumer. So, if you are ordering food or grocery from a store, the seller can identify the consumer, which sets the stage for a host of opportunities that exist in the real world when you step into a brick-and-mortar store with whom you share a long and fruitful association. Moreover, it reduces the distance between the producer and the consumer, which means the wastage levels are minimal. And both get the value they deserve.
As more and more local businesses operate locally in the digital world, the profits increase and so does the business value, which benefits the consumer, the service providers who fulfil these orders. What’s even more important is that the entire value of the transactions remain in the local community, unlike in big tech commerce, where profits are centralized.
The author is Founder & CEO, eSamudaay.