India’s e-commerce revenue growth is at 112 per cent (YoY) and 79 per cent over the past two weeks, clearly signalling a bullish trend for the sector.
- By Divakar Vijayasarathy
‘Events don’t hurt us, but our views of them can’, Epictetus, the Roman philosopher, once quoted. Covid times have given rise to unprecedented challenges and crisis, however, for the optimistic and opportunistic, there are green shoots for the taking. The e-commerce sector, considered to be a formidable fledgeling vis–a–vis, the traditional brick and mortar business couldn’t have asked for a better stage to showcase its relevance.
Globally, there are disturbing developments like businesses shutting down or filing for bankruptcies but what is getting lost amidst the wave of pessimism is the significant prospect of low cost, geography agnostic, tech-driven and profitable online business and administrative models which are here to stay. From traditional businesses to regulators to judiciary, the embrace of digitization has happened at the rate of light-years even by utopian standards. India’s e-commerce revenue growth is at 112 per cent (YoY) and 79 per cent over the past two weeks, as per CB Insights, clearly signalling a bullish trend for the sector. Some of the evolving possibilities in the realm of online commerce during these times and beyond can be imagined as:
- Inevitable embrace of “digital” by the traditional world: Most traditional businesses, which have had a marginal online presence for the sake of “me too” being online, have now been forced to look at the channel as the only saviour during these times. The lockdown and the paranoia have made physical stores redundant in the immediate future however the digital world has enabled many offline brands to stay relevant and accessible to their customers. Zara, one of the largest high-street fashion retailers, has announced the closure of 1200 (nearly 20 per cent of its outlets) stores over the next two years to focus on online sales.
- Reinvention of physical store options: Physical businesses are beginning to explore newer formats that are cost-efficient, tech-heavy and medium agnostic. Starbucks would shut up to 400 company-owned locations over the next 18 months while simultaneously expanding “convenience-led formats” such as curbside pickup, drive-through and mobile-only pickup locations. Similarly, many offline retailers are providing the option of buying online and taking delivery/exchange offline (omnichannel), in a bid to expand client engagement across channels.
- Service businesses become a virtual network of professionals: With travel getting risky and regulated, online professional consultation (doctors, lawyers, chartered accountants etc) has become common and the need to use a physical infrastructure is restricted for chronic cases or diagnosis. Use of freelancers vis-à-vis full-time employees is likely to accelerate the trend of self-employed professionals – rather we might call it the uberisation of the professional services market.
- Homeschooling is big and pervasive: Homeschooling, which was thus far considered as a remote alternative to schooling, is now all-pervasive and a significant minority of parents seem to prefer this as an alternative going forward given the lacunae in our traditional educational system. A survey by ParentCircle reveals that 15 per cent of parents in India were considering homeschooling as a serious option, something which was faintly in the realm of possibility has become a serious reality and is here to stay. Homeschooling opens up new opportunities for retired and far-flung teachers to have a shot at economic prosperity and for parents, neighbourhood and schools need not necessarily go together.
- Network as critical infrastructure: With physical movement significantly restricted, cyberspace has become the new zone of action. Unlike the physical market, the winner-takes-all theory looms large in this arena. Regulators are working overtime to bring out appropriate laws to democratise digital access, preserve data privacy and harness its potential in anonymity and more importantly control the effects of monopolization of digital market places. Investment and regulation of digital infrastructure would determine the success of e-commerce and no country wants to be left behind. The Indian government has proactively introduced a draft e-commerce policy that was to facilitate the setting up of a regulator for the sector. However the same has been put on hold given the Covid times. Right to digital access would become a fundamental right just as the right to life or education.
- The rise of Warehouse from Mall Rubbles: Alternate uses of existing real estate have quickly emerged and property owners are finding ways to sweat their assets. E-commerce logistics has emerged as one of the promising avenues for a sustained annuity flow, mall and even (run down) theatre properties are quickly getting converted to Warehouses within city precincts. In one of the rare displays of optimism, Mr Gary Anderson COO of Prologis Inc,( one of the largest e-commerce logistics companies in the world) stated that “95 per cent of our assets and our facilities, and our customers’ operations, have remained open throughout the entirety of the crisis…and I don’t think you can say that about many real estate asset classes.” This trend is likely to gain traction in the near future and mid-term, given the Covid constraints of access and safety.
Covid has certainly brought out the best of mankind’s survival instincts, despite constraints the resilient have managed to thrive and e-commerce is one such instance. A significant proportion of the population is likely to embrace the change and many are likely to stay for the good. During these times it makes sense to start afresh and look forward from an open and independent perspective. To remember Winston Churchill “If we open a quarrel between past and present, we shall find that we have lost the future”.
Divakar Vijayasarathy is the Founder & Managing Partner of DVS Advisors LLP. Views expressed are the author’s own.