Smaller e-commerce players struggle to stay relevant

They are children of a lesser God with investments hard to come by.

After the mega $16 billion deal by Walmart to take over Flipkart, smaller e-commerce players such as Snapdeal and ShopClues are re-working their strategy, focussing on core product categories and taking on new customer profiles to stay relevant with discount-led, online shoppers.

Snapdeal, which has turned its focus to the mass market, catering to the customers in tier II and III towns, has witnessed a 40 per cent spike in seller activity which were previously dipping, leading to 2.5X growth in order volumes, revealed Snapdeal insiders.

ShopClues, a tier II, III, IV focussed player from inception, is now going omni-channel with its first store due to open in Lucknow soon. While Snapdeal refused to comment, insiders say, the turnaround happened with the sharp focus on the value segment along with the regular promotions by the company like launching special online stores on festivals/celebrations such as Eid, Father’s Day, Summer Store.

ShopClues, which has reportedly been shopping around for a buyer, plans to open a pan-India network of experience stores that will showcase its in-house exclusive labels like Digimate, Home Berry and MEIA.

How far will these new strategies and their outcomes take Snapdeal and ShopClues in a dog-eat-dog market where only the most deeply funded have sufficient runway to survive and thrive?

With Walmart entering the fray, you can very well start writing out the obituaries of fringe e-commerce firms like Snapdeal and ShopClues, observes Rajeev Banduni, CEO, GrowthEnabler, a firm that delivers data, insights & intelligence on disruptive technologies and digital innovations.

“Since these smaller firms do not have deep pockets to offer price, convenience, fulfilment at scale, they would necessarily have to offer customers a unique value proposition that the big players do not have, in order to survive. Like specialty, omni-channel firm, Patagonia that offers outdoor clothing/gear from climbing, surfing, skiing to snowboarding, fly fishing and trail running,” he said. Anil Kumar, CEO of RedSeer Consulting agrees. “It is very difficult for smaller horizontal firms - Snapdeal and ShopClues to survive, unless they are able to raise huge rounds of funding.

But, he points out that niche firms that offer differentiated value propositions to customers that cannot be easily replicated by the big horizontal marketplaces, will continue to be successful.

For instance, beauty and cosmetics firm, Nykaa whose market share is over 45 per cent engages with its customers online, with beauty-related content and at its stores where trained beauty experts offer recommendations and makeovers.

Pepperfry dominates the online furniture and home décor market with over 60 per cent market share and BigBasket, which has over 40 per cent market share, also offers its house brands which brings in a significant chunk of its revenue.

Sanjay Sethi, co-Founder and CEO, ShopClues, believes otherwise. “When shopping malls started mushrooming, every soothsayer predicted doomsday for local markets. But, Sarojini Nagar and Karol Bagh markets in Delhi are thriving; so are Fashion Street in Mumbai and Commercial Street in Bengaluru.

E-commerce is still only 2 per cent of retail, so there are opportunities for multiple players operating in different segments of the consumer spectrum. We are focussed on the lower-income “Bharat” consumers who are largely underserved, and that’s a huge opportunity,” he said.

There is enough room for four-five e-commerce firms in India, says Vidhya Shankar, Executive Director, Grant Thornton India.

“While a pure discounting model will not work anymore for smaller firms like Snapdeal and ShopClues, if they re-work their strategy and focus on specific product categories to get their unit economics in place, they will be able to attract fresh investments and be back in the game,” observes Shankar.