E-commerce offers multiple benefits to society by enabling uninhibited growth of entrepreneurial ventures, creating an inclusive ecosystem, promoting SME growth and providing direct and indirect livelihood to many. Let’s look at how e-commerce players are making efforts to create a synchronous business platform.
According to the KPMG-IAMAI ecommerce report, ‘SME/MSME sector contributes significantly to the manufacturing and exports of India and the sector provides employment to 42 million individuals across 13 million units spread across the country. Despite registering a consistent higher growth rate than the rest of the industrial sector, many SMEs and MSMEs in India do not have the requisite knowledge or resources to reach out to customers on digital media.’ Marketplace platforms provided by e-commerce players like Amazon, Olx, Quikr, Fashionandyou, Snapdeal or organisations such as the Central Cottage Industries Corporation of India (CCIC) and the Handicrafts and Handlooms Export Corporation of India (HHEC) have been instrumental in providing livelihood opportunities to individuals associated with SMEs and MSMEs and other small retailers.
There are small and budding entrepreneurs in different parts of India who are hemmed by big retailers and looking for access to a platform that would provide them with avenues to get the customer at a minimal investment. E-commerce is now helping small retailers by creating a perfect platform that connects them and their consumers, creating a wonderful mix of pricing, access, distribution, convenience and extended employment opportunities. The advantage is that it not only makes the site an exclusive shopping destination, but also gives small and medium retailers a chance to sell to a bigger clientele. Vendio supports over 80,000 small and medium online retailers in the States, and the US from day one has been a very important market to Alibaba.com. AliExpress.com and Alibaba.com have a variety of sourcing opportunities to reduce the cost, improve the margin, and differentiate with other online competitors.
A nationwide housewives’´ network in Peru, Tortas Peru, which bakes confectioneries and sells them over the internet, has generated lucrative employment opportunities for women taking care of children at home while providing the country with much-needed foreign exchange. India Shop, an online platform, enables rural artisans to sell saris, leather goods, sculptures and other handicrafts made by rural and women cooperatives in Tamil Nadu. They provide the rural artisan women with a direct selling platform to local, regional and global customers, thus cutting out the middleman and ensuring higher profits. Snapdeal.com was the first ever online partner to tap directly from the manufacturer; it is very well known in the Varanasi market. Other than generating income for both the parties, small manufacturers help the online portals to showcase regional products and procure small volumes. This is a win-win situation for both – the vendor and the e-commerce portal – as they get to showcase newer products at short intervals, which keeps the customers interested in buying more from these websites.
Fashionandyou.com started their operations by selling popular national and international brands, which were anyways sold by other players also. What was missing, however, was the regionalised and localised touch and the uniqueness of ethnic products manufactured in Tier-II and -III cities that were not available in metros. “Fashionandyou.com assists in putting their products on sale and reach out to millions of customers every day. With consistent marketing around and visibility, some of the vendors have grown more than 200 percent in less than 6 months,” says Aasheesh Mediratta, CEO, Fashionandyou.com. The portal provides the much-needed platform and visibility, which otherwise wouldn’t have been possible for them.
SMEs across the country are welcoming the change and embracing e-commerce to sustain themselves in both domestic and international markets. Shortening of traditional supply chains, minimisation of transport obstacles and reduction in delivery costs have led to higher profit margins for these small retailers, pushing their revenue figures in two digits in a short span of time. Rohit Kanthale, of Shri Balaji Collections, did not shoot off well with his offline wholesale and retail business until he discovered Fashionandyou.com, a platform to sell his Banarasi silk saris under the brand name of Bunkar. He feels that “online is the future as customers are slowly moving more and more towards e-commerce websites to purchase from, due to huge and widespread range and availability. I have seen 40 percent year on year growth in my revenue after selling on Fashionandyou.com and I expect it to reach 100 percent in the next 2 years.” The main reason for Mohd. Zubair to move his handicraft business of home décor and garden merchandise to selling online was to increase domestic presence. He says: “Earlier, I was only exporting my products in the foreign markets but after adopting the selling platform from Fashionandyou.com, I have been able to tap the domestic market as well on a huge scale and have seen a growth of 100 percent in my revenue figures.”
Asha Sharma, who owns a boutique on Linking Road under the name of Oasis, Mumbai, said some months ago her son suggested that she tie up with an online site to sell her designs. “Not only the margins are good ranging from 5 to 30 percent, but my business visibility has increased and so has my sales.” The boutique supplies 12–14 outfits every fortnight and no inventory is carried forward to the next month. “Margins are built into the manufacturing cost and vary from product to product. High value products can have lower percentage margin and vice-versa for low ASP products,” says Mediratta.
Ashish Rathore sources handmade accessories from different self-help groups across the country. He says: “Where earlier the craftsmen used to sell maybe a hundred or so pieces a month, they now sell four times the number. Also, appreciation for their craft pours in from unexpected corners.” Globally, Alibaba.com has more than 1.3 million suppliers suitable for export. Among these suppliers, over 100,000 verified gold suppliers are in China and about 20,000 outside China, mainly in countries like India, Malaysia, Indonesia, and Vietnam. “We have around 30 vendors in home and living across bed, linen and kitchen ware categories. We source various kinds of products from these vendors like bed sheets, cushion covers, comforters, curtains, blankets, towels, handicraft deco, and house party décor. Around 40 vendors in ethnicwear category are from small town and they contribute close to 20 percent of the ethnicwear business,” says Mediratta.
"What differentiates these small retailers from others is the kind of workmanship, quality and prices that they offer. Also, the ability of a small manufacturer to turn around production in a crunched time, degree of customisation, etc. makes critical success factors for signing contracts with bigger e-commerce retailers. In most cases, before on-boarding the retailers, buyers visit the facility to check the manufacturing setup to carry out quality and quantity check. Quality checks are done both at the vendor’s and buyer’s premises. The QC team visits the vendor premises before any event is taken live to ensure high fulfilment. Once the orders are placed by customers and goods reach our[Whose quote is this?] fulfilment centre, each and every product is quality checked in all aspects – material, dimensions, craftsmanship, etc. before orders are shipped to customers. Generally, contracts are not exclusive as they sell locally also and are based on small margins." Mendiratta, adds.
Innovative business inventory models for small retailers
Majority of the Indian e-commerce players have inventory-led models where these companies have been trying to reduce their inventory exposure by resorting to sales on return (SOR) basis.
This working capital management technique assumes that the e-commerce company is buying an item from a supplier and in case the product is not sold within a stipulated time, the supplier will take the item back. Another practice in vogue is creating a back-to-back arrangement, that is, get a customer order and then procure the item and ship it to the buyer. These practices work well with small sales of unit shipment. “The inventory-led e-commerce business model cannot offer product variety, selection and price advantage to customers in comparison to other models and it creates a network of retailers all across the country, which in turn can generate multiple business opportunities,” says Rajesh Jain, an independent retail consultant.
E-commerce retailers are now looking at shop models and creating seller and buyer market players where anyone, if free to sell their merchandise, could use the logistics of the website to deliver it to the end consumer. This kind of arrangement eliminates the challenge of exclusive contract rates, which earlier had to be worked out with each individual retailer. In the new models, small vendors gain and earn much more as these models tend to take care of the marketing, logistics, customer support and payment while sellers take care of manufacturing inventory online. Entry regulations and rules are much lower in e-commerce, thus making it easier for newcomers and small traders to reach a wider customer base at much lower costs.
Sai Handicrafts, who are selling their Kanchipuram silk at various online stores, have not just witnessed increased sales in a short span of time, but are now able to track design movements and trends in accordance to the demands of the customers. The innovative feedback mechanism now enables them to innovate and customise with more efficiency.
Some e-commerce companies are even setting up their fulfillment centres in smaller towns and vendors from such locations are bound to make profits out of this proposition. Such a model is further helping small vendors to list and sell their products. “Sourcing products from different retailers reduces the risks as opposed to hosting an exclusive site catering to one particular brand,” Jain quips.
Amazon has recently launched its own full-blown site for the Indian market, which also allows any third party retailer to sell their products on Amazon’s Indian marketplace and through a fulfillment centre near Mumbai, customers will receive the merchandise they ordered straight to their door. Looking at more examples is ShopClues, which sells everything that is allowed to be sold online and can be practically shipped, whereas, LadyBlush is a marketplace exclusively for women. On other hand, Nethaat connects sellers and buyers of handicrafts, designer handmade items and eco-friendly products.
Vendors selling through FabFurnish have to ship their products to the warehouse, which are then shipped to customers. While FabFurnish takes care of end delivery to customers only, Pepperfry, another furniture portal, follows the managed marketplace model. It takes care of the logistics as well as the procurement of furniture from small vendors in Jaipur, Jodhpur and Saharanpur.
Another trend is other than single category sites, marketplace platforms and e-commerce players are bringing in their private labels.
In the face of rising competition from multi-category sites like Flipkart, Snapdeal and Amazon, launching private labels will help boost profit margins by 40 percent and offer its customers customised differentiation. It will also help single category sites to sustain their stand and boost profits. Myntra has also capitalised on the advantages provided by private labels and has about 10 private labels on its portal currently along with selling its own fashion products. These account for about 20 percent of Myntra’s sales.
India’s online retail scenario is developing along a global trajectory and is providing a sustainable and profit-centric marketing and distribution model for sellers. Where technology platforms are generally operated from the major cities and by big online retailers, most of the logistical management like sourcing, storage and deliveries are moving to Tier-II and -III city retailers and proving to be cost effective.
