Monday, November 19, 2018

What to expect in consumer internet sector - e paper - english news paper today - news headlines today

What to expect in consumer internet sector
Guest Column: Satish Meena, Senior forecast analyst Forrester Research

As we enter 2019 the big players are expected to outspend each other in increasing the market share by targeting the existing customers and acquiring new customers. Entering new product categories and geographies is also going to be the key theme for 2019.

The recent exit of Binny Bansal as Flipkart Group CEO will change a lot of things in Flipkart and has lessons for the ecosystem. Forrester sees the following trends in the Indian consumer internet landscape in 2019.

Flipkart will stop behaving as start-up

After the exit of Binny Bansal, we expect Flipkart to change its mindset from a start-up to an independent subsidiary of a public listed company. This will change the growth at any cost with a focus on margins approach in coming years. While the focus will remain on maintaining the lead in mobile and fashion category, Flipkart will enhance the offerings in household items and grocery in 2019 to compete with Amazon and make use of Walmart’s strength in this area. We also expect Myntra to be ultimately merged with Flipkart Fashion (which just happened a few days ago) and entry of private labels from Walmart in the fashion category.

Apart from this, with Amazon taking positions in offline retail via stakes in More, Shoppers’ Stop and Future Group, Flipkart will have to formulate strategy to compete with Amazon in this area. Flipkart might be leading in mobile and fashion currently, but Amazon is targeting the household spending and customer experience to become the default online retailer for household even if they miss on the smartphone purchase.

No decline in last mile delivery cost for food

Delivery cost, especially last mile delivery, which accounts for around 40-50 per cent of eCommerce transport remains the biggest challenge for online retailers and food deliverycompanies. Food delivery companies had to double the salary of drivers from around Rs 18,000 to Rs 40,000 in the span of just 9 months from December 2017. With the competition from Foodpanda and UberEats ramps up in 2019, we expect this cost to increase further. Food delivery companies are already charging around 25 per cent commission from restaurants, apart from delivery cost to customers and differential pricing for delivery menu.

This may not be enough to fill the gap and companies are looking for entering into Cloudkitchen, Supply (HyperPure by Zomato) and launching new delivery only food brands to improve the profit margin along with advertising, subscription and using the delivery fleet to deliver additional goods during the lean time. Scalability of all these ideas will be tested in the next few months.

Online grocery is still very far from scale

In 2018, online grocery is expected to become a billion-dollar category but still very far from justifying the kind of noise associated with this category. After piloting multiple methods to sell grocery to Indian customers, Amazon is buying stakes in offline grocers, Grofers is moving towards creating online version of Patanjali store, Bigbasket remains focused on superior customer experience and micro delivery startups like Milkbasket are targeting the repeat purchase like milk and bread. Apart from this, Flipkart is still figuring out how to enter grocery at a scale and expected to act in 2019 with the backing of Walmart. With online spending per buyer of $238 in 2018 Indian buyers will take more time to buy grocery as compared to more than $2000 in South Korea where online grocery penetration is around 15 per cent. We also expect that pure play online grocery companies like Grofers and BigBasket may find it difficult to remain online only in 2019.

Cab hailing hits a road block

Increasing fuel costs and declining growth in rides took a toll on the customer experience promised by cab hailing companies like Ola and Uber in India. Both Ola and Uber saw drivers going on strike for better incentive structure to cover for the increasing cost but just offering additional incentives to drivers won’t solve the problem of customer experience for these companies. Booking a cab on these apps is becoming unreliable with drivers cancelling trips at will. This is the problem which both Ola and Uber have to solve along with the quality of cars and the behaviour of drivers. To compensate for slow down in growth, cab hailing companies are looking to expand geographies (Ola entered Australia, New Zealand and UK) and entering food delivery via Foodpanda and UberEats. We expect them to provide additional last mile delivery services to business and customer to ensure growth.

According to Forrester’s Online Retail forecast, we expect India’s eCommerce sales to grow 29 per cent annually over the next 5 years, but not all products will grow equally. Aggressive investment and focus on scaling by key players will also ensure that we do not witness any clamp down in the loss figures for key companies in 2019.

What to expect in consumer internet sector

Source: EP