The race to acquire a pie of the Rs 64.8 lakh crore Indian e-commerce sector is becoming hotter with two more players joining Reliance Industries and Amazon, who are currently engaged in a court battle to acquire a stake in Rs 26,000 crore debt laden Future Group. As per a Business Today report, the Walmart-Flipkart combination has acquired minority stakes in Arvind Brands and Aditya Birla Fashion Retail while Tata Group is gearing up to acquire a stake in India’s biggest online grocery retailer Big Basket.

Combined, the top three retailers have invested Rs 2.46 lakh crore in the Indian e-commerce industry. While Walmart has announced $2 billion investment; Reliance plans to spend another Rs 24,713 crore to buy Future Group's retail assets. Similarly, Amazon has pumped in $6.5 billion in the Indian e-tail landscape industry.

Acquiring more power

Each player is stocking fresh resources. While the Walmart-Flipkart combo plans to launch a $50 billion overseas IPO, Reliance Retail aims to raise more funds for future growth. On the other hand, Amazon Inc has adopted a new strategy to invest in physical stores in India. In 2018, it partnered Samara Captial to buy the Aditya Birla Group’s grocery retail ‘More’. A year earlier, it had bought a 5 per cent stake in Shoppers Stop. The Tata Group has also joined the fray with its e-commerce arm Tata Cliq planning to launch a super app to help consumers shop across its consumer-facing businesses. The company also plans to buy the Rs 6,000-crore online grocery platform Big Basket.

New business models for creating depth

Reliance acquisition of Future Retail would add Rs 26,000 crore revenue to its kitty while Amazon would have to be satisfied with just 500 More stores being added to its portfolio. Since grocery offers them more volumes and resilience, retailers like Amazon are adopting a hyperlocal business model to create depth city by city in terms of fulfillment. Rishav Jain, Senior Director and Consumer, Consumer Tech & Retail Lead, Alvarez & Marsal, expects online grocery penetration will grow incrementally over the next few years. However, tapping this opportunity will require huge investments and smart strategies, he says.

New strategies being adopted

Reliance Retail has launched a new venture JioMart which aims to onboard 15 million strong kirana stores across the country. These stores will be integrated with JioMart through its point of sales devices and their inventories will be controlled by Reliance.

Google's investment in the company will provide high quality data while its deal with Facebook gives it access to over 300 million Indian users. On their part, Amazon and Flipkart have introduced interfaces in South Indian languages also apart from Hindi. Currently, Reliance, Amazon and Walmart seem to be surging ahead in this battle. However, the Tatas too have an ace up their sleeve in the form of D’Mart, which might also plan to spread wings across the country. The battleground is surely heating up with industry getting increasingly complex.

This festive season, sales of major fashion brands touched 65-70 per cent of their pre-COVID levels. While overall trend through the COVID period was towards casual wear, consumers shopped bit for occasion wear too, says Siddharth Bindra, Managing Director, BIBA.

Bulk of the festival sales came from Tier II-III-IV markets. However, Tier I and metros also did well, adds J Suresh, Managing Director and CEO, Arvind Brands which saw upto 85 per cent sales recovery. Raymond too recorded majority of sales from smaller towns, says Ganesh Kumar, COO, Raymond Lifestyle. A bulk of its sales in fabric business came from the Rs 750-Rs 3,000 price points. The brand expects traction for its premium range during the upcoming wedding season, says Ganesh Kumar, COO.

As per Lalit Agrawal, Chairman and Managing Director, V-Mart saw higher traction in its Northern markets. He hopes the wedding season will drive up consumption. As most retailers considerably stepped up their omni-channel presence, online contributed between 30-40 per cent of sales. However, an overall growth in FY21 is unlikely since the first quarter was a wash-out

As the second wave of COVID-19 threatens to devastate India’s top cities, consumer goods manufacturers are closely monitoring its impact on post-festive demand. Retailers of apparel, electronics and packaged consumer goods’ expect current demand to continue till December before subsiding in the last quarter of this fiscal. This is one of the reasons retailers are unwilling to commit beyond December, commented Kumar Rajagopalan, CEO, Retailers Association of India (RAI) to Live Mint.

Suresh Narayanan, Chairman and Managing Director, Nestle India also believes, retailers will be able truly gauge their consumers’ intentions only post Diwali. Till then, they would have to wait and see whether things have really stabilized or they are seeing pent-up demand.

Apparels, electronics sales trends change post lockdown

Indeed, unlocking initiatives alongwith festivals did help retailers push up sales during Diwali in apparels, home appliances and FMCG goods. As data from the RAI suggests, sales of electronics retailers jumped by15-18 per cent 30 days before Diwali while those of formal-wear retailers dropped by 35 per cent. During this period, sales of athleisure, casual wear and fitness footwear retailers grew while those of homeware retailers declined by 10 per cent.

The recent announcement of lockdowns in Madhya Pradesh and Gujarat could again bother retailers as they would have to urge brands to introduce new schemes to attract consumers. One of the ways retailers can boost sales in coming months is by exploring purchase occasions such as winter launch, end-of-season sale, wedding festivals followed by spring launch towards mid and end of January, says Abhishek Bansal, Executive Director, Pacific Malls.

Demand for apparel expected to decline

Companies expect the post-festive season to be extremely crucial for retailers to sustain demand. Pradeep Bakshi, MD & CEO, Voltas expects demand for essential goods to remain high in coming months. Another category expected to grow in the next few months is the home appliances category, says Kamal Nandi, President, CEAMA and Executive Vice President, Godrej Appliances. However, retailers of formal apparels, beauty products, home furnishings and other discretionary products do not expect their businesses to recover. Though weddings and year-end festivities will help sustain demand until February, the period post that would prove extremely critical for retailers, believes Sanjay Vakharia, CEO, Spykar Lifestyles.

Providing much needed boost to the Indian e-commerce industry, COVID-19 has accelerated the use of technology amongst fashion companies. As an Economic Times reports suggest, companies are adopting new business models to offer customized and interactive shopping experience to customers. One such emerging business model is social commerce which combines the benefits of social media and e-commerce.

A recent survey by PayPal social commerce is projected to become a $100 billion vertical e-commerce by 2025. Growth is being mainly being driven by the use of videos on social media platforms such as Instagram and Snapchat. Regional social networking platforms such as ShareChat and Roposo are also stimulating growth by offering content in vernacular languages. In the last few months, there has been a spurt in homegrown social commerce startups. Big e-commerce players like Flipkart are entering the social commerce space to target consumers in Tier II and Tier III Indian cities.

Indian social commerce market is largely driven by consumers and sellers from smaller cities. Most customers of social commerce players such as Meesho, Shop 101, Bulbul are based in Tier II and III cities. Another factor driving Indian social commerce is the increasing number direct-to-consumer brands. As per a Unicommerce trends report, the number of brands developing their own websites has grown 65 per cent in 2020. Smaller retailers are also marketing their products on social media platforms such as Facebook, WhatsApp, Instagram, etc.

WhatsApp, AI tops business users in India

A large number of businesses are using messaging apps such as WhatsApp to conduct their business. It is one of the most lucrative platforms for small and medium sellers in India. Around one million sellers use WhatsApp in India for conducting their businesses. Companies are building WhatsApp chatbots for retailers to help them manage a large number of orders.

Artificial Intelligence (AI) has also become a major growth avenue for retailers and brands. They are now experimenting with both marketplace and reseller models with the help of AI & automation. Chatbots are being created to help consumers shop directly on WhatsApp. AI tools like simplified product searches, recommendation systems for consumers are helping brands achieve an elevated level of customer satisfaction.

Collaboration with logistic service providers a key growth factor

Inventory management being an important part of the industry, social commerce players need to collaborate with logistic service providers to ensure maximum reach, timely delivery, and low returns. Over the years, these players have been successful in providing a sales platform for small and medium scale sellers by exploring artificial intelligence/machine learning algorithms. AI solutions have also helped these players manage shipments besides providing them with regular delivery updates.

Social commerce also helps smaller sellers become more efficient by providing them with an integrated view of their inventories and orders. The use of this technology is poised to grow with time with social commerce becoming major driver of e-commerce growth in India.

Indian e-commerce industry is expected to grow to $200 billion by 2026 recording double digits growth YoY, says a Financial Express report. This growth has primarily been driven in very few categories such as fashion, consumer electronics, mobile phones, books amongst the others. COVID-19 situation has forced FMCG players to step out of their comfort zones and adapt their product portfolio/mix in sync with the sudden change in consumer purchase behavior. The situation has merely fuelled the growth of e-commerce with many large players like Swiggy, Facebook, Reliance Jio, entering this space.

The entry of these players is likely to change the retail landscape as they will pump millions of dollars to build the necessary infrastructure and bring in a structure that will drive high level of efficiency in the retail operations. This will only drive stickiness towards this sector and bring in droves of consumers who have started embraci ng digital mode of shopping- be it through a shopping app, e-commerce website or a messaging app.

New robust hyper-local platforms are also likely to emerge out in micro-ecommerce space to connect and deliver value to all these FMCG players. These platforms will facilitate smooth/efficient flow of supplies and financial resources to these kirana stores and end-consumers.

As per a new McKinsey survey, Indian consumers’ newfound optimism would result in increased spending across categories in the months to come. The survey found most consumers have been trading down or buying less expensive goods while they go for a shopping. Also, the brand loyalty has gone for a toss.

However, the intent to spend has increased by 30 per cent, says the report. About 58 per cent of Indians reported being optimistic about economic recovery in the next two to three months; about 32 per cent think it would take about 6 to 12 months while 10 per cent reported being pessimistic about the recovery.

As per the survey, only Chinese consumers are as optimistic as Indian ones 58 per cent consumers being optimistic, 38 per cent being unsure and 4 per cent being pessimistic.

Buoyed by the unexpected bounce-back of retail sales in festive season, Indian fashion and apparel retailers have started approaching suppliers for spring/summer collections. Also, retailers, who had earlier left stocks of garments and fabrics on warehouse floors, have now started picking them up, says Premal Udani, Chairman, Kaytee Corp.

Spurt in sales has energized retailers who are rushing orders for spring/summer collections. Many see a ray of hope to reach a pre-pandemic level in the first quarter of next financial year. Rishi Vasudev, CEO, Lifestyle, is confident of 90-100 per cent recovery of pre-COVID levels of business by March-April. Arvind Fashions too is positive and has placed another round of orders in November after gauging improving market conditions.

Rahul Mehta, Chief Mentor, CMAI, hopes along with large fashion apparel retailers smaller ones too start placing orders in coming months. However, there are suppliers and retailers are concerned about another wave of coronavirus spike in coming months. Udani believes if this happens, it will again have a negative effect.

The legal spat between Amazon.com Inc and Reliance Industries over the Reliance-Future deal has invoked a xenophobic fervor amongst watchers by sparking a foreign vs local debate. Amazon has accused the Future Group of violating a contract by agreeing to a sale to the Mukesh Ambani controlled Reliance Industries. The dispute has reached the Delhi High Court which is now contemplating if Amazon has any legal rights to object to this transaction. On its part, Amazon urged the high court to impose a business contract in this commercial dispute. The e-commerce giant alleged if Future is allowed to default on its contract with Amazon, it might scare off global investors. India cannot afford to let this happen at a stage when it needs foreign investments the most.

Deal to give Reliance undisputed market share

The deal holds utmost significance for Reliance as it assures the company an undisputed share in the Indian market. However, Amazon is not willing to cede this advantage to Reliance as India with its billion-plus consumers, is one its biggest markets. In the court hearing, Harish Salve, the celebrity lawyer representing Future Retail accused Amazon of threatening Future to either deal only with the e-commerce giant or shut down. And that aborting the Future-Reliance at its current stage would lead to thousands of job losses and bankruptcy. He argued as Amazon has no investment in Future Retail, Reliance is not obliged to seek permission to buy a stake in the company.

Amazon’s counter arguments

Countering these allegations, Gopal Subramanium, Amazon’s lawyer and India’s former attorney general said, Amazon had the right to block this deal as the e-tailer has already introduced Future Retail to a prospective investor to ease its distress. The company also has invested $6.5 billion in India so far besides creating thousands of jobs in the country.

Salve replied the Indian laws do not recognize the transaction between the e-commerce company and the Singapore arbitration tribunal, and the Reliance-Future deal will help save Future Retail from collapse. The lawyer filed a legal petition after Amazon apprised India’s market and antitrust regulators of the Singapore arbitration order of an interim stay.

Last week, Amazon suffered its first setback in the case as the deal was approved by the Competition Commission of India. Reliance now aims to finalize the deal as soon as possible.

Meanwhile media reports suggest, Future Retail’s plea to be excluded from being a party to the Amazon-Future Coupons' arbitration proceedings has been turned down by Court of Singapore International Arbitration Centre (SIAC) which has ordered the arbitration to proceed. The buzz is FRL had approached SIAC with its pleas the arbitration proceedings were part of a contract to which the company is not a party pleading it be excluded from being a party on account of jurisdiction objection. SIAC says an Economic Times report has decided “the arbitration process shall proceed and accordingly, a tribunal will be constituted in this matter.”

In January this year, the Kerala government introduced a ‘fat tax,’ on certain food types not suitable for consumption. The tax aims to curb consumption of unhealthy foods in India. In fashion, especially couture, the tax refers to the practice of charging extra for clothes in bigger sizes.

Fat tax helps designers, who have to forgo their profit margins to provide larger sizes, connect with customers who have to pay extra to clothe themselves suitably. Designer aggregator stores in India like Fuel, Pernia’s Pop Up Shop, and Aza usually stock extra-large pieces for three months without guarantying sale, which makes it difficult for designers to send them multiple pieces in a variety of sizes. Luxury women’s wear brand Papa Don’t Preach doesn’t make plus-sized clothing if not demanded by a customer at its store. The brand does not stock more than two to three pieces of a particular design at any given time, since it’s made to measure.

Additional raw material costs hinder production of plus sizes

One reason designers shy away from producing large size clothes in India is because they require more rawRequired An urgent resizing of Indian sizing materials which increases their production costs. Shubhika Sharma, Founder and Creative Director of Papa don’t Preach, believes this cost needs to be borne by designers as the actual additional costs aren’t that steep. However, in India luxury designers try to control their production costs by using cheaper raw materials, says local fashion watchdog Diet Sabya.

As a lot of the embroidery work being done today on garments is machine-based and the fabrics are procured from China at throwaway prices, designers’ justification for charging extra for more fabric, embroidery, etc does not stand, points out Neelakshi Singh, Professor, National Institute of Fashion Technology and Pearl Academy. Sharma adds, designers do not make a loss making an XL size for a paying customer. Though the cost of embroidery does increase marginally it can be accommodated in the original price. Sharma advises designers to learn from growing sustainable fashion movement and apply it to plus-size production.

Resizing can help write off fat tax

For emerging designers, staying in business, means catering to the average, the middle — the S through L sizes. However, these sizes don’t generally fit Indian bodies, points out Sharma. For them, tops and bottoms have different sizes and an L size garment made for Indian body type won’t fit any other customer. This is because in India, plus size individuals actually belong to the mid-sizes that are more affordable for customers and more profitable for designers. Hence, if the current measurements are resized according to Indian bodies, it could help to write off fat tax completely.

Such an initiative has been introduced by the National Institute of Fashion Technology (NIFT) in partnership with the Indian Ministry of Textiles. Together, these two bodies are carrying out a National Sizing Survey that will measure 25,000 men and women across six major cities in the country, in the age group 15-65 years. The survey aims to make the ready-to-wear fashion industry more aware of Indian sizes. Though some industry leaders including Vishakha Bhaskar, Co-founder, Angrakha are skeptical of these efforts, it’s not too late for the Indian fashion industry to revolutionize the concept of plus size in India.

India Ratings and Research (Ind-Ra) estimates a demand recovery for the apparel sector in FY22 while it expects 40-45 per cent decline in FY21 revenues. As per a Live Mint report, the agency also estimates a threefold jump in online sales for retailers in the current fiscal.

For the third quarter, Ind-Ra, a part of the Fitch Group, expects apparel sales to touch 80 per cent of pre-COVID levels, with food and grocery retail hitting more than 100 per cent.

The agency predicts an obvious significant shift in consumer shopping habits with more consumers buying goods online. Ind-Ra expects sales made through the online route to increase by a factor of more than three in FY21.

Companies have focused on a strong digital footprint with increased investments in developing their own websites and mobile apps, while also partnering with online channel partners to fuel growth, the agency said.

As a result, business via own websites or through online marketplaces is expected to increase to 10-15 per cent of total sales by FY22, up from 2-4 per cent, faster than the earlier five-year timeline predicted to reach this volume.

A new report by e-commece Software as a Service Platform Unicommerce shows, sales of DTC brands grew by 78 per cent during the third quarter ending September 39. This surge in DTC sales indicates the discontent amongst consumers with online shopping and pushes more brands to build their own D2C channels.

The report states, there has been a 51 per cent surge in the number of brands building their own websites in the third quarter. These channels help brands in better content marketing, upselling as well as building a more profitable channel in the long run.

While e-commerce order volumes grew by 31 per cent in the third quarter, the gross merchandise value (GMV), or gross sales, for the sector grew by just 24 per cent. This was due to a 5 per cent drop in average order values as consumers opted for more value-conscious buying, says Unicommerce.

E-commerce logistics provider Shiprocket noted D2C brands shipping 33 per cent more orders in September compared to July. The growth was strongest for the large brands in September on the back of sales and promotions. Initial indications for October are showing that this will be a strong month even for the smaller D2C brands, said Saahil Goel, Co-founder and CEO, Shiprocket.

As per a report by Payoneer, Indian e-commerce sector ranks on the 9th position globally in cross border growth.

The sector saw a massive growth in recent times as more Indians shopped online rather than venturing outside, says Economic Times. The sector also attracted huge investments from global players such as Facebook investing in Reliance Jio. Google announced its first investment in Mukesh Ambani-owned Jio Platforms, joining Facebook, etc. The deal was followed by Reliance Retail buying out Future group to increase the Ambani group’s presence in e-commerce space.

According to the report, as the world moved to full or partial lockdown, online shopping cemented into a new reality. The year 2020 has seen a decade of growth within just a few months with China topping the charts followed by the US, Hong Kong, South Korea, UK, Ukraine and Vietnam. India on the ninth position is followed by Japan which emerges on the tenth position.