BackShopify eyes India’s e-commerce promise
The Ottawa-based company expects to double the number of stores operating on its platform in India from 5,000 to 10,000 in the next one year
Premium
New Delhi: Shopify Inc., a Canadian e-commerce software maker that helps small businesses go online, is betting on India to become one of its top three markets in the next two to three years as more and more brick-and-mortar stores and entrepreneurs seek to tap the online retail opportunity.
The Ottawa-based company is also expecting to double the number of stores operating on its platform in India from 5,000 to 10,000 in the next one year, said Harley Finkelstein, chief platform officer at Shopify, who was in India to meet sellers and industry bodies.
“India is our biggest opportunity," Finkelstein said, adding that “the next five years in India will be the most exciting years of retail in the last 100 years. I believe that the retail revolution is happening now and that future retail belongs to small businesses not big box stores like Amazon or Walmart."
Currently, Shopify, estimated to be a billion dollar company, has more than 100,000 active stores in 165 countries. Founded in 2006 by Tobias Lütke, Daniel Weinand, and Scott Lake, the company set up its Indian operations in June 2013.
Shopify offers sellers such as General Electric Co., Tesla Motors Inc., Encyclopaedia Britannica Inc. and Evernote Corp., an online platform. It assists in setting up their websites and helps with marketing and search engine optimization, payment gateways and partnerships with logistics and back-end firms.
The company makes money by charging a monthly subscription fee for technology and other services that it offers. In India, fashion retailers such as YellowFashion, PosterGully, Beach Co. and Confession9 are on its platform. Electronics is another big category for Shopify in India, other than fashion and apparel.
The company says India holds immense promise as the country’s online sales are merely 0.3% of the overall retail sales in the country. In the US, 12% of the total retail sales happen online while the figure is 8% for Canada. Besides, the Internet penetration here is rising rapidly.
“...200 million people in India have Internet access which is similar to the number in the US. But the difference is that in the US the penetration rate is 80% while in India it is only 17%," said Finkelstein.
While marketplaces help small merchants to sell their products through their online platforms, Shopify creates an individual web presence for them.
A lot of small and medium businesses choose to be in a marketplace as the cost of creating, operating and scaling up business through individual websites is high.
However, the advent of global companies such Shopify, Bigcommerce and eBay Inc.-owned Magento and Indian companies such as MartJack and BuildaBazaar, that offer services to sellers for a fee, has helped rationalize the cost.
“E-commerce might be in its infancy in India but it is going to happen much faster than it has happened anywhere else in the world and it is going to dominate," said Finkelstein.
Although the company encourages sellers to cross-sell their products on marketplaces such as Amazon.in, Flipkart and Snapdeal, it eventually wants to enable small sellers to have their individual stores on the web. “They (marketplaces) are great places to introduce your brand to consumers but eventually you want the consumer to come to you," he said.
To be sure, companies that offer these online services suffer from a high churn as sellers often go dormant or drop out owing to poor customer response. “Often retailers get excited by the monthly subscription model and start their own portals but they do not get traction, their pricing is not as competitive as larger online retailers and they struggle to manage logistics back-end etc," said Mukul Arora, vice- president at the private equity firm SAIF Partners.
According to him, these companies in India have a 30% churn rate year on year.
In Finkelstein’s view, the biggest pain point in India is “perception and connotation... both retailers as well as customers are scared to do business online".
Arora says that if such companies offer a more comprehensive programme including back-end management, pricing analytics and solutions to integrate websites with other marketplace platforms, they would do better.
Anand Ramanathan, associate director of management consulting at KPMG India, also sees a huge opportunity for e-commerce enablers and technology providers.
“A marketplace has many vendors catering to many different marketplaces... you need a platform that can help vendors track inventory across all platforms, and project sales so that they can serve better," Ramanathan said.
A lot of information technology companies are also jumping into the game to help vendors go online with fewer complexities, he added.
“Such companies take the entire headache of technology so that we can focus on the core business,"said Darshan Patodi, co-founder, YellowFashion, that sells Indian wear online via Shopify’s platform.
Started in 2011, YellowFashion currently sells 5,000 products a month. It expects a turnover of nearly ₹ 10 crore in the current fiscal year.
Khyati Behl in Delhi contributed to this story.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
