India’s 21-day lockdown may have thrown up an opportunity for online grocers to shine, but the rest of the e-commerce industry is drowning in the Covid-19 tsunami.
The Narendra Modi government has restricted online sales of all goods except “food, pharmaceuticals, and medical equipment” until April 14. However, these three categories are only a sliver of India’s $60 billion online retail industry, which is dominated by mobile phones, electronics, and fashion.
The shutdown, therefore, could turn out be a body blow for most Indian online retailers who are already sitting on massive losses. “The lockdown is already impacting economic activity and will make it worse,” said Yugal Joshi, vice-president of Texas-based consultancy Everest Group. “Every aspect of (the) ecosystem will get impacted. It will result in firings, hiring delays, and other challenges.”
The big fish
Even in the days leading to the lockdown on March 25, when only some pockets of the country were under curfew, e-commerce companies were witnessing an at least 60% fall in demand across most categories, Sukriti Seth, analyst at TechSci Research, told Quartz.
Starting March 24, the country’s largest online retailers, Amazon and Flipkart, restricted customers from placing orders.
Amazon said it would prioritise delivery of “critical” items such as household staples, packaged food, healthcare, hygiene, and personal safety products. “This also means that we have to temporarily stop taking orders, and disable shipments, for lower-priority products,” the company wrote in a blog post.
Multiple shoppers told Quartz that Amazon cancelled their orders that were placed before March 24, if the items they had purchased were not essential. For instance, a Guguram-based technology professional said his employer had ordered screens and keyboards from Amazon for its teams to operate smoothly from home, only to later say the orders were cancelled.
The two companies, with their deep-pocketed parents and diversified businesses, can afford to take such proactive steps, but for a lot of smaller players, this could be the death knell.
Small fish, big pond
India’s online retail industry includes players that are focussed on niche verticals such as the eyewear seller Lenskart, fashion portal Myntra, beauty products seller Nykaa, furniture major Pepperfry, and lingerie e-tailer Zivame.
With most of the products that they sell excluded from the government’s permitted list of essential items, these websites are now trying to come up with ways to keep their business running.
For instance, Nykaa is taking pre-paid orders for essentials like personal hygiene products, hand sanitisers, sanitary napkins, and more, albeit with longer delivery timelines than usual. And Lenskart, which has set up automated manufacturing processes, is delivering eyeglasses and contact lenses and even subsidising it by 30%.
Despite the tepid business, these companies will still have to bear the usual costs such as employee salaries and office rentals. “P&Ls (profits and losses will be stressed and almost all companies will have to watch their spends during this time,” Anurag Avula, co-founder and CEO of e-commerce solutions startup Shopmatic, told Quartz.
Therefore, smaller players are taking drastic steps already. For instance, XYXX, a digital-first men’s underwear brand, has suspended its website. “Consumer sentiment has plummeted because of growing uncertainty. And even if the consumer demand picks up in e-commerce, there is no clarity on how it will be fulfilled,” Yogesh Kabra, founder and CEO, told Quartz. “If these restrictions, no matter how reasonable, continue, then a massive drop in e-commerce sales is inevitable.”
Kiabza, a self-funded e-commerce store for pre-owned clothing, is in a fix as its funding plans have gone for a toss. “We were in advanced talks with VCs, which are now slowing down. In fact, one of them told us that all talks are off as they have taken a policy decision to not make any new investments till July,” Nohar Nath, founder and CEO at Kiabza told Quartz. “The bigger players with VC backing are in a much better position to ride this out than a smaller, niche, bootstrapped platform like ours.”
Despite the doom and gloom, some companies are coming up with ways to stay afloat.
Fashion e-commerce site Fynd has also stopped all online deliveries, and co-founder Farooq Adam says he’s started planning for the long-haul as he anticipates the lockdown to be extended. “We have started identifying non-commerce tech capabilities which we can start aggressively monetising,” he said.
Coutloot, a fashion re-commerce site, has launched a feature where users can see shops or sellers of essential goods within a 500 metre to 1 kilometre range to minimise logistical nightmares, co-founder Jasmeet Thind said.
Raisin, a women’s apparel brand that sells on Amazon, Myntra, Jabong and Ajio, is planning to increase marketing spends by up to 15% in the hope that it’ll find more buyers than before once the lockdown is over. It might “help in maintaining the losses that will be occurred during the lockdown period,” co-founder Vikash Pacheriwal told Quartz.
Sellers should consider longer shipping time options and increasing communication with buyers, Payoneer, a digital platform that facilitates cross-border payments, working capital, tax solutions, merchant services, and risk management, said in a statement. Marketplaces can help sellers by mitigating negative feedback, subsidising handling fees and waiving penalty fees for refunds, which are also on the rise.
The bright spots
Companies operating in the “essential items” space, meanwhile, are having a field day. Medtech startup Dozee, which produces contactless health monitoring devices, has seen customer engagement rise and expects it to boom further. “People are monitoring their health on an ongoing basis,” says CEO Mudit Dandwate.
In addition, despite the daunting situation, none of the companies Quartz spoke to said they were planning layoffs yet. “We’ll be supporting our staff through this pandemic. Neither salaries nor leaves will be deducted,” Megha Asher, founder of online organic skincare brand Juicy Chemistry, said. “Our investors understand this delicate situation and are supporting us. No panicking or cutting budgets.”
And while short-term woes are aplenty, coronavirus is forcing the industry to quickly innovate—a gain in the long-run.
“Lots of problems can be solved using technology, from how to make people work remotely to how to ensure supply chain traceability,” Pranshu Kacholia, vice-president, business, at logistics intelligence platform Clickpost told Quartz. “During this time, a lot of intelligence can be built which could create long-lasting benefits better e-commerce experience in the future.”