India’s unorganised retail that stands at 90 percent, is the key towards digitising and providing an access to new products and shopping experiences. A recent article stated that there are 70 million online shoppers in India, of whom only 10 million can be classified as ‘digital natives’. These numbers mean that today in a country of 1.3 billion people, less than 1 percent would be considered to be digital natives.
What does that mean?
One can say that digital natives as a percentage of India’s population will rise. However, a more important question is what are the alternatives to a simple pureplay online business in India? Given India’s disparate income levels, urban structures, demographics and social patterns, could the digital play look different in a more developed world? Just like India simply leapfrogged the desktop era into accessing the internet via mobile phones directly versus the evolution in the West, is it possible that a majority of Indian consumers will leapfrog the online only models and go straight to phygital commerce which is a combination of physical and digital? We have already seen this trend shaping up in China since 2016 with the launch of Alibaba‘s New Retail and Tencent‘s Smart Retail. Given the size of the unorganised offline retail space in India, the opportunity to digitise and vertically integrate the space provides a fruitful opportunity.
The significant investments and businesses that have been seen in unorganised retail over the last few years suggest that investors and entrepreneurs realise that Indian unorganised retail presents a massive opportunity. However, the focus so far has been on horizontal solutions that look at using technology to make unorganised retail more efficient. Indian unorganised retail sector needs a vertical solution.
This sector has a hyper-local distribution. The business solution needed is one that can utilise some percentage of the millions of unorganised retail stores to generate value for both the stores and the consumers. To understand this better, let us look at what the unorganised retail sector lacks:
- A high-quality inventory
- Real-time data
- A supply chain that is modernised to deal with a demanding consumer
- Technology that links the consumer to the factory
- Fluid sales and marketing
- The ability to generate demand
- Acquire consumers over and above the usual walk-ins
The ability to use the unorganised retail assets to integrate all the way from the consumer to the factory, create massive scale to serve a billion people is where the real value creation and opportunity lie.
These solutions will create new models of commerce that can enable Indians to have a digital shopping experience with the best of both the online and offline worlds. The vertical solutions that give rise to new models of commerce will be the game changer. While helping keep a tab of accounts better the question is, can a vertical solution leverage unorganised retail to deliver a 20X increase in per-store sales. To paraphrase venture capital terminology, the keys to the kingdom will need the ‘hard things’ to be done both via technology and operations.
The future belongs to those who can build models that can organise millions of unorganised retailers to expand and create new markets. The last unconquered consumer market of the world, India, will see $100 billion internet businesses emerge when a billion Indians access the digital experience.
(The writers are co-founders of 335bazaar, an offline to online retail technology business in India)