As Shopee pulls out, how can brands succeed in India’s e-commerce space?
Following Singapore-based Shopee’s recent decision to shut its India operations after less than six months there, The Drum asked some senior marketers to help unravel the nuances of this sudden development and explain what it means for other global brands keenly looking toward markets such as India.
Getting behind Shopee’s recent India exit
As markets across the globe open after two years of intermittent lockdowns and erratic demand, it is also a time for companies and brands to consolidate their business models and outlook. ROI, business outcomes and viability are being looked at more keenly than ever. And top that up with the complexities of the different markets, which makes the business viability an even more complex and longer-term phenomenon.
One example has been Singapore e-commerce firm Shopee’s recent exit from the India market less than a year after its launch. Interestingly, earlier this year Shopee also exited its France business after its recent foray into Europe.
A statement from Shopee confirmed its exit from India, and said: “In view of the global market uncertainties, we have decided to close our early-stage Shopee India initiative.”
Finally, it also reiterates that discounts don’t and can’t build markets. Burning VC money is easy, but establishing success is much more difficult.
Here is what some experts say about the future of e-commerce in India...
Harsha Razdan, partner, head – life sciences, consumer markets and internet business, KPMG India
To succeed in the Indian e-commerce space, companies will have to play a long-term strategy. Getting a share in a crowded market with well-established players will not only require patience but also a significant investment before they can turn profitable. Moreover, e-commerce today continues to struggle with its challenges of duplicate products, deep discounting and opposition from local traders.
E-commerce is an atmosphere that’s constantly changing and upgrading, as customer acquisition is key to winning a greater share of the pie. The trends show that growth and change take place every year. To provide value and choices, companies are first attempting to bring multiple services under one umbrella – by both organic and inorganic means – and will then push for integration.
India has a multitude of unicorns and startups that are chalking out their niche before they turn to other services as part of their expansion plans. The future of e-commerce is going to be driven by tech-based investments of the future that carry a distinguishing power – such as delivery drones, social media and influencer-based shopping with an added layer of personalization, e-commerce pop-up shops using voice assistants and artificial intelligence (AI) systems, and minimalist and fast sites.
Satish Krishnamurthy, chief strategy officer – India, Interbrand
India is a tough market to crack. Period. From same-day deliveries to social commerce, every day in India presents a new challenge to tackle. In a landscape where it’s about the last man standing, it took time for players such as Amazon and Flipkart to establish themselves over the failures of many startups.
For Sea Ltd, which dominated South Asian markets for a while, the lesson is at various levels. It overestimated its capability to dent the Indian market with Shopee. Also, the banning of Garena Game Fire by the Indian Government came as a double blow.
Resorting to short-term tactics including deep discounting, Shopee became a transactional entity, diluting its brand strength. Not building enough brand strength is also one of the biggest mistakes that any new entrant can make.
The Indian e-commerce market is in flux. While there is experimentation happening at one end, there is consolidation happening at the other, and there are many examples.
The food delivery startups are experimenting with grocery. Amazon is offering its Amazon Shipping services to other companies. Flipkart is getting into grocery. Restaurants are offering direct delivery through homegrown platforms.
All companies are adopting a fast-fail approach to acquire and retain users. If it works, consolidate the offering – otherwise try something else.
Shopee entered India with a clear agenda, but never got the opportunity to experiment and consolidate. That is what helps any company build on its successes and move into another orbit.
Harish Bijoor, brand consultant and founder, Harish Bijoor Consults
Shopee’s action was both quick and knee jerk. The entry was rather quick and generic, and the exit was even more so sudden to the business shoppers meant to build in India.
There are many readings into this. The first is the fact that the e-commerce market in India is cluttered. A platform that does not bring in differentiation and innovation will just burn money in terms of discounts in the quick quest to acquire customers and establish numbers. If you enter a clutter, make sure you are not a part of it. Instead, stand out from the rest. Rejig your offering to suit the geography and its demands. For instance, Shopee started with the USP of being a C2C offering in its mother market. India can be a big market in the C2C space. The brand could have thought this out as a path-breaking entry-level strategy for itself.
Secondly, an e-commerce player in India faces deep and wide polarized competition from Amazon and Flipkart. You have Amazon on one side and Walmart on another, and add to it the future of the Jio app and the just-launched Tata Neu. Life in e-commerce is not an easy track – unless you are different and, more importantly, differently geared.
The third dimension is the fact that India questions China, Chinese servers, Chinese apps and anything that has a deep relation with the C-word. Shopee read the writing on the wall that the future of Indian policy is not going to change too quickly on this count. And so they packed and left.
Swagata Sarangi, co-founder, Smytten
It’s a wise decision from Shopee’s perspective given the financial and geopolitical risk they were exposed to for their Indian operation. The segment Shopee was operating under, in India, is already hyper-competitive, with significant price undercutting as a market reality. In such an environment one is up for a long winter of unprofitable business.
The Indian e-commerce market has a lot of headroom for growth, and potentially would be a $350bn-$400bn industry by 2030. But this would need a significant amount of investment and effort from the players in the industry, as this growth would be primarily driven by the next 400-500 million Indian users, where a lot of education and value delivery will be required.
Platforms such as Shopee are very well poised from a value delivery perspective to this segment, but it would need billions of dollars of investments, and years of effort in changing user behavior and fighting strong competition such as Meesho, Shopsy and other established players. If a new international entrant is not prepared with a big war chest and here for a short-term win, it’s better to cut its losses and move on.