By Hardik Harsora, Co- Founder of Effex Business Solutions

This article was originally published by BW Disrupt & India Retailing,

Mumbai, March 2017 – In hindsight, it was always on the cards. The e-commerce industry would thrive and flourish in India with the inception of the internet. Over 350 million Indian users have access to the internet, and World-pay projects that this number could increase to 600 million by 2020.

A major contributor to the growth of e-commerce in India is the penetration of mobile phones. Cheap mobile phones have leapfrogged landlines and computers. Coupled with data plans from telecom companies which are much cheaper than in China and USA, the internet is now available to common man in urban and rural areas.

The push for faster work to lay optic fiber networks under the Bharat Net project, and for digital payments, will fuel the growth for e-commerce in the country. Add to that the elimination of middlemen, and access to quality brands for people in Tier 2 and Tier 3 cities, plus a young population with over 60 percent people under the age of 35. Suddenly you realize that e-commerce has nowhere to go but forward. No wonder Worldpay predicts that by 2034, India is set to become the world’s second largest e-commerce market.

However, I would like to play devil’s advocate here. Yes, the e-commerce marketplace will continue to flourish in the coming years, but not the way we expect. Currently, few e-commerce marketplace players have a viable unique selling proposition. Most players in this field operate at a loss, and continue operations purely on investors’ money. This is not a sustainable business model.

For example, a certain groceries selling e-commerce marketplace works like this: when a customer places an order, its delivery staff visits the vegetable mandi close to the customer’s house. The delivery person buys vegetables at a discounted price, and hands it over to the customer. How sustainable and scalable is this business model? What will this company do if vegetable vendors start reaching out to their customers directly? Or if a competitor enters the market and undercuts their cost?

Even investors appear to fuel this game only for a brief period before they exit by selling their share to another unsuspecting victim at a higher price. This vicious circle will go on until an e-commerce marketplace files for an IPO. Its PRs will boast of lakhs of users, and most people will subscribe for the IPO without checking how much debt the company owns. After that, the stock price will barely move upwards. The investors and founder would have exited after making their money. The last people to have invested in the venture will see their money either stagnate or go down the drain.

Just like retail space, e-commerce will witness consolidation within a few years too.

India has to go beyond just the traditional marketplace model to truly experience the potential of e-commerce, or e-tail.

Many innovations occur in India. But most of them fizzle out. Why? Demand falls short due to logistical challenges and lack of awareness. The e-commerce sector can bridge this gap and encourage more people to achieve their goals, while contributing to the improvement of society. Hence, this platform must evolve in something which fuels innovation.

For instance, Mitticool, a globally acknowledged and appreciated Indian innovation, now uses the e-commerce platform to sell its goods anywhere across the country. So do companies like RangDe, which act as a bridge between ’social investors’ and rural folk, who need small amounts of money to improve their business. Ketto, Wishberry, and other crowdfunding platforms use e-commerce to help people raise funds and fulfill their dreams. Primo Toys, a London-based venture which created an innovative game to teach children how to code, uses the e-commerce platform to increase its reach in India and across the world.

The renewed focus on the Unified Payment Interface (UPI) will make transferring funds and online payments easier. This will reduce India’s dependence on cash, and the burden on the RBI to print it. It will also mitigate risks for buyers and sellers. It will bring stakeholders like the consumer, the merchant and banks on a common platform, creating a plethora of services unheard of in today’s global payment offerings. In turn, that will bring forward more innovative ventures, big and small. It will encourage them to go online for building awareness and increasing sales.

Because of its 24/7 availability, e-commerce has abolished the restrictions on business hours. But e-tail will continue to flourish only when innovation occurs in it. This platform must go beyond cheap branded goods to truly benefit the country.

Disclaimer: The views expressed in the article above are those of the authors’ and do not necessarily represent or reflect the views of this publishing house