Online Travel Agents (OTAs) account for an estimated 30% of the market share in the Indian consumer internet market. The remaining 70% is distributed among 20 sub-verticals including horizontal e-tailing, fashion, furniture, 3PL, grocery, hotel, food tech, cab aggregators, ed tech, and alternative lending.
The Indian consumer internet sector saw a moderate annual growth of about 29 per cent in 2016 compared to approximately 66% in 2015. It is forecasted to keep up its growth momentum and become a 65 billion dollar industry by 2017, growing at a rate of about 44 per cent YoY according to research from RedSeer Consulting.
Here are more insights from RedSeer on some of the underperformers and disruptors of last year.
FurnitureFurniture is most underperforming categories in the internet space. The sector faces many challenges like customers preferring in-person experience before buying any furniture, which takes away the strong value proposition of the e-tailing market. And when the etailers move to omni-channel the cost of the real estate, logistics start resembling more of an offline player. The other challenge faced by the industry is around the mix of products being pushed by etailers vs. the products bought. While the furniture story has been sailing on very high average order values, customers end up buying more of side tables and smaller items, further impacting the business model.
Third Party Logistics (3PL)This year has not been the best of the years for the 3PL players. This is largely due to sluggish growth of the overall etailing market and, captive share of deliveries increasing significantly. At 60-65 percent of the orders being shipped through the captive arms, there was a limited head way for the sector.
Food TechFew internet verticals saw the roller coaster ride as seen by the food tech industry last year. The whole value chain got disrupted, challenges by unit economics, scalability and finally the dust is settling. With restaurants realizing that Food-tech can be a strong channel for acquiring and retaining customers, they are more forthcoming on adding to the revenue stack of such companies. This coupled with customers paying convenience charges, see the sector moving towards viability. Also, the increase in adaptability of the internet kitchen, which has a high margin on food ensures good volumes. The other debate which needs to settle is on the owned vs. 3rd party delivery, as the customer experience is heavily tied with the delivery performance.
Alternative LendingAlternative lending is trying to disrupt the way India borrows, and the very ability of many to borrow. With as high as 75 per cent of SME loans not being fulfilled, alternative lending on the back of sharp analytics and quick disbursal, is expected to disrupt the lending industry. These are the initial days for the industry but the early signs are promising.
