Alibaba, E-bay, Amazon, Snapdeal and finally Flipkart Is Indian IT landscape in for a tectonic shift?

 Asoke K. Laha
President & MD,
Interra IT

India’s ascendency among the comity of nations is, by and large, contributed by its supremacy in information technology. The readers may attribute that this statement may be driven by my vested interests in the IT sector. The next stage of transformation is more exciting and I have a feeling that it is dictated by the concept of equal partnership, be it relating to research and innovation or e-commerce. Corporations from all over the world mainly from the US are coming as strategic investors. Let us look at the e-commerce landscape. Flipkart, Amazon India, Snapdeal, Quikr, etc are gearing up to tap the Indian market. Undoubtedly, an e-commerce revolution is taking place in India. According to the latest paper reports, these companies, particularly Flipkart is raking in investment in billions and the world’s best investors, be it pension funds, hedge funds, etc are heavily investing in these companies.
Amazon, which has entered India in the e-commerce landscape recently, has not lagged behind in unveiling its India plan. A day after the Flipkart’s announcement, the world’s e-commerce behemoth has said that it would be investing US$2 billion to beef up its presence in India. Many more e-commerce companies across the world are strategizing to enter India. Does it mean that that the IT space in India is in for a churning? I think so. In India, where millions of people are incrementally graduating to higher income brackets, people will be looking for convenience, and e-commerce readily comes to their rescue. They can order things and pay through credit or debit cards. Significantly, a sizeable number of young people are doing this and their number is increasing every day. A lot of them are from rural areas.
I know of a company in Delhi, sourcing fish from anywhere in India. One has to go to their website and order the fish of their choice. The next day, the fish will arrive at your doorstep ice packed and you have to make the payment in cash or if you wish you can make the payment through the net also. The underlying fact is that there is a marked change in how people buy and sell things. They can study carefully the attributes of a product and place the order online. And it is getting delivered at home at the appointed time.
That is only the front-end transaction. There are a lot of back-end transactions taking place. Let us look at some of them. One, there is a well-heeled distribution system in place. The moment you place the order, the company sources the products from the available centres. Then, there is the packing which has to be done very carefully, knowing fully well that the goods to be transported are perishable commodities. It has to be packed air tight with ice topped to maintain the temperature and texture of the goods. Then, it has to be airlifted if the destination is far away. There has to be branch offices at cities and towns where these services have to be offered. Once received, the goods have to be delivered at home. Basic to this business model is the volume of business and scale of operations. If the business is limited, such models will not work since the end-products have to be priced very high. 
It is also instructive to look at the advantages of e-commerce. Since it is operated in the virtual platform, the trader or the operator need not have an office to store things or display materials. Goods of different hues and prices are displayed in the net. Here, the trader saves considerably the rentals for the showrooms or retail shops that they have to set up. Secondly, it is a business that can lead to zero inventory since the goods can be sourced directly from the company or warehouse. You save quite a lot on wages also since less number of people has to be employed. In effect, you require only the people to operate the virtual medium, such as taking orders, executing orders, etc. Since there is a zero inventory, you save money on storing goods and the likely damage to goods to them during storage. But success of this model is dependent on the strength of the distribution network which you build.
Does it mean that retail business as we see now will come to a grinding halt? It is too premature to engage in that speculation. There may be some people who may still like to order things by visiting shops since they can feel, touch and get satisfied about its quality, which may not be possible at the time of ordering through net. But business has a habit of transforming itself. Those who can meet consumer demands and adhere to stringent quality norms and delivery schedules can only survive in the long run. They only will get the repeated orders, increased volumes and can derive economies of scale.
Now let us look at the scope of the e-commerce business in India. It is quite likely that, by 2020, close-to 40 per cent of the population will become computer and net savvy. By 2050, this figure would be somewhere around 70 per cent. By that time, I presume that most of the households in India will have at least one PC and a net connection, enabling over a billion people to use e-retailing. Presently, the number of people using the e-retail is only abysmally low. One can assume the potential market that awaits the e-commerce. That is why companies like Alibaba, eBay and Amazon want the government to open up e-commerce for FDI. Despite the initial reservation against opening up this sector, sooner or later the government will have to do that. Of course, that will bring a lot of FDI along with a tectonic shift in how we purchase, sell our products and, of course, the range of choice the consumer can have before buying the products.
That also will signify a reverse of what is happening now. We are focussing on other countries for selling our IT products and services. With e-commerce revolution, many foreign companies will stay put in India for reaping the enormous bounty of opportunities that India presents. That will be a role reversal. Let us be prepared for those eventualities.