The profusion of e-commerce apps and platforms in India has understandably raised questions about their sustainability. Only a handful of businesses in the country are currently in the green. A key reason lies in the fact that they continue to spend heavily to acquire new customers without a commensurate increase in earnings. This is hardly a long-term solution, and at some point, they will have to turn their focus to profitability as their investors start demanding answers. 

In this context, foreign e-commerce apps and platforms may have a longer runway owing to their larger war chest, while the future of indigenous ones could well be at stake. Broadly speaking, e-commerce businesses rely on a strategy that revolves around two key factors - customer acquisition and customer retention - with companies focusing on the first in their bid to reach the second. Most e-commerce businesses in India have not been able to successfully make the shift, which accounts for the spending. Whether homegrown e-commerce apps and platforms will be able to make that elusive transition will eventually determine their fate. 

Upselling, Cross-Selling, and User Experience 

To achieve profitability, companies need to concentrate on finding the right strategy through a mix of core and non-core revenue channels. Streamlining operations, improving unit economics, and finding cost-effective ways for customer acquisition are some of the ways in which companies could improve their profitability. A promising opportunity lies in the realm of upselling and cross-selling which can generate both revenue and customer loyalty. 

Because the customer is already familiar with the platform and trusts it instinctively, it should be relatively easy to upsell or cross-sell products and services to them over the same platform. Some e-commerce and food tech companies have already started experimenting with this by offering memberships and subscription plans to customers with attractive benefits like discounts on various products and services, free and faster delivery, and even access to premium audio-visual content. Other benefits may include free meals, movie tickets, BOGO offers, points for shopping, gift cards, VIP privileges - the list goes on. As homegrown e-commerce apps and platforms look for newer avenues for monetization, this could be a path well worth exploring. 

The successful upselling or cross-selling of products and services crucially depends on the recommendation engine of the platform - which is another area that homegrown apps need to look at. An upgraded algorithm that is on par with foreign apps could be instrumental in increasing their sales. A sharper, intuitive algorithm could also help display more contextual, persona-focussed sponsored ads to users, providing value for money for the advertiser, time value for the user, and increasing ad revenue for the platform. 

The user interface (UI) of homegrown apps could be a third area of focus. Currently, the UI of many homegrown apps and platforms lag behind their foreign counterparts, possibly resulting in the loss of customers to platforms offering a better user experience. Fixing this key aspect could result in better customer acquisition, and customer retention, and address profitability issues. 

Localization of E-commerce 

Despite the failure of e-commerce businesses to churn out profits, the concept of online commerce as a whole has been hugely successful in the country. The Indian e-commerce market size is projected to reach $120 billion by 2026 from a low of $38 billion in 2021 as per a joint study by FICCI and Anarock. That said, the e-commerce model that currently exists in the country is missing a crucial piece by circumventing the entire local economy. 

Till now, India has successfully replicated the US-style e-commerce model where consumers purchase products that come from a warehouse or from an unknown merchant located in a distant city. This system entirely sidesteps the local merchant who may already be stocking the product and is willing to offer it at an equally competitive price. 

Sourcing orders locally will reduce shipping costs, compress delivery timelines, and also provide more confidence to the consumers as products might come from a merchant nearby they are already familiar with. The future of e-commerce in India may typically involve digitizing local merchant catalogs and enabling them with services like delivery, payments, and procurement. With their knowledge of local markets, homegrown e-commerce companies are in a better position to cash in on this opportunity to create new avenues for monetization. 

Could ONDC be the Game-Changer? 

The rollout of ONDC in Bengaluru and other major Indian cities starting September this year marks the beginning of a new chapter for India’s e-commerce industry. ONDC’s open-source methodology and emphasis on unbundling will help in breaking down the walled gardens in the e-commerce industry and enable both big and small players to compete on an equal footing. 

ONDC will make it easier for the merchants to onboard through one app but inter-operate on multiple e-commerce marketplaces with seamless one-time cataloging to enable merchants to maximize their discoverability with minimum effort. It will also enable them to plug-and-play various other services like payments, delivery, online presence, billing, and marketing through a single platform, providing genuine flexibility. 

As far as e-commerce platforms are concerned, ONDC could put the focus firmly on their UI/UX vis-a-vis their backend operations. With no need to maintain inventory or run a logistics service—thanks to the unbundling of services—the quality of UI/UX could turn out to be the key differentiator for individual e-commerce platforms. With the same products available on multiple apps and backend operations including logistics taken out of the equation, revenue could boil down to the singular factor of user experience over different apps. 

The Future is Vertical 

With a high-quality talent pool and unmatched cost advantages, homegrown apps and platforms not only have it in them to survive the tough e-commerce market but also grow into businesses that dominate on the global stage. ONDC could be an important enabler in this regard, allowing them to take the lead in shaping the future of digital commerce. 

In the long term, the future of homegrown e-commerce apps and platforms may lie in greater verticalization through specialized marketplaces. This will enable them to capitalize on advantages such as a better value proposition, greater choices for customers in the area of specialization, and economies of scale to create profitable entities that offer better experiences for their customers.