E-commerce in India has come a long way since the days of a few odd sellers hosting auctions on their eBay listings. While it may seem intuitive and normal today to buy things online, not long ago the fear of someone running off with their hard-earned money would deter most people. It required an incredible amount of effort, time and sustained innovation for us to reach a point where we are today. And yet, the true opportunity remains largely unrealized, with e-commerce’s share of overall retail limited to just 4.3% as of FY20, despite the huge Covid-driven push. That’s significantly low, especially compared to some of the more evolved ecosystems like China where online sales comprise almost 25% of overall retail.
While e-commerce platforms have so far been the major driving force behind the growth, the next major wave is going to come from all directions, with sellers, customers and brands contributing in their own major ways. One category of players that’s right at the intersection of all of these e-commerce roll-up companies.
E-commerce roll-up companies acquire, consolidate and operate multiple e-commerce brands simultaneously. What makes their business model so exciting is that they’re able to grow these acquired brands much faster than they’d grow on their own, helping brands achieve years worth of growth within months. They’re able to do so through capital, expertise and shared synergies that’s not readily accessible with individual brands.
As a case in point, one of the most common problems faced by e-commerce brand owners is working capital, which significantly limits their ability to have enough inventory available with them. Ultimately, this often leads to an Out of Stock situation on various platforms where brands not only lose out on precious revenue, but also end up getting penalized permanently by the ranking system of various marketplaces. Since e-commerce roll-up companies operate multiple brands at scale, they’ve stronger sourcing & financing capabilities ensuring that their brands never run out of inventory, ultimately allowing for a greater growth potential.
One of the unique things about e-commerce roll-up companies compared to the traditional consumer goods companies is their Internet & Technology first approach. While the traditional companies have to figure out a way to fit the Internet within their existing business processes, being born out of the Internet itself comes with a set of distinct advantages. As an example, consider the entire product development process. Traditionally, it would take months of market research, countless focus group discussions, rounds of internal pitches for a product idea to get approved. The final product could easily take years before launch.
E-commerce on the other hand has brought the customer, the brand and the engineer together in one room. With all the data that’s available to an online brand, you no longer need psychic powers to figure out what people want & the problems they are facing.
E-commerce roll-up companies are able to leverage this as an advantage in their entire decision making process by making data-driven choices from product ideation to development, ultimately making their brands much more customer centric, the holy grail for any aspiring consumer brand.
One must realize that the rise of roll-up companies is a good thing for everyone – the platforms, the sellers and most importantly the consumers. Roll-up companies bring along with them deep expertise, technological innovation and capital investment that’s certain to drive growth on e-commerce platforms in a meaningful way. Sellers on the other hand now have the option of an exit. An honest hardworking entrepreneur based out of a small town in India can now dream of making a significant financial outcome by selling off his business – something otherwise available to the rare few.
And finally – the customers will have far greater choice and access to products that actually solve their problems. As roll-up companies push to raise the bar in terms of customer experience, any new age consumer brand will be further incentivised to invest more and more into creating genuine customer delight.
Cliched as it may sound, the future is the internet and the future of commerce is e-commerce. Some of the smaller, private label brands of today are going to become the mega brands of tomorrow. And in the same breath, some of the e-commerce roll-up companies of today are going to the Unilevers and P&Gs of tomorrow, with internet & technology deeply embedded in their DNA.
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Source ET Retail