In a year when change became the only constant for India's retail, both brick-and-mortar and e-commerce majors remained on their toes to decipher consumers consumption behavior and demand.
Where 2016 brings to an end, years long wild exuberance by online players in the name of customer acquisitions, discounts, and deals, the offline world began realizing the unavoidable importance of a seamless experience in the consumer's journey.
A fair share of e-tailers made quiet-but-inglorious exits, having learnt the hard way the perils of obsessing over customer acquisition at the cost of a truly differential retail model.ALSO READ: 5 startups that shut shop in 2016
While on the other side of the fence, Walmart topped the Fortune Global 500 list of the world's biggest companies -- for the third consecutive year -- with sales of USD 482 billion last year. Reinstating belief in the undeniable power of real-world retail,
The Government, on its part, swirled into action with several moves to stabilize the economy with solid economic reforms. Though by the end of it, some actions do leave consumers cash-strapped and offline retailers worried with business hitting a bump.
All in all, a mixed year, characterized by more understanding and learnings rather than unrealistic goals. Here's our lowdown on the major newsmakers of 2016:
The Public and The Public Sector
It won't be an exaggeration to say that 2016 - which also marked the 25th year of economic liberalization in India - was the year of reforms, clearances, and liberalization. The year saw some long-stalled and much-talked about Government plans taking shape.
Where Prime Minister Narendra Modi gave a green signal to his ambitious Startup India initiative, the much-awaited Goods and Services Tax (GST) bill finally saw the light of the day scheduled for April 2017 and promising to usher in an effective and transparent tax regime throughout the country. The country's capital city too got a thumbs up for round the clock retail policy with several other states contemplating it.
FDI rules for marketplace format of e-commerce retailing were also liberated, though the news didn’t really raise many eyebrows; these companies were already getting foreign funding. However, the announcement of a clear regulatory framework and definition of e-commerce, inventory-based and marketplace models, pushed e-tailers to revise their operations and cut down on the predatory pricing, which until now has been the regular norm for e-commerce operation in India.
Paying heed to the request of Food processing Minister Harsimrat Kaur Badal and with a view to benefit farmers and reduce wastage of fruits and vegetables, the FY’17 Budget proposal of Government allowed 100 per cent FDI in marketing and processing of foods products produced and manufactured in India. FDI in multi-brand retail, however, remains tightly under guard.
India Advances Digital Journey
While technology arguably became the powerful influencer of consumption in India, there were still some years before India bid adieu to their cash. However, an eventful evening of November 8 - that made high denomination currency redundant with an immediate effect - advanced the digital journey this year.
Cash-starved consumers left no stone unturned to save their precious cash, that made offline retailers unsettled - albeit initially- while mobile wallets companies didn't hesitate to become the biggest advocates of the move.
Where some grabbed prime advertisement spaces in leading dailies and raked millions of users (and thereby revenues), some scrambled to reach the same set of consumers with the tried and tested route of cashback and discounts. Brick and mortar retailers too played the digital card and embraced the opportunity. Where, some turned into ATMs, some took the opportunity to unleash their own mobile wallet.
Omnichannel and 'Experiential retail' continued to be used conveniently for all the online forays or experiential store launches, the litmus test of how much of it actually converted into sales and delivers consumer convenience is yet to be unfolded
Realism Took Root in E-commerce Companies
The e-commerce 'fund-raise' party came to an end after the giddy times of early 2015 when almost everyone raised insane venture capital, private equity and hedge fund money at valuations that increasingly looked difficult to justify in 2016.
2016 emerged as the year of a reality check. One that shattered many myths...
The continuous valuation markdowns, shutdowns, and layoffs forced various e-commerce biggies to relook their business models. Even as, nobody pointed fingers on VCs, PEs and investors, who at the first place ignored the mounting losses, asked no questions on the profitability or even a break even window.
For some companies, generating critical mass with viable entities and eliminating non-core or under-performing business emerged as a viable option. A few of the online players focussed on their core business strengths and thereby scaled up efficiencies by either consolidating or/ and acquiring complementary outfits.
Among the headlines makers, Flipkart's Myntra managed to pluck Rocket Internet-backed troubled fashion e-tailer Jabong -under its arch-rival Snapdeal's nose- at a cut-price deal, paying just $70 million for Jabong, which was worth as much as €388 million (about $508 million) in December 2013. And in the process becoming the largest online retailer of fashion, with 70 per cent of the market share.
Similarly, TinyOwl Technology Pvt. Ltd, one of the most well-funded start-ups, merged with logistics company and logistics firm RoadRunnr (Carthero Technologies Pvt. Ltd) in May to start a new entity called Runnr to stay afloat.
But it was not all that gloomy for some. America's behemoth Amazon, unlike other players, remained cash-rich through the year, thanks to its founder who made massive top-up for India investment. The company also managed to surpass Flipkart- in terms of app downloads throughout the year, while former is still holding on to its leading position in the e-commerce battle, according to data from various tracking platforms.
However, it will be interesting to watch whether Amazon maintain its dominance post-Chinese behemoth Alibaba's India entry, which remained the significant milestone to be achieved in India's e-commerce chapter...
Food Tech Lost Its Appetite
Gone are the days when Food start-ups were the flavour of the season.
The sector, which up until last year, saw investors pumping in millions of dollars- betting on consumers’ changing habits to drive growth for their business- went stale in the first 9 months of 2016.
According to data from VCCEdge, investments in food technology, which posted a 358 per cent increase in deal value to $504 million in 2015 with 85 deals, registered only 33 deals worth $67 million in 2016 until September. While the share in a total number of deals in the space has remained above 50 per cent, there has been a fall from 44 per cent to 27 per cent in terms of deal value.
Lesson learnt. While monies burnt on attracting consumers to apps/websites can initially increase valuations, VC/ PE funding and number of app downloads, real-world business runs on a matrix of differentiation and exceptional customer services.
But things were not so despondent for those who made fundamentally correct business models. Zomato, who made a robust entry into online food ordering last year, became one of the highest venture-funded food companies in India, along with its arch-rival Swiggy. Food retail companies like BigBaskey, Grofers, Urdoorstep also look good, at least for the medium term.
Techies and Transitions
After the exuberance, job cuts became the code of the moment for India's e-commerce startups. Where many startups came under the fire for revoking joining dates of IIMS and IITs graduates, continues employees exodus reflected the real-world ground realities of e-commerce.
Silicon Valley, which became the preferred recruiting grounds for online entrepreneurs last year, failed to retain the Bay Area employees.
The worst hurt was home-grown major Flipkart. Who this year, saw as many as seven executives at the level of senior vice-president, the second highest rank at the company, leaving—including commerce platform head Mukesh Bansal, chief financial officer Sanjay Baweja, chief?business?officer?Ankit Nagori, product chief Punit Soni, legal head Rajinder Sharma, and Anand K.V., who headed customer experience. Even Sachin Bansal, the company’s co-founder, moved aside as chief executive in January and was replaced by Flipkart’s other founder, Binny Bansal.
On the other hand, Snapdeal’s Chief Product Officer Anand Chandrasekaran also call it quits, to start his own entrepreneurial venture. Chandrasekaran was brought on board in June 2015 to revamp the company’s platform, especially mobile.