Amazon, Flipkart, other e-commerce portals to lose market share to these online retail startups

The share of vertical platforms (startups engaged in the retail of goods of the particular market) is likely to go up by around 10 per cent between 2019 and 2022 in the online retail market in terms of the gross merchandise value (GMV). Sectors particularly pharma, furniture, groceries, baby care, beauty and personal care are some of the key markets where startups have a strong play vis-a-vis horizontal platforms, according to a report. India’s horizontal marketplaces include Amazon, Flipkart, Snapdeal, ShopClues etc. Nykaa, FirstCry, Grofers, PepperFry are some of the leading platforms in their respective markets competing with Walmart-owned Flipkart and Amazon India that sells almost every consumer good under the sun.

Indian e-retail market’s GMV stood at around $30.8 billion in 2019 and is likely to grow to $67.7 billion by 2022 wherein the share of big and small or emerging verticals will scale up from around 20 per cent to 30 per cent, a report by consulting firm RedSeer said on Thursday. This also indicates a fall of 10 per cent market share from 80 per cent ($24.64 billion) in 2019 to 70 per cent ($47.39 billion) in 2022 by GMV for horizontal players.

“The share of verticals will increase. The whole digital experience of buying is basically created for that customer. There is no incentive for someone like Amazon, Flipkart or Paytm to create those digital interactions at the first place. It takes a lot of money. However, the growth of the verticals’ share also depends on the product category. Both verticals and horizontals will coexist,” Arnav Gupta, an analyst focusing on finance and retail at Forrester told Financial Express Online.

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Horizontals had the majority GMV share of 55 per cent and 57 per cent in furniture and babycare categories respectively in 2019 while vertical players led the beauty and personal care, and groceries markets with 52 per cent and 82 per cent share respectively. Among these categories, pharma was the only sector where vertical e-tailers had a 100 per cent GMV share.

Differentiated supply chain, specific user experience demand, and non-standard product and purchase flows help verticals with better share than horizontals in these categories. Also, the customer mindset on these platforms is to browse and discover products about a particular type instead of various categories and hence the expectations about more variety and quality is higher on verticals — different from being on horizontals such as Amazon and Flipkart.

“These reasons are right. Verticals require specialisation whereas you can only go to a certain depth in horizontals. Verticals are supposed to go till the end. For instance, online pharmacies need to have medicines of all types of dose and salt. So verticals have to be specialised in their categories,” added Gupta. Some of the vertical unicorns in India include Zomato, Swiggy, BigBasket, OYO, along with other leading platforms such as Practo, Myntra, PhonePe, BookMyShow, FabAlley, UrbanClap, Shuttl, Policy Bazaar etc.