Transforming the Indian eCommerce Landscape: How Marketplaces have Evolved?

With the rise of eCommerce and the increasing accessibility of technology, India has seen a surge in online businesses in recent years. The unified payments infrastructure (UPI) and the advancement of supply chain and logistics technologies have made it easier for businesses, both big and small, to go online and take advantage of the expanding internet penetration in the country, which is currently at around 59%.

Multiple software layers, such as storefronts, logistics, payments, marketing and more, have enabled businesses to quickly and easily set up online marketplaces at scale. However, despite this growth, only about 10% of the Indian population and 20% of the internet population currently transact online.

As these numbers continue to increase and consumer behavior shifts towards online shopping, India presents a massive opportunity for digital consumption in the coming decade. The potential for growth in the eCommerce market is huge and it is estimated to reach a trillion dollars in the next decade.

As eCommerce and online marketplaces have grown in India over the past decade, the marketplaces themselves have also evolved and become more sophisticated businesses. In the early days, internet marketplaces were primarily connection platforms where sellers could list their products or services, and consumers could find suppliers of various goods and services online. These early marketplaces operated like horizontal classifieds, such as Justdial , allowing consumers to discover suppliers of a wide range of goods and services online.

Over time, marketplaces have evolved to focus on specific niche areas, such as BharatMatrimony.com which is a marketplace specifically for wedding services. Both of these types of marketplaces had one thing in common: they enabled the buyer-seller connection on the platform, but then let the two parties close out the transaction themselves, meaning that the platform wasn't involved in the transaction itself. As the marketplaces evolved, they have been able to offer more services such as payment gateways, logistics and delivery, and customer support, among others. This evolution has allowed the marketplaces to take a more active role in the transaction process, and provide more value to the customers.

As online payments and logistics have evolved, led by the proliferation of technologies such as Unified Payments Interface (UPI), eWayBill, and GST, marketplaces have moved towards a transactional model. This means that they now not only facilitate the discovery of goods and services, but also the transaction closure and payments. This is exemplified by companies like Ola , which facilitates the entire cab-booking experience, from discovery to payment.

As transactional marketplaces scaled across multiple cities and towns, they started to run into challenges of supply standardization and operational complexity. To overcome these challenges, the next step of evolution was for marketplaces to own and manage not just the transaction experience, but also the supply itself, creating what's known as "Vertical, Full Stack, Managed, Transactional" marketplaces. An example of this is our company Recykal.com , which is an end-to-end cloud-based waste and recycle-enabling technology that connects waste generators with collectors, processors and recyclers. The software assures transparency and traceability in supply chains, transparency in pricing and recorded electronic payments to improve conditions for wastepickers.

By controlling a product or service end-to-end, internet marketplaces are able to improve customer experience and create efficiencies by cutting out middlemen. This allows them to increase gross margins and benefit from higher rates of customer retention. These marketplaces, by having control over the entire process, can ensure higher standards of service, and can also respond better to customer needs and complaints.

In the last decade, B2C internet marketplaces were the leading players in catalog-based commerce in India. However, in the coming decade, it is expected that a different kind of businesses will rise in India: B2C marketplaces catering to new consumer segments, Direct-to-Consumer brands (D2C) for both new and existing consumer segments, and B2B marketplaces for Small and Medium Enterprises (SMEs). These new businesses will be built for both products and services.

Source : BVP (Investment company that provides insights on internet marketplaces in India)