Online Retail Startups in India to Give Stiff Competition to Amazon, Flipkart, and Other eCommerce Players [REPORT]

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RedSeer, a market research company based in Bengaluru, India released a report on Thursday predicting a 10% growth in GMV of Indian vertical online retailers by 2022.

The total GMV of the Indian e-retail market is estimated to be $30.8 billion in 2019. Horizontal e-retailers account for 80% of this sum whereas vertical retailers make up for a mere 20%. However, the report forecasts that by 2022, out of a GMV of $67.7 billion, vertical-led online retailers will claim 30% of the value, decreasing the market share of horizontal retailers to 70%.

Currently, the biggest industries benefitting from a vertical marketing system are furniture, pharma, baby care, beauty and personal care, and groceries. Out of these, pharma, beauty and personal care, and groceries have the biggest hold on online vertical retailing.

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The online pharmaceutical sector is 100% vertical-led due to highly specialized needs such as trained staff, specific user demands, unique supply chains, a need for regulatory compliance, etc. The report predicts that this sector will continue to be dominated by vertical players over the years.

e-Grocery is the second biggest vertical-led sector with 82% of the GMV belonging to vertical players. 52% of the GMV of beauty and personal care products belong to vertical retailers.

Furniture and babycare are still somewhat dominated by horizontal e-marketplaces with both owing 55% and 57% of their GMV, respectively to horizontal players. However, the chances of the tables turning are likely in the coming years.

The report lists a differentiated supply chain, specific user experience demand, and non-standard product and purchase flows as the reasons vertical players fare better in certain categories.

What are the horizontal and vertical marketing systems?

All forms of markets follow one of two systems or formats, namely a horizontal marketing system or a vertical marketing system.

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Horizontal marketing systems are those in which players on the same level of a supply chain collaborate to increase their reach in a given market. Thus, horizontal marketing systems cater to heterogeneous demands. Thus, online retailers like Amazon, Flipkart, and SnapDeal are examples of horizontal systems because they offer products from various industries and suppliers in one place.

Vertical marketing systems, on the other hand, are more specialized and aren’t limited to functioning on a single level of the supply chain. Instead, producers, wholesalers, and retailers blend their tasks together to work as a single unit. This system aims at reducing inter-level conflict and increase overall profits. Some examples of vertical online retailers in India are Big Basket, Myntra, and PepperFry.

Both systems have their own merits. A horizontal system provides high profits with low capital investment. On the other hand, vertical systems cater to customer needs more comprehensively, and offer better quality and wider options in the same product category.

Over the years, India’s online retail sector has seen tremendous growth. Amazon and Flipkart reported record sales during the festive season this year, with the expansion of consumer base to include customers from rural and tier-II regions.

Some of India’s biggest vertical players are BigBasket, Myntra, Zomato, UrbanClap, and MedLife.

Myntra, a clothing and fashion e-retailer has an estimated annual revenue of $313.3 million with around 2,300 employees under its wing. BigBasket reportedly makes up for 50% of the annual e-commerce grocery revenue in India. In September, the health technology startup MedLife hit the 100 crore revenue mark.

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