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Ankita \n Rai, Business Standard<\/i><\/p>\n Ankita \n Rai, Business Standard<\/i><\/p>\n
New \n Delhi, 15 Jun 2015<\/i><\/p>\n
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Travel, \n books, electronics, fashion, classifieds and now local services \n – e-commerce has disrupted the status quo in almost every sector. \n With Amazon venturing into grocery (Kirana Now), Snapdeal entering \n services and Flipkart ready to follow suit, on-demand services \n appear to be the next frontier for competition in the crowded \n e-retail space.<\/p>\n
Look at what’s in the pipeline. Amazon recently launched Amazon \n Home Services in the US market. It is expected to launch a similar \n service in India soon. Online marketplace major Snapdeal has gone \n a step further with its service platform to include utility payments \n and a marketplace for financial services besides home services. \n Given the huge investor interest in the category, a handful of \n highly localised home services start-ups (such as UrbanClap, LocalOye, \n Taskbob and UrbanPro) have also thrown their hats in the ring \n .<\/p>\n
This is a big shift, mind you. From being online marketplaces \n for products you are now moving into services, you are aggregating \n photographers and tutors and handymen, and organising a highly \n fragmented but huge market. Look at some numbers. The homecare \n and installation services market in India is estimated at Rs 90,000 \n crore; the laundry market at Rs 200,000 crore annually, of which \n 95 per cent is unorganised.<\/p>\n
You can see why e-commerce companies are muscling in, but does \n it really help the local guy who would like to offer a highly \n personalised service? Apparently yes, it broadens the prospective \n client base and gives him a chance to scale up quickly. Experts \n say an entry in services can also help the large horizontal players \n trim costs and improve margins. The incremental cost of delivery \n of services is lower and can potentially give better returns on \n investment.<\/p>\n
Says Devangshu Dutta, chief executive, Third Eyesight, "A \n search for margin improvement and a desire to be ‘the e-commerce \n of everything’ are the prime drivers to enter the services aggregation \n space. <\/b><\/p>\n
"Merchandise e-commerce has moved from inventory-led \n models to marketplaces, but once all costs are worked into the \n equation, even these are margin-negative, if not for the marketplace \n then for the sellers on the marketplace. Aggregating more services \n would be a way to generate extra margins and also defray customer-acquisition \n and retention costs over a wider base of businesses."<\/b><\/p>\n
For large horizontal players, the ability to cross-sell services \n can lead to better margins compared to niche players. Also local \n services can be seen as a differentiator. It allows e-retailers \n to not just target the retail share of the consumer wallet but \n the entire consumption basket. "Why would they want to limit \n themselves to just retail products when there is so much of value-add \n they can provide through services," asks Pragya Singh, VP, \n retail & consumer products division, Technopak.<\/p>\n
Jabong.com co-founder & MD Praveen Sinha, who has invested \n in two local services start-ups, Zimmber and Wassup, says, "Local \n services is the next phase of ecommerce and will see huge growth \n provided companies are able to execute it well. However, operational \n complexity is the biggest challenge here."<\/p>\n
So what are the challenges an e-commerce marketplace is likely \n to encounter when it decides to aggregate services? How should \n it tweak its supply chain network to take advantage of the growing \n demand for hyper-local services?<\/p>\n
The bigger the better<\/b><\/p>\n
An eretailer can deliver a product to any location from its centralised \n warehouse through courier partners but the same theory doesn’t \n work in services. Execution is a challenge as you cannot replicate \n a successful model in many geographies at the same time.<\/p>\n
That said, big horizontal retailers with their established supply \n chain networks have an advantage over smaller players\/start-ups \n in the category. Consider Snapdeal, which currently offers home\/installation \n services, and financial services through RupeePower. "The \n home and installation services business is an extension of our \n home and living category, offering an assortment of 10 lakh products \n and end-to-end home services that include furniture installation, \n electrical, plumbing, pest control and professional home cleaning \n services," says Saurabh Bansal, vice-president, home, Snapdeal.<\/p>\n
Online classifieds platform Quikr is also working on a service \n offering. Pranay Chulet, co-founder and the CEO of Quikr, says, \n "We are launching a sub-brand called Quikrservices, which \n will enable better interaction between buyers and sellers. Services \n is a different ballgame. The availability of buyer and seller \n at the same time is important. It is not as simple as shipping \n a product to the consumer’s doorstep."<\/p>\n
Experts reckon services can be cracked but only at scale. Simply \n put, unless you are very large in size you cannot hope to provide \n customised service. More volume means better customisation and \n competitive pricing. "Service providers are also able to \n get more business from a platform, so they can offer better prices," \n adds Chulet.<\/p>\n
But scale can only solve 50 per cent of the problems. Delivering \n a standardised service experience is a big challenge. Says Debadutta \n Upadhyaya, co-founder, Timesaverz, a mobile marketplace for services, \n "Standardisation of processes, skill verification, background \n checks and soft skill training of service partners are a must." \n Timesaverz is present in Mumbai, Pune, Bengaluru. It charges a \n 20 per cent commission from service partners for every transaction \n and saw 10x revenue growth last year over the previous year.<\/p>\n
On its part, Snapdeal has tied-up with service providers such \n as EasyFix and Hicare with proven capabilities. "We are working \n to ensure that professionals who perform end-user tasks are trained \n in customer communication and service delivery," says Bansal.<\/p>\n
Most players are making extensive use of technology to connect \n a customer with a service provider who is best suited to service \n her unique need. In a way it also makes the local services business \n more transparent and efficient, says Varun Khiatan, founder, UrbanClap. \n UrbanClap is an online marketplace that provides services in 20 \n categories including personal services and events.<\/p>\n
However, service is not an easy space to operate in. Aggregation \n of local services are open not only to ecommerce players, but \n also to search giant Google on the one hand (through search results \n and ads) and local aggregators (sector-specific news bulletins \n in a city like Noida). "Most domestic services, for instance, \n are more high-involvement than merchandise buys and the last-mile, \n last-minute connectivity with the customer is where the relationship \n is made or broken. In such cases local aggregators with a hands-on \n approach will have a competitive advantage," says Dutta.<\/b><\/p>\n
Net-net, while search and service aggregation may appear a low-margin \n game, over time, technology-powered large e-commerce platforms \n have the potential to leverage the high volumes it offers and \n organise this highly fragmented market in the process.<\/p>\n
Hyper local isn’t easy: Ashvin Vellody, partner, management \n consulting, KPMG India: <\/i><\/b>At present, Indian service \n industry consists of 64.8 per cent of the total Indian GDP, of \n which e-commerce occupies around 4 per cent. As people move across \n cities, traditional neighbour-hood and referral networks, which \n connected consumers with local tradesmen, have broken down. Online \n services marketplaces are quickly filling this space and finding \n resonance with the digitally-enabled consumer. <\/i>However, \n this model is not without its challenges, the largest of which \n is limited supply of skilled and certified tradesmen, who could \n deliver quality services. India has a high number of semi-skilled \n workers but lacks quality due to chronic under investment in the \n development of such trade-skills and vocational education. Therefore, \n many marketplaces would have to spend considerable amounts of \n time, effort and money in building\/upgrading tradesmen skills, \n such as language and customer orientation. <\/i>Online marketplaces \n also have to reach out to tradesmen in each city and invest in \n enhancing their capabilities before registering them on their \n websites. The ability to scale up across cities quickly, while \n maintaining uniform quality standards and competitive prices, \n is going to a key factor determining success or failure.<\/i><\/p>\n