Shopify wants a piece of India’s burgeoning e-commerce market. So does everybody else

Fleck sells brass and stoneware dinnerware, cutlery and houseware to India’s urban online shopper. “We wanted to bring a modern aesthetic, while not letting go of the Indian charm,” says co-owner Nishant Chauhan. He and wife Shruti source products from Jaipur and Moradabad in the north and Mysore in the south and, since mid-2019, they have sold them via their Shopify store. 

The Chauhans aren’t alone. The Ottawa-based e-commerce firm has been expanding its Indian presence over the last three years, hiring staff and localizing features for merchants in the country. It’s far from the only foreign giant drawn to the subcontinent’s swelling consumer market, however. Amazon, Facebook, and Google are pouring billions into India, doing deals with domestic conglomerates to access their infrastructure and existing clientele. 

Along with some of the biggest names in tech—and India’s largest company, itself in the middle of a huge retail push—Shopify is trying to make inroads in a market where shoppers’ habits favour major online marketplaces and small, local brick-and-mortar stores. Its success will depend on consumers buying more from direct-to-consumer (DTC) brands like Fleck.

Indian e-commerce has grown rapidly in recent years, even as the country’s wider economic expansion has slowed. Consumers will spend US$99 billion annually shopping online by 2024, Goldman Sachs forecast in July, representing 10.7 per cent of all retail sales—up from 4.7 per cent in 2019.

Foreign tech giants are piling into the Indian e-commerce market, promising to bring small businesses online. Amazon pledged US$1 billion for such efforts in January. Earlier this year, Facebook and Google paid US$5.7 billion and US$4.5 billion, respectively, for stakes in Reliance Jio Platforms, the telecom and tech subsidiary of India’s biggest company, which has embarked on a major retail expansion. 

Shopify first entered India in June 2013 via a partnership with Singapore-based conglomerate Singtel, which sold subscriptions to Shopify’s software to merchants—businesses that use its platform to build and host their online stores—in four Asian markets; the partnership lasted just over a year. Local development agencies say merchant interest in the platform has grown steadily since, with a particular breakthrough in the last two years.

Shopify Commerce India, a local subsidiary incorporated in May 2017, had revenues of ₹16.65 crore (US$2.21 million) in the fiscal year ended Mar. 31, 2020, according to filings with the Government of India’s Ministry of Corporate Affairs that The Logic obtained via a public-records request. That’s a tiny fraction of the US$1.7 billion the parent company brought in worldwide over that period. 

But the Indian arm is growing quickly, with revenue in the last fiscal nearly double the ₹8.49 crore it made over the previous 15 months, according to the documents. “India is in the top 10 countries of Shopify globally, in terms of numbers,” Vargab Bakshi, international partnerships lead, said on “The Startup Operator” podcast in August. Shopify merchants had Indian sales of more than US$456 million between 2016 and 2019, according to the firm’s global economic impact report. (Shopify did not respond to The Logic’s request for comment for this story.)

Fleck is one of the new stores driving the platform’s growth in India. The Chauhans launched it last year after an unsuccessful attempt to sell stoneware crockery and linens on Etsy. “We wanted our brand to say something,” Chauhan told The Logic—but Etsy shops all look alike, with merchant customization limited to the choice of banner image. Shopify let Chauhan, who works in tech, set up a “good-looking store very quickly and start selling,” although he’d like more flexibility in modifying the site. Sales are robust, he said. “We’re planning to scale up the business and invest our efforts full time.” 

Indian e-commerce has been dominated by marketplaces like Amazon and Walmart-owned Flipkart, which each accounted for nearly a third of sales in 2017, per Forrester. The two firms have invested heavily in marketing, said Jayanth Kolla, partner at Bengaluru-based research firm Converge Catalyst, in part because shoppers needed to be convinced to buy online. “They had to create the consumer.”

Once online, Indian consumers have proved demanding. “There’s no such thing as brand loyalty,” Kolla said. “They want high-quality merchandise for the lowest price that they can get.” That’s not how the DTC brands Shopify mostly serves typically compete. Payments and logistics create further challenges for the platforms that enable them, like Shopify and BuildaBazaar, owned by Ahmedabad-based Infibeam. For purchases from independent merchants, “the consumer is not very comfortable paying upfront,” said Kolla; they prefer cash-on-delivery (CoD), although its popularity has declined during the pandemic.

Fleck uses Shiprocket, a third-party service integrated with Shopify, for logistics including CoD. But Indian merchants would benefit from some of the features Shopify makes available to their North American users, said Abhisarika Das, a director at KLoc Technologies, a Bengaluru-based agency that builds e-commerce stores for its clients. For example, the platform doesn’t offer Shopify Payments on the subcontinent, so shoppers have to complete purchases on an external provider’s platform rather than on the merchant’s own website, reducing conversions. Shopify Commerce India’s earnings may be low in part because the platform doesn’t offer the range of add-on services in the country that now generate more revenue for Shopify globally than selling software subscriptions.  

Das says the lack of a few features is a small drawback, however. Her agency—20 of whose 50 staff work on Shopify stores—gets a couple of inquiries a week from brick-and-mortar stores looking to go online, new DTC brands or venture-backed product companies. Another agency, Chandigarh-based CueBlocks, has helped some clients migrate to Shopify from rival platforms like Magento. Other vendors want to lower their dependence on Amazon or Flipkart. “As these marketplaces start squeezing the margins, they’re not as lucrative as they were a few years back,” said CueBlocks president Pancham Prashar. “Some [merchants have] realized that they need to really focus on their site.”   

As in North America, major Indian consumer packaged goods firms and retailers are also signing up. For example, the multinational conglomerate Tata uses Shopify stores for its cooking-ingredient lines and its department-store chain Westside. So does furniture-making giant Nilkamal. Shopify has specifically targeted large brands on the subcontinent, launching a country-specific package for enterprise customers in early 2017. “That’s where we are focusing on India right now, to promote Shopify Gold as a product,” Bakshi said on the SEMrush podcast in September 2019, noting that the firm’s 15-person commercial team in the country were targeting merchants with annual sales of US$500,000 and up.

Kolla said getting well-known large merchants on board could help attract smaller ones, pointing to a similar effect among consumers. “If their cousin in Bombay is ordering Raymond from Shopify, then this guy in Baroda or Bhopal or Indore … is that much more willing to use the same channel,” he said, citing a popular men’s clothing label that previously used the platform.  

Shopify recently shifted strategy in India, however. Das said the platform stopped signing up new clients on the Gold plan a couple of months ago. KLoc now puts large clients on the regular Shopify Plus enterprise package. In January, Shopify also moved several members of its Bengaluru team from Shopify Gold sales to roles in market development or managing the firm’s relationships with agencies and app developers, according to their LinkedIn profiles.

Shopify isn’t targeting the same small businesses in India as Facebook and Google. The U.S. giants’ new partner Reliance is focused on “kirana shops down the road,” said Kolla. “There are 60 million of them in India.” While supermarkets have made inroads in recent years, these micro, multi-brand corner stores offering staples and free home delivery have regained share during the pandemic. 

Reliance’s JioMart platform offers them point-of-sale systems and features like ordering, payment, delivery, customer service and reviews. Goldman Sachs estimates it will take half the country’s online grocery market, thanks in part to its integration with Facebook-owned WhatsApp.

Merchants and agency executives say there’s room for different models in Indian e-commerce. The “Amazons and Flipkarts are able to make sales on standardized products,” said Chauhan “For anything non-standard, people do tend to lean toward DTC brands.” Das segments it geographically. Residents in smaller centres tend to favour the aggregators, so Facebook, Google and Jio’s efforts will likely dominate there. But in the country’s largest cities, consumers “want to discover brands and buy direct.” There’s a growing chance that purchase will be on a Shopify store.