E-commerce: The industry is sold on AI and machine learning

It was in 1999 when K Vaitheeswaran along with V S Sudhakar, Vipul Parekh, Hari Menon, V S Ramesh and Sundeep Thakran founded Fabmart.com, India’s first online store. Later rebranded as Indiaplaza.com, the company shut down in 2014.

But India’s ecommerce journey really began in 2007 with Flipkart. Soon after, there was an influx of startups almost crowding the sector to a point of no return. According to a report by ASSOCHAM and Forrester, India’s ecommerce industry is currently worth over USD 30 billion and is poised to reach USD 120 billion by the year 2020, at an annual rate of 51 percent.

With over 300 million Internet users, the country has embraced ecommerce as a part of daily life. From just desktop web versions to swanky mobile sites, most ecommerce companies now have dedicated mobile apps, toe to toe with the growing market. As a nascent and growing industry, ecommerce is also a sector where we see active usage of newer technologies like robotics, cloud and AI.

However, all is not well in paradise. Between 2015 and 2017, over 20 leading ecommerce companies have shut shop including Grofers, PepperTap, JustEat and HelpChat. Established companies like Ola tried their hands in grocery delivery, bike taxis and even food delivery, but failed. Fashion giants Jabong and Myntra got acquired by Flipkart. Several reports suggest that the sector will not see profits well until 2020.

For a better understanding of how this sector will leverage technology and what the lack of profits mean for the industry and whether the ecommerce bubble might still have a chance, we reached out to Gunjan Patidar, CTO at Zomato, Pramod Jajoo, CTO at BigBasket and Rajesh Dalal, VP – Technology at MakeMyTrip for their expert views on the sector.

1. What are the key technology trends in ecommerce in 2017?

Patidar: 2017 will see a lot of push towards efficiency and automation across all technology verticals. Ecommerce will be its biggest benefactor as improvements in logistics, data processing and infrastructure will drive more efficiency. 2016 proved that the recent advancements in Machine Learning and AI, combined with the Big Data revolution of the recent past, have significant practical applications in the industry. We’ll start seeing many more applications of that in Ecommerce. There will also be a major change in the ways payments work as the next billion go cashless.

Jajoo: Ecommerce is all about catering to the customer, so a customized customer solution is very important. For example, at BigBasket, we need to provide customers with the right set of products at the right price along with a good delivery experience at the right time. It is important to leverage technology like data intelligence to enable this.

Dalal: Increased mobile adoption, more and more use of data science, increased security. At MakeMyTrip, we are constantly trying to improve our mobile applications and invest in analytics to understand our customers better.

2. How are newer technologies affecting the ecommerce industry? 

Patidar: Although AI and robotics have been around for some time, and have been improving incrementally over the years, the recent quantum leap in their accuracy, cost and performance is starting to drive a massive impact on the industry. For the first time now, computers are matching, and in some cases surpassing humans in a number of non-repetitive tasks. Significant investments by a number of companies has led to the rise of very high level frameworks in the open, and you no longer need a PhD to build intelligent programs, rather simply put pieces together smartly to achieve end goals. All this is, and will continue driving up the efficiency and quality in ecommerce.

Jajoo: One needs to derive intelligence and actionable insights from data and to do that, technologies like AI and machine learning are very important tools to make solutions more compelling. It is important to apply these technologies with the proper business context so that one can use these more efficiently. Robotics becomes highly relevant to ecommerce when it comes to physical handling of goods.

Dalal: These technologies are helping the ecommerce industry understand their customers better. In an industry where customer is top priority, connected data helps us understand their travel behaviour in a much better way and helps us in offering them customized packages.

3. In 2015-2016, the ecommerce industry witnessed the shutdown of several companies. How long do you think will the ecommerce bubble will last?

Patidar: Every nascent industry must go through the learning phase to realize what’s right and what’s not. Last few years have been that for ecommerce. But the survivors are more careful and mature than ever. There are still huge challenges ahead, but this time, thankfully, the bubble eased up before it was too late.

Jajoo: Ecommerce is a long term trend and any long term trend will face a few bumps on the way. A few years ago, some of us could never think of shopping digitally and now, most of us cannot imagine life without it. People will not go back to shopping the old way and denounce ecommerce, which makes the industry critical for the future.

Dalal: While it is true that companies have been shutting down, newer companies have also come up to take their place in an even higher numbers. Companies shutting down cannot be taken as a benchmark for the industry and it depends on which company is shutting down and why.

4. How long do you think will the sector survive on not making enough profits?

Patidar: With the recent focus on improving monetisation and reducing cash burn, we’ll see at least some players in the green soon enough. Technology will play a big role in this regard and those who internalise this early will not just survive but flourish.

Jajoo: Essentially, no business can survive without profits in the long run. Although this sector is a long term one, a company needs to have a viable business model to survive the market. The current trend of shelling out discounts where the company is actually losing money is clearly not a sustainable model over a long term. Fundamentally, as a business, ecommerce can be executed in a more efficient way because there are ways of cutting costs and at the same time, monetize it. Companies need to learn the different ways to generate the extra margin so that they can be profitable. From a data perspective, technology will play a large part in this learning.

Dalal: At the end of the day, a company has to churn out profits in order to survive. Some of the companies not making profits will eventually shut down as they are obviously unable to make their business model worthwhile for the market. Ecommerce in India is still pretty new and we have to create awareness regarding business plans, buyers and the market.

5. What is your key strategy for 2017?

Patidar: At Zomato, our immediate focus is to drive growth sustainably through technology. All our recent initiatives have been heavily focused on creating real value for our users and merchant partners. We’ll continue to drive this further and also build more depth within our vertical with some new products. There’s also a big push towards automation and data driven growth.

Jajoo: We expect to leverage technology to make ourselves more efficient and customer friendly. We need to make technology the forefront of our business.

Dalal: At MakeMyTrip, we are working towards ramping up our mobile strategy and enhance the UI, while also investing in data crunching technologies to gain more insight into customer behaviour. Security is another area we are focusing on and investing in right now.