The Danger of Trying to Specialize for an Ever-changing Colossal

“Computer accessories products grow consistently year-over-year. Keyboards, mouse and webcams—sales for these products don’t go down. It might be 10-15% growth per year, it’s still a very big market. When exclusivity is a bigger number game with a bigger player, why not be exclusive?,” a senior executive at an Accelerator brand said, declining to be named due to contractual obligations.

Shifting power dynamics

Shifting power dynamics

Commonalities aside, market dynamics will see exclusivity in foodtech and e-commerce go in opposite directions, several industry executives told The Ken.

While exclusivity agreements are beneficial to both platforms and sellers, foodtech firms now need these tie-ups more than restaurants do. Since people are still hesitant to order food due to Covid concerns, Swiggy and Zomato cannot create and fulfill demand for restaurants. Both have been focussing on their unit economics since late last year, slashing discounts and increasing delivery charges. In May, both Swiggy and Zomato culled 13% of their workforce. Swiggy even shut a number of its 1,000-plus cloud kitchens to cut costs.

E-commerce firms on the other hand have the upper hand in this new dynamic for multiple reasons. With offline markets disrupted and brands increasingly moving online, sellers are more reliant on e-commerce to drum up demand and get rid of 3-4 months of built up inventory. Exclusives in e-commerce will now be category-specific based on demand prediction. Electronics will probably attract more exclusives than, say, fashion or furniture.

Fit to fight

Last month, Amazon infused fresh capital of Rs 2,310 crore (US$308.3 million) into Amazon Seller Services

Besides, the brewing anti-China sentiment in India has already resulted in e-commerce players toning down the excitement around product launches, according to TechARC’s Kawoosa. Launches were always dominated by Chinese brands, so now, more than ever, the Appario playbook of tying up with smaller, lesser-known brands could help e-commerce players.

Covid-hit Indian consumers are also looking to shop cheaper, which again makes the case for smaller electronics brands doing well. And if Appario is asking for exclusive launches from sellers, Flipkart’s preferred vendors WS Retail and OmniTechRetail are likely to follow suit, an executive at eKart said, declining to be named as they are not authorised to speak to the media.

All in all, e-commerce players may not need to incentivise exclusives as much as foodtech players. Swiggy and Zomato are not charging restaurants penalties for breaching exclusivity contracts, the two former foodtech executives said. A breach of contract in the past would’ve had the restaurant reverting to the standard commission rates along with arrears for the rest of the period. The contracts are usually for a year, but some restaurants have asked for the period to be shortened, the former Swiggy executive said.

When it comes to exclusivity, there’s definitely a shift in power structures. For e-commerce platforms, it means picking the right horse. But for foodtech platforms, it’s more of quiet acceptance.