China’s loss in specialty chemicals benefits India Subscription works for e-com
China's loss is India's gain. Atleast, that's what, when it comes to chemicals, especially, specialty chemicals market. The downturn in China's chemicals and specialty chemicals market in the recent years, has come as a boon for the Indian chemicals and specialty chemicals industry, said a recent Crisil Research report.
Traditionally, the European Union (EU) and the US were the key chemical hubs globally. Together they contributed nearly 40 per cent of global chemical sales till 2006. However, the 'Great Recession' of 2008 changed everything. Developing countries started faring better than the relatively mature economies of the West. Over the last decade, the core of the chemical industry has shifted from the West to Asia, with China being the key benefactor. However, China's specialty chemicals market has seen a downturn in recent years, for more reasons than one, most prominent being the introduction of stringent environmental norms, which has led to the shutdown of several chemical plants. The labour cost (hourly cost of compensation) in China was lower than that of India till 2007. However, over 2005-2015, the average labour cost in China increased nearly 19-20 per cent CAGR, against 4-5 per cent CAGR in India. In fact, over the last five years, this cost has more than doubled compared with India, rendering Chinese manufacturers' uncompetitive vis-à-vis India in labour cost.
"The domestic chemicals industry in China is witnessing a slowdown as a result of an overall slower economic growth. Over the next 2-3 years, China's GDP is projected to grow at 6-6.5 per cent, against 8-10 per cent witnessed over the last decade (2009-2018). This slowdown would translate into lower off-take of specialty chemicals from large segments such as construction, automobiles, textiles and consumer durables. Thanks to shutdowns in China and lack of capacity additions in other developed countries, India stands to benefit in the export market. Also supporting the growth in India is its ability to manufacture at a lower price compared with its western counterparts. This along with the emergence of established players bodes well for Indian manufacturers," said the report.
Interestingly, India also faces threat from environmental concerns. However, the threat is limited only to smaller players and shall serve as an opportunity for larger players. Increasing the number of loyal customers is the way forward for e-commerce companies to lower cash burn. Online grocery chains have already converted onethird of their user base into subscribers.
Online grocery verticals have taken the lead in terms of monetizing their convenience seeking consumers, by converting 30-40 per cent of the consumer base as their subscribers. Subscription increases the stickiness of the customer and frequency of his purchase as he enjoys exclusive privileges, finds RedSeer Consulting.
These privileges include price savings via cashbacks and price discounts, along with free/priority delivery. Both BigBasket and Grofers offer free shipping, monthly cashbacks, priority slots and extra offers and benefits for their subscribers. Grofers' Smart Bachat Club subscription is available at Rs 49 for one month, Rs 249 for six months and Rs 449 for 12 months. BigBasket subscription for 6 months is available for Rs 299.
The programme has started showing results as the 30 to 40 per cent of these subscribers account for 60 per cent of the sales.
"The growing maturity of internet users has led to a significant increase in the share of users who transact frequently on online platforms,” said Mrigank Gutgutia, Head, Consumer Internet, RedSeer.
In the broader consumer internet space, online streaming platforms have been working on full or partial subscription models.