India's great digital wave offers opportunities and raises some questions

WHAT does a combination of a massive under-30 population and a surge in connectivity lead to? An unimaginable explosion of digital opportunities. India is in the midst of the beginning of this huge tide. Steep rises in smartphone sales, the vast youth population that is unafraid of trying out new online services, and rapid increase in net connectivity are creating an industry storm.

Consider these. India's smartphone sales are clocking 26.5 million units a quarter. Subscribers have leapfrogged from traditional clamsets to smartphones in a two-three year transformation cycle. After capturing the markets in major cities, the smartphone players have dived deep into tier II and tier III cities. There are currently 10-12 models available right from sub-US$100 to US$1,000 and there is no affordability debate. Apps and online services have increased manifold in parallel.

Indians are shopping online or via apps for clothing, shoes, lingerie, groceries, air tickets, train tickets, mobile phones, white goods, furniture, books, toys, education materials, fashion accessories, cakes, bread, medicines, cosmetics and even liquor. Services or bookings for services include car hire, car rental, salon, tuition, holiday packages, tickets for events, food services, plumbing services, etc. Other online services used include special areas like astrology, private health consultation (psychiatry, sex counselling), matrimonial services, online learning and priest services. Consumer-to- consumer or C2C e-commerce has also sprouted. Like in other developed markets, online banking and funds transfer are on the rise.

One of the emerging areas is "payments". Consumers use payment apps to pay for government and private services. You could sit at home and top up your pre-paid phone card or your broadband service or cable TV service. Working couples arrange their common appointments (like lunch or dinner with friends) through apps. The app-savvy net-savvy consumer population is rising rapidly and causing lifestyle changes.

These trends are not unique to India. The amazing aspect is the rate at which the transformation is happening and in the process, several generations of evolution are skipped. For example, Indian consumers have not been fully exposed to a supermarket and mall offering. There are very few international class malls or stores in India while countries like Thailand, China, the Philippines and Vietnam have had them for some time now.

While Indians have missed out on modern retail experience, the consumers are enjoying state of the art online and app engagement. Perhaps the absence of premium retail experience helps the online trade. Juxtaposed on top of the huge size of the market, this is a bonanza for nimble digital marketers. Flipkart, one of the early online e-commerce entrants, recently ran a campaign that reportedly clocked over US$1 billion in a few days. A handful of the digital companies are already in the unicorn category with valuation above US$1 billion.

The entry barrier is low. Many of the players have tech backgrounds and only a few have domain expertise. Not all players are expected to do well under these circumstances. True to the technology industry, companies are being eulogised for their product or service and for quickly acquiring customers. Under-30 entrepreneurs sporting t-shirts and week-long beards are making it into Forbes and Fortune lists.

Financial bottomline is not yet a major concern even for the investors. Ola, a cab service operator, has more than 100,000 cars in its system across several cities and has garnered up to 30 per cent market share of cab travel in many cities. According to the grapevine, the company currently loses 300 per cent on every dollar revenue earned. All that is going towards advertising and ramping-up activities. Companies such as Ola are disrupting the campus recruitment market by hiring in loads and offering astronomical paychecks.

Most of the digital companies have attracted startup and venture capital funds. Valuations have been crazy, as is normally the rule with tech companies. The fall can also be steep. Housing.com - in which Japanese telecom giant Softbank has invested - recently pared staff significantly and changed the top management as results were not satisfactory. Considering global giants like Amazon have yet to show a sustainable financial model, no one seems to be worried about the Indian situation. Optimism is the buzzword.

There will be a churn in due course, with mergers, acquisitions and the demise of some companies. If you are an entrepreneur, your conundrum is understandable. Do you ride the frenzy wave or fish in calmer waters? While there is some empirical evidence that there is an early mover advantage with investors, the evidence is mixed when it comes to customers and long-term profitability. But the game may not be about long-term profitability. It may just be start, ramp up, sell and start again. That is the Silicon Valley mantra retold.