There’s a poem titled The Mountain and the Squirrel. It’s by American philosopher Ralph Waldo Emerson, and it’s on a quarrel the two have. The mountain calls the other a “little prig” and, the furry one replies: “Talents differ; all is well and wisely put;/ If I cannot carry forests on my back,/ Neither can you crack a nut.” Bottomline: Being small has its merits, even in e-commerce.

In the initial surge, investors poured money into the likes of Flipkart and Snapdeal, the big guys. The hype was around being everything to everyone, to grow mountainously in horizontal e-commerce. The sites were selling everything, from earbuds and scrubbers to high-performance stereo and vacuum cleaners. Then, a handful of entrepreneurs decided to take the side door. They decided to solve pain points of access to quality products in verticals such as babycare, eyewear, beauty, innerwear and even furniture. These niche players have proved to be more capital efficient, even as the horizontal players continue to guzzle cash. Investors, who had been skeptical about these specialist businesses, have begun to show interest in them over the past three to four years. Tritely put, small has become big.

“Building leadership in verticals is much easier than building leadership in horizontals as it tends to be a winner-takes-all market. So, investors back the market leaders… because you cannot come from behind and catch up in these segments,” says TCM Sundaram, founder, Chiratae Ventures. According to Forrester Research, the Indian vertical e-commerce space is pegged at about $10 billion, excluding sales of these companies from offline channels.

But, COVID-19 has knocked every business out of its rack. Like most other businesses, vertical e-commerce companies, too, have had zero revenue during the lockdown. They aren’t changing their strategy yet, to tide over this period. They have simply begun to focus more on better financial management, and are going slow on expansion.

LEADER TAKES A BOW
These niche players, including the likes of Lenskart, Nykaa, FirstCry, FabAlley and Purplle, which are collectively valued between $3.6 billion-$3.8 billion, are hoping their cash reserves will see them through most of 2020. Call it a stroke of luck or by design, most of these companies have raised significant capital in the past 12-18 months from investors. FirstCry, Nykaa and Lenskart, with the largest market share in online babycare, beauty and eyewear segments, are the highest funded start-ups in these segments (See: Small fish in a big pond).