Consolidation Heats Up as a Growth Strategy

Coforge's acquisition of Encora for an enterprise value of $2.35 billion is one of India's largest IT services acquisitions, creating a combined entity with a projected revenue of $2.5 billion. This all-stock deal aims to bolster Coforge's AI-led digital engineering capabilities and significantly expand its presence in North America. The transaction is part of a larger trend of consolidation within the Indian IT industry as companies seek to gain scale and offer more comprehensive AI-powered solutions. This move mirrors a broader resurgence in India's tech M&A landscape, which was expected to reach up to $29 billion in 2025, a sharp rebound from previous years. This wave is driven by a need for vendor consolidation to counter slowing organic growth and disruption from artificial intelligence. Unlike the post-pandemic focus on digital transformation, the current M&A activity is centered on acquiring scale and operational leverage, with a notable increase in large strategic acquisitions valued over $500 million. For marketplaces, this consolidation highlights the growing importance of expanding into Tier 2 and Tier 3 cities, which now account for over 60% of e-commerce transactions in India. Consumers in these cities are increasingly aspirational and digitally fluent, often spending more time and money online than their metro counterparts, particularly on premium goods. However, their purchasing decisions are heavily influenced by price-consciousness, trust, and a strong preference for cash-on-delivery. Successfully scaling in these non-metro markets requires a localized approach, as a one-size-fits-all metro strategy often fails. Key challenges include underdeveloped logistics infrastructure, poor last-mile connectivity, and a lack of standardized addresses, which can lead to higher operational costs. Startups that have succeeded have invested in regional fulfillment centers and tailored their product assortments to local tastes and value thresholds. Social commerce, particularly through WhatsApp, is a dominant channel in Tier 2 and Tier 3 regions, boasting conversion rates 2-4 times higher than other platforms. This is driven by trust in personal connections and the ease of conversational commerce, from sharing catalogs to processing payments via UPI within a single chat. Platforms like Meesho have built their entire business model around this insight, with over 80% of their customers coming from these smaller cities. The rise of quick commerce and hyperlocal delivery, projected to become a $20 billion market by 2028, is reshaping consumer expectations around speed and convenience. While this presents a competitive threat, it also creates opportunities for marketplaces to leverage hyperlocal networks for faster, more efficient delivery of goods from local pop-up vendors. This model empowers local retailers and artisans to expand their market reach significantly. Government initiatives like the Open Network for Digital Commerce (ONDC) are further democratizing e-commerce by lowering entry barriers for small sellers, artisans, and rural entrepreneurs. ONDC aims to provide a level playing field, allowing small vendors to gain visibility across multiple platforms without being tied to specific platform policies. Schemes like PM Vishwakarma and platforms such as the Government e-Marketplace (GeM) also offer financial support, training, and direct access to a larger market for artisans and small enterprises. Digital platforms have become a lifeline for Indian artisans, enabling them to showcase their craft to a global audience and bypass traditional middlemen. Success stories, like the Blue Pottery Collective from Rajasthan reaching customers in over 50 cities, demonstrate the power of e-commerce in preserving traditional crafts and fostering financial independence for artisan communities. For marketplaces, understanding and amplifying the stories behind these crafts can build strong emotional connections with buyers.