eCommerce in India - A blog by Darpan Munjal

The stakes are getting high in the eCommerce space in India. As more and more online retailers enter the market, they are driving up the cost of customer acquisition. Although this level of entry in the eCommerce market is good from a long term perspective, the challenge is that most entrepreneurs don’t have the resources or capital to wait for years before they can see some signs of profitability. The good news is that there are still some business models out there, which are mostly untapped. If you execute these well, you can not only create uncontested market space, you can make it difficult for others to compete in the game. These ideas do require some innovation –however, I am not talking about a significant technological innovation – I am talking about innovation in service offerings that can help you leap outside the traditional industry boundaries. I have written most of my articles around B2C opportunities, in this article I will focus primarily on the B2B opportunities within the online space in India.

So what are some of these ideas? Well, before discussing the specific ideas, I want to start with some of the key traits of these business models. Most of the ideas that I will discuss have one common theme – low cost of initial acquisition and high switching costs. These ideas involve offering innovative, easy to plug-in, value added services to online retailers at such a low price point that retailers have no reason to look any further. So what does one gain by this charitable gesture, you ask? Well, the key is to cut so deep into the core business processes of the online retailers, that it becomes progressively difficult for them to switch to a different provider over time.

Nothing better than starting with an example – so here goes. Power Reviews is a service provider which provides technology to online retailers in US to capture and display customer/product reviews on the site. It goes one step beyond the traditional customer reviews, and offers unique capabilities to aggregate the ratings across multiple product dimensions. The great thing about Power Reviews is that it is can be fully integrated into a website within few days. Even better, the entire offering is available for no cost to online retailers! So what is the catch, you ask? Power Reviews also maintains another online property called Buzzillions.com. The only thing they ask online retailers in return for their sophisticated Reviews technology is that the reviews collected on the retailer’s web site are syndicated and aggregated on the Buzzillions website. This is a great model – on one hand, Power Reviews is offering a significant value to the online retailers, and on the other hand, they are building a great destination site for customers with aggregated reviews from all participating retailers – a win/win scenario for power reviews, online retailers and the end customers.

Internet technology is moving more and more towards a widget based, plug and play based approach and niches are being carved out from various aspects of online shopping experience. There is no reason for online retailers to build all capabilities from scratch – instead, Continue reading �

I am not a big fan of Office 2007 interface, but I love its blogging capabilities. I can just write a normal word document and then directly post it to my Wordpress account - with one click of a button. It is even cooler than the “One Click checkout” at Amazon! This had been working great for me - until now, that is! I accidentally published a draft post that had nothing more than some of my random thoughts.  Anyway, if you are subscribed to an offline reader such as Google Reader, that post was most likely pushed to you and you were probably wondering what that was all about. Well, now you know!  It was an accident. My Apologies.

I will be posting another article, hopefully this weekend, that features some of the opportunities and thoughts in eCommerce services/ platform space.

Darpan

In one of my previous posts, I had extended the invitation to Commercewiki readers to contribute to this blog. This post is by one of the readers - Sachin Singhal who has done a great job in articulating the profitability situation of eCommerce in India. Thanks Sachin for your contribution - comments are welcome from everyone.

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Yesterday I was listening to Avril Lavigne’s song “Tomorrow is a different day” and certainly believe it to be true when it comes to e-commerce industry in India.

No Doubt, Travel portals are outperforming in India. Travel alone constitutes 50% of Rs 4800 crore online market in 2007-08. Recently MakeMyTrip has touched whopping Rs1000 crores of turnover. It around 20% of total e-commerce market. It’s expected that travel portals will grow 65% annually. We are experiencing an exponential growth in this vertical. Are these companies making profit or able to break even? How much is the average cost of acquisition? Well these questions still lingers me. The average cost of acquisition in E-commerce industry is around Rs 1100. If the average order size on these travel portals is Rs 4000 and typical net margins are 6-7% (That too on the higher side), these portals will make only Rs 300 on average. That’s far below the cost of acquisition.But the big question arises how the Non-Travel Portals are performing in India? Continue reading �

The unorganized retail business in India thrives on personalization. You walk into a local kirana (grocery) store and the store owner greets you with your name, asks about the family and then gives you a customary 5% discount for being a long time customer. He also knows the brand of tea you like and recommends you a new brand that just came out and then chats with you for few minutes about last night’s 20/20 cricket match. You end up making some impulse purchases while you are chatting and walk away happy with the overall experience. This level of personalization is a dream for the nationwide organized retailers, and although it may seem simple in a neighborhood grocery store, scaling it to a big-box retailer, with hundreds of employees and thousands of customers a day, is a different story.

But retailers are trying. As the retail environment gets more competitive, physical retailers have started shifting from a product centric to a customer centric mentality to connect with their customers. A large number of retailers now make the assortment decisions for what products to carry in their stores based upon the local demographics of the consumer visiting the store – as opposed to having a “one-size-fits-all” assortment for all the stores across the nation. Despite the serious constraints that are working against them such as supply chain and difficulty in capturing customer insights, the physical retailers are spending significant effort and resources in personalizing their strategies.

What about the online retailers?

One would think that things would be better in case of online retailers – where the customer insights are flowing in with every single click and the technology is available to act on these insights almost on a real time basis. While personalization seems easier to accomplish in that scenario, Continue reading �

Recently I got an invitation from an old colleague to join Plaxo. I thought to myself – I don’t need another social network to maintain professional contacts, I already have LinkedIn! Within the next 3 days, I suddenly started receiving Plaxo invitations from my other LinkedIn contacts – it almost felt like some sort of evil spam! As much as I hate to sign up for a new site I don’t intend to use, my curiousity got the best of me, and I indulged in accepting the invitation to see what all the hype was about. Moments after clicking through the registration process, I realized how easy Plaxo made to import contacts from my other sources – Gmail, Outlook and most surprisingly from LinkedIn!!

These are the initial signs of what is changing in the digital world. Information created by users is following them from one site to another. This is particularly timely now that the users have started feeling the “network fatigue” that comes from maintaining multiple social-networking profiles, e-mail accounts, blogs, address book applications and the like. Things are changing, really changing in the social web. Initiatives such as Dataportability group are all about making the web more free flowing in terms of user data – most of the key players such as Google, Facebook, Microsoft and Yahoo have already signed up. If things pan out the way they are Continue reading �

The online shopping space in India is getting more and more crowded . Even though, the overall pie remains small, today’s customers have more options than ever when it comes to online shopping. This certainly is good news for aggregation platforms such as price comparison engines. The more options shoppers have, the greater value they would see in platforms that offer a one stop comparison of products and prices across retailers. Not surprisingly, several comparison shopping platforms have been launched in the Indian market. Tolmol.com and Bechna.com are the two most prominent ones. So if we have these comparison shopping platforms available, why aren’t people using them? Or are they?

Today’s Environment
Before we try to answer these questions, let’s try to explore the value proposition offered by these comparison shopping platforms. At the most basic level, a comparison shopping engine must deliver on a promise of accuracy, and unbiased price comparisons across a wide breadth of online retailers. The overall value proposition offered by these platforms is to help customers save time in making more informed shopping decisions. The question is how well are these comparison shopping platforms able to deliver on these basic promises? To explore this further, let’s take an example. Suppose, you are looking to buy a Nokia N70 phone – instead of visiting individual shopping sites separately, you decide to start with a comparison shopping platform like Tolmol.com. Performing a search for N70 on Tolmol.com quickly displays about 9 different online retailers selling this product. So far so good, however there is one little problem. Continue reading �

During the past several months, I have connected with several intelligent and knowledgeable individuals through this blog - individuals who are passionate about doing something big in the interent/online space in India. If you are a regular reader of this blog, chances are that you have thoughts or opinions about the online/internet industry in India that might be helpful to others. I am inviting you to reflect upon your personal experiences and beliefs in this space by becoming an author on this blog. Since this site is not expected to reach profitability until 2068, you may not receive a monetary incentive to contribute - but then again, we are not all here just for monetary incentives. There is a bigger reason for us to be here - to connect, share and contribute.Submitting your article to this blog is very simple. Just click here to register and you will immediately receive a welcome email with a link that you can use to begin submitting articles to this Blog. Please keep the following guidelines in mind when submitting the articles -

1. You are welcome to write about any topics such as Web 2.0, eCommerce, technology, entrepreneurship, trends. The only restriction is that it must somehow be related to the internet space - so you can’t write an article about your pet (unless, your pet’s name is Ajax or Click or if you are thinking about selling pet food online!)

2. Excessive plugging of a company or site is not allowed. You can mention a company or a site and include a link to it, as long as it helps the point you are making in the article. However, you can’t write articles to specifically promote a particular business or a site.

3. This blog has special next generation profanity filters which will automatically detect any foul language and will not only reject your article, but will also destroy your computer, your keyboard, and possibly burn your fingers. So keep the profanity to a minimum for your own safety.

4. Other than that, anything goes.

Regular authors will be featured on the “About the authors” page along with their detailed profile - which will put them on a fast track path to worldwide fame. Ok, I exaggerated a bit - you may not become famous, but it will certainly help you connect with other like minded individuals within the industry.

So let’s celebrate the entrepreneurial spirit by actively contributing and learning from each other’s experience. There is a tremendous opportunity and potential for internet businesses in India, and everyone can win and co-exist by helping build a better digital eco system.

Click here to contribute to the blog

It is human tendency to resist change. The most natural instinct is to continue doing things the old way. And when changes are implemented, we try to fit them back into the mold because of our comfort level with how things used to work in the past. That is kind of how online shopping has evolved. Even in the western world, not many physical retailers believed in online channel during its infancy – they looked at it more as a distraction. However, when they started understanding the potential of online shopping, more and more retailers began to build an online presence. However, they did everything in their power to ensure that the online shopping works as close to the physical channel as possible – whether it was pricing decisions or merchandising decisions or logistics – everything was designed to work similar to how it works in the physical store. Most of the online retailers overlooked the power that internet offers around connecting individuals so that they can help each other in making better purchase decisions. Since then several new age online retailers have come up and have started capitalizing on the true potential of internet, and the role it can play in changing how people make their purchase decisions. These new players have started questioning the well accepted norms such as “category managers are the ones responsible for selecting the product assortment and making the pricing decisions” - Why should an internal category manager’s intelligence be better than the collective intelligence of hundreds of thousands of online users – who use these products day in and day out?

This question is the premise of my topic today – a topic that is near and dear to my heart and the one that happens to be first in my series of new venture ideas – Community based shopping. Before we go further, let me just clarify what I mean by community based shopping. At the most basic level, this describes an environment where online communities or users play a key role in helping other people make their purchase decision. As you read this post, I am sure one thought would certainly go through your mind – is India ready for this? At a time when internet hasn’t reached the home of a common man, when users aren’t even able to do their own online shopping, how can we expect them to help others shop online? This is a good thought and at a high level, it makes a lot of sense. However, we really need to dig a bit deeper to understand the real opportunities.

For a few minutes, let’s keep the issue of internet adoption in India aside (I promise, I will come back to it later). Let’s just evaluate, at the most basic level, whether the concept of social shopping makes sense. If we look at most online players today, the notion of human touch is missing from the online shopping experience. For all its power, Google can’t tell shoppers what’s cool or what their friends or like-minded consumers recommend. Same is the case with majority of the shopping sites. A search for men’s shoes on a typical shopping site Continue reading �

As the internet penetration reaches the average household in India, the digital eco system would need to evolve, opening up several gaps in the value chain. If you are an entrepreneur or dream of becoming one in the near future, there are significant opportunities related to internet/eCommerce that might give you a first or early mover advantage for the Indian market. Until now, my blog has focused on discussing trends, opportunities and best practices at a macro level. Now, however, I think it is time to make things a bit more interesting, and start focusing on specific concepts or business ideas that can be monetized in the Indian context. Over the next several weeks, I will be posting a series of blog articles which will showcase different business ideas in various categories related to internet/ online commerce in India.

Needless to say that these are just ideas and an idea alone cannot make a venture successful. End of the day, it is about execution and the team. If you have a strong team, with solid execution, the chances of your success are significantly higher even if you don’t have a killer/unique idea. However, everything else being equal, a differentiated idea will help further improve the chances of success as long as you are filling a genuine gap in the marketplace. So here are the categories in which I will be posting new business ideas – my hope is that some of these ideas turn into reality and when they do, the overall eco system for eCommerce will significantly improve, resulting in a far bigger pie for everyone.

1. Community based shopping:

In this category, I will be posting some ideas around the next generation of online shopping which will leverage the online communities at all levels of ecommerce value chain. We have already seen some of the successful Web 2.0 models for India outside the online shopping space; it is time now to look at some interesting models that fit within the online shopping space.

2. Content Management

As more players enter the eCommerce market, companies will seriously need to reconsider their content management strategy. There will be an obvious need for third party service providers who can provide value added content for products (e.g. detailed attributes, images, videos etc.). There is no need for eCommerce companies to keep this function internal, and outsourcing it to a mature service provider might help improve the overall user experience, and ultimately, the conversion rates. I will be discussing some business ideas for service providers who can rule this virtually uncharted space.

3. Aggregation Platforms

We are already seeing activity in this space. Portals like TolMol.com have started seeding this market and influencing customer behavior around online price comparison. However, Continue reading �

At least that’s what I felt after attending the Web innovation conference held in Bangalore this week. I don’t understand why folks spend so much time slicing and dicing what web 2.0 means. I could hear some people even talking about Web 3.0 – some of the gifted ones even offered a glimpse into Web 4.0!! Now, come on! Isn’t that a bit too much? We are not talking about a software release which comes in different versions with a predefined set of features. We are talking about evolution of the internet economy here. Don’t get me wrong - I definitely think Web 2.0 is a beautiful thing and the power of communities has a huge potential for the new economy. But that’s exactly my point – people need to think about the applications of this concept, as opposed to getting hung up around the text book or Wikipedia definitions of Web 2.0. Ok, enough with my ranting – it wasn’t all that bad. There were some decent speakers as well – like Rohit from Techtribe who offered some good insights into the dynamics of online communities.

It would be great to see more businesses in India that are built around the power of online communities. A lot of people feel that online communities may not be a good fit for the Indian culture, but I strongly feel that the communities can be very successful if the right incentives are offered to them. I am posting the slides that I used for my topic at the conference – “the future of eCommerce”. eCommerce is definitely an area
Continue reading �