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 �

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

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 �

My daughter will be turning 5 in a few days and unfortunately I wouldn’t be able to celebrate the birthday with her because she is currently in Chicago with her Mom. So I was talking to her on the phone, and asked her what would she like for her birthday present. She thought for a few seconds and then asked me inquisitively – “Daddy, how are you going to get me a present? You are in India, remember?” Smart question, I thought. But few seconds later, came an even smarter response from her. “I know!” “How about if you order it on your computer and, like before, I will get it in that brown box from Toys’R’Us .com“. I thought to myself – wow my little daughter is growing up. She may not understand what eCommerce is but she does understand that you can do something in the computer, and few days later a brown box is waiting for her in the front of the house! She almost believes that Toys’R’us has deputed little magical Santas inside every computer, and they are able to send exactly the toy children wish for!!


What really impressed me was the fact that she remembered Toys’R’Us.com and could associate it with someone who could help in meeting her birthday wish. This got me thinking about how online retailers in US have been able to create a unique enough differentiation for themselves where customers know exactly what these retailers stand for. There are some retailers in US that are still struggling with this, but at a broad level, most of the retailers (online as well as traditional) have found a unique proposition for the customers. Whether it is the largest assortment (Amazon.com) or value for money (overstock.com) or discount electronics (Newegg.com) or Jewelry & Gifts (Bluenile.com) or upscale household category (William-Sonoma) or a great service experience (Zappos.com), there is a lot of differentiation. If a 5 year old can recall Toys’R’Us when they are thinking of toys, imagine how easy would it be for a grown up to do the same across various categories. Then I thought about the Indian context and I tried really hard to think about all the unique things that the online retailers in India stand for. I thought about product assortment, pricing, categories, service and after trying really hard, I wasn’t able to come up with any meaningful differentiation that really sets one retailer apart from other. True, there are some retailers that offer a bigger assortment than others – but more or less all other dimensions are similar across most of the online retailers.


Then I thought, what is it that Indian customers think about before shopping at one retailer vs. other. I also asked this question to a lot of individuals who I know have been online shoppers for quite some time. The results of this “unscientific” study were very disturbing Continue reading �

The other day, I met someone at a conference who mentioned to me that he was planning on starting an online retail venture in India. He said he has already begun the software development for the platform and one of his friends is a great SEO person so marketing should not be an issue. Is there anything else critical that he should plan for, he asked? Although his level of planning (or lack thereof) didn’t give me a lot of confidence in his venture, it did give me few ideas for topics that I should write about in my Blog.

Although technology plays a critical role in building an eCommerce operation, just focusing on a technology platform without careful planning of other factors is a recipe for failure. I have heard a lot of people say that successful eCommerce companies require a strong technology orientation and should therefore, be led by a technology team. Although a technology leadership can certainly help, having a strong technology foundation doesn’t obviate the need for traditional factors that make a retail business successful. Customers don’t buy products in an online store just because they love the technology. At the end of the day, it comes down to having the right mix of products, at the right price, coupled with a strong execution and end to end experience that is difficult for other competitors to copy. No doubt that technology can and should play a key role in all above factors. However, one must remember that technology is like a foundation of a house, it is a necessary component, and if poorly designed, it can destroy the house. However, Continue reading �

The online retail environment in India is eerily quiet. The overall online pie is still very small. Broadly speaking, Indian consumers aren’t shopping online. The distributors or local vendors still look at the online channel as a drop in the bucket. New online retailers are slowly emerging – however Indian ecommerce just can’t seem to hit its stride. What does this all mean? Is online retailing not for the Indian market? Are the cultural preferences of Indian customers so unique that ecommerce will never achieve a mainstream status? Although the current state paints a very somber image for eCommerce in India, it reminds me of the time when we went on a vacation to Florida, only to find out that the area was about to be hit by a category 3 hurricane. Standing in balcony of the hotel room, I could feel an uneasy quiet. Wind was calm however I could feel something big was about to happen. Two years later, I find myself standing on the verge of another perfect storm – a storm that will change the face of online shopping in India.

It is not a mystery anymore that the retail industry is going through a significant organization in India. Some would argue that this opens up more exciting options for consumers to shop in a physical store, which would further impact the adoption of online shopping in a negative way. Fair argument, however, I would like to share some specific reasons why I strongly believe that a reverse phenomenon is inevitable – organization in physical retail will fuel an explosive growth of online ecommerce in India.

Why has eCommerce adoption been slow in India?
Before we look at the factors that will drive an explosive growth in eCommerce, it is important to look at why eCommerce hasn’t taken off so far in India. Continue reading �