eCommerce Blog

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 – other than familiarity with the brand, the one key aspect that most of these individuals looked at was price of the product they were looking for. I asked them what about service, and the quality of execution – the answer was even more disturbing. “What service?” Almost all of them said that they’ve faced service related issues with most of the online retailers so they really don’t differentiate any one retailer vs. other on the basis of service.

All this long winded background really leads me to one simple conclusion – there really isn’t any strong differentiation that online retailers in India are able to stand for. This may sound very obvious and you are probably thinking – Duh Mr Blogger!! Thanks for enlightening us with something we already knew!! Point taken – however, my question is that isn’t a brand more than just a name and a symbol? Isn’t it about delivering a promise – a promise for something. Whether it is better execution, great experience, lowest prices – a brand must stand for something that customers can relate to. So what promise do the online retailers in India stand for? I continued my exploration and thought about all the different dimensions that the online retailers could look at in order to differentiate themselves.

The first one that comes to mind is focus on specific categories. Why isn’t there any online retailer that is focused on just one category? Why don’t we have any online retailer in India who can claim to be the largest books store or the largest jewelry store? One obvious answer could be that the overall eCommerce pie is too small and by focusing on just one category, the retailer may not be able to make decent revenue. Fair argument – however this is where the true visionaries are required. Its true that online shopping is not a large category today (roughly about Rs. 400 Cr to 700 Cr, depending upon who you ask). However, one must have a conviction and a vision around where eCommerce is headed. Once eCommerce hits the tipping point, the retailers who are focused on specific categories stand to gain the most by capturing the largest market share for that specific category. “But I want to build the next Amazon!!”, you say. “I want to build a mega store that can capture market share across all these categories – why should I focus on only one category?” Nothing wrong with that thought – however then you must think of a different dimension that really sets you apart from other online retailers. This is a good segue to my next point.

The second and my most favorite point is about service. I have heard a lot of people say that although it is good to strive for excellence in service, this dimension alone can’t differentiate one online retailer from another – not especially in India. I respectfully disagree. It is true that in the Indian context today, most online shoppers are shopping on the basis of price. However, perhaps this is because they haven’t yet experienced an online retailer that is truly focused on consumer delight. There is a difference between striving to be great in execution vs. building the organization from the ground up that is focused on customer service and delight. Case in point – Amazon and Zappos. Amazon does a fantastic job in execution and offers a very decent customer service, but I would argue that the focus at Amazon is on operational excellence rather than customer delight. Zappos on the other hand, goes out of the way to make sure that every single customer is delighted even at the expense of higher operational costs. It is a subtle difference but this subtle difference helped Zappos in grabbing the largest market share within shoes category leaving behind the likes of Amazon and Walmart.com.

Another dimension that is most commonly looked at is that of price. My personal perspective is that differentiating purely on the basis of price is a dangerous game to play. A game that will eventually be lost. This is especially relevant in the Indian context where the product sourcing doesn’t offer a lot of differentiation. There are a limited set of vendors in the marketplace who are supplying to majority of the online retailers. Therefore, it is hard to build a sourcing relationship with a specific vendor that can offer a sustainable price advantage. This is only possible if the online retailer is focused on private label merchandise – however, selling private label within India via an online channel will be extremely difficult.

So what does this all mean? Is there no room for broad based online retailers? I think there is enough room for every one – however, today the options are fairly limited from a customer point of view. Therefore, even though there is not much differentiation among online retailers, customers are still shopping online – albeit primarily on the basis of price & reputation. As more online retailers enter the space and as the eCommerce awareness increases, customers will start looking more and more for that brand promise. They will start looking for that one thing in the online retailer that is unique enough for them to switch from a browser to a buyer. That would be the time when the online retailers who haven’t yet thought about a unique brand promise will struggle. But will it be too late by that time? Time will tell – but in the meantime, I am off to Toys’R’us.com to shop for that Dora doll for my daughter.