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, it is much more cost effective to power components of the shopping experience using these best in class, niche technologies which are maturing every day. Whether you are an online retailer or a service provider, the opportunities are limitless. The key is to build win-win partnership models where the sum of being part of a value chain is greater than the individual parts. For the Indian market, where eCommerce is still in its early stage of evolution, this opens up a lot of uncontested space. Here are some ideas:

1. Customer/Product Reviews: A model such as an Indian version of Power Reviews is not only viable, it is much needed at this time. Most online retailers have built very basic product review capabilities and the review content is moderated very poorly. A lot of times, the reviews listed on product pages are general questions from customers that look more like customer service issues, than product reviews. Having access to a service provider that can not only provide highly sophisticated technology but also provide value added services for review moderation will be a huge success. On the other hand, there still isn’t any destination portal that provides unbiased and extensive product content/ information to help buyers make purchase decisions. The only “somewhat” credible source is mouthshut.com but it is too broad – offering reviews from car dealers to restaurants to products – making it less appealing for someone who is looking specifically for reviews around purchase, along with immediate price comparison information. A Power Reviews like model will help in quickly building up this unbiased destination portal, which could offer a significant value in the Indian context.
2. Content Management: Product content is a fundamental component of the online shopping experience and an essential differentiator for successful online retailers. Several surveys have been done in the mature eCommerce markets where customers rate high quality product content as one of the most important factors to enhance a buyer’s online experience. However, if you look at the product content on most ecommerce sites in India, you don’t have to be really online savvy to come to the conclusion that the content is extremely basic. Whether it is the product images, or the copy or the attributes – most of the content is provided directly by third party sellers who do nothing more than copying and pasting it from another site. Notwithstanding the copyright issues, the content is generally not of much help to customers in helping them make the shopping decision. There is an opportunity for service providers to start building and licensing a rich repository of online content for major categories such as electronics. Content is a critical component for any online retailer and it is an activity that takes up significant resources to keep up with and manage. Having access to a rich repository that is being managed and built by a service provider who does it for a living can be a huge value-add. In addition, we can extend the above example of Power Reviews, and instead of charging significant licensing fees for this content, the service providers can in return, obtain reverse licensing for additional user generated content being generated on the online retailers site. Again, a win-win situation for customers and online retailers.
3. Email & Campaign Management –Email marketing is one of the most cost-effective and quantifiable ways to market an online retailer’s products and services, allowing them to send more personal, precisely targeted messages than other mediums. When used correctly and effectively, permission-based email marketing can also become the number one customer acquisition and retention tool. However, Email marketing has still not evolved as a mature channel for online retailers in India. It is still being done in an adhoc fashion, and there is a need for more mature service providers, who can provide an overall management of email program, including activities such as handling end to end planning, reviews, as well as monitoring Bounce rates, click rates, A/B testing based upon the concepts. Given the highly quantifiable nature of this channel, service providers can look at offering revenue sharing models where the initial cost of using the platform is negligible, but they get paid based upon the performance and effectiveness of these marketing programs.
4. Assisted eCommerce Solutions – One of the reasons eCommerce hasn’t yet reached enough scale in India is because of relatively low Internet penetration, especially in B or C class cities. There are models possible where a combination of technology as well as local presence can help in building virtual hubs in parts of country where internet is not easily available. This will require a larger investment, and a regional sales force – but the pricing advantage or availability of large virtual assortment of products can provide strong reasons for individuals living in this city to consider online channel as a shopping alternative. Service providers can think of a number of categories in this space – from local kiosk solutions to internet café solutions that work on a affiliate/ rev share model so that the online retailers are only paying a percent of the additional demand being aggregated through these channels.
5. Payment Gateways – A large expense that eats into the operating margins of online retailers in India is the transaction cost to payment gateways who act as the interface between online retailers and issuing credit card banks. In today’s environment, not many options are available to online retailers. In some cases, the smaller volume online retailers end up paying 6-7% of their sales as payment gateway fees, wiping out majority of their product margins. CCAvenue – one of the original players in this space, charges 7% transaction fees as part of its “economy plan”. If you are a retailer, selling products in the electronics category, you are probably earning 8-10% gross margin. In this scenario, there is not much scope for online retailers to achieve reasonable profitability. Although I don’t want to undermine the importance of a payment gateway solution, but when I see 7% being charged for a service, that at an overly simplified level involves routing transactions from the retailer to the bank, I do think that this space needs more entry. Payment gateway is the core need of any online retailer, and the market can easily support 8-10 strong players in this space. The initial setup cost to build a payment gateway service offering will certainly be high – but there is a large opportunity to begin offering easily integrated, Plug and play solutions in this category at significantly lower transaction costs.

The list of opportunities is limitless. As I mentioned in one of my previous posts, the ecosystem is slowly evolving which will help improve the maturity level of end to end ecommerce experience. However, if you are interested in offering services in this space, or are already playing in this space, this is the time to think about how you can carve out a niche and a unique business model that can not only provide low acquisition costs for online retailers, but can also create a significant value for your business and the end customers.

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

Darpan

If I have advertising budget of Rs X per month then I would prefer to spend X/2 and save rest of the amount for contingencies. Main stress should be strategic tie-ups which will provide me visibility and foot falls without spending anything. Cost of Acquisition is an overhead that should be minimized. In long run the direct traffic and traffic from referring sites should constitute the major chunk of the pie. Google Adwords and other PPC campaigns share should not be more than 15-20%. We can’t rely on pure internet revenue in India as the market is still in nascent phase. One has to take alternate ways to keep up the pace and make business model profitable. Diversification in sales channel like corporate sales, print media sales can boost the sales to considerable amount. For that business need to invest in human resources and such type of investment is directly proportional to sales.

All these strategies can bring renaissance in e-commerce market in India and certainly we can hope for a new dawn.

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, there are only a handful of online retailers that have been able to come close to offering a personalized and unique experience for their customers. Personalization is not a new technology, but it is generally treated as a step child by most online retailers. A recent survey from Forrester Research found that just 16% of e-retailers use personalization techniques effectively for merchandising. And No, by personalization, I don’t mean the welcome message that you see when you visit an online retailer’s home page or the “My account” section where you can check your order history. I am talking about the capability which goes above and beyond the obvious – where a visitor’s implicit or explicit interactions with the website are used to build a unique shopping experience and relevant product recommendations for her. Easier said than done, you say. We all would like to get to that level of nirvana in personalization – but the question is does the technology investment and time required to get to that state justify the results in the end? May be. May be not. I certainly don’t recommend that online retailers start making large investments in personalization technology and then see if it sticks with the customers. However, I do think that it is important to take incremental steps so that the customers feel more connected with the e-tailer.

Building relationships..

The key objective of personalization should be to build deeper relationships with the customers. In today’s environment, a large number of online retailers interact with their customers on a transactional basis. This kind of interaction with the customers reminds me of the movie “50 first dates”. Retailers almost start over fresh with their visitors everyday, and completely forget about the interactions with the same visitors during previous visits. Then there are a large number of online retailers, who do take the extra step of making product recommendations to their visitors. However, unfortunately, a lot of times these recommendations are pushed based upon internal rules defined by merchandise managers instead of the customer insights. When we make a recommendation to the visitors, we are almost making a statement that we know something about their behavior and our recommendations are a reflection of that knowledge. Therefore making wrong recommendations is a risky proposition, because that could rub individuals the wrong way – case in point Walmart.com who had to issue a public apology and temporarily shut down its entire cross-selling recommendation system when customers who looked at a boxed set of African American films that included “Martin Luther King: I Have a Dream” and “Unforgivable Blackness: The Rise and Fall of Jack Johnson” were told they might also appreciate a “Planet of the Apes” DVD collection, as well as “Ace Ventura: Pet Detective” and other irrelevant titles.

On the other hand, helping customers find the right product at the right time has always been the dream of online retailers because they know that achieving that level of capability can significantly improve the conversion rates and the stickiness of the site. Amazon.com has taken on this mission and has certainly come a long way in offering recommendations based upon the collective insights captured from the consumers. The question is – are they effective? I have a lot of friends who really love Amazon’s recommendations – a lot of them think it is cool to see what else other people have purchased after buying a particular product online. I do think it is pretty cool from technology perspective, and I do think the recommendations are helpful – but I personally feel that Amazon’s recommendations have too much of “group think” factor which falls short of taking into account individual’s unique tastes, likes and dislikes. I also think that Amazon has gone a bit too far in flooding the product page with different types of recommendations– which can overwhelm and possibly further confuse visitors in their decision making.

Recommendation Strategies

So what are some of the things online retailers can do to connect with their customers?

First of all, there are rule based recommendations. This is where the online category managers build rules to associate different items that go with each other. For example, if you are looking at a DVD burner, a rule could be a setup to recommend you a 50 pack of Sony DVD-R. This is one of the most common cross-sell recommendation techniques used by online retailers – the only downside is it requires significant manual effort to setup and it is based upon the internal decisions of a single category manager. The technique might work effectively for a highly niche retailer with small assortment, but is not quite scalable and effective if you have relatively large catalog.

The next level of recommendations start taking into account the “aggregate wisdom” collected from all the customers. One common recommendation technique is to start showing “Top Selling Products” in all categories, sub categories and search pages. A lot of time customers need help with item discovery process and although they might not trust what a retailer is pushing to them in the form of recommendations, they do take other visitors’ opinion seriously. Seeing a product listed high in top selling items can give the visitor a vote of confidence – because they know they are not making a really bad decision if most other visitors have purchased the same item.

An equally effective but less frequently seen capability that relies on “aggregate wisdom” is “Top Rated Items”. This is where visitors are recommended products based upon the ratings received from other customers. The products that receive highest aggregated ratings in any given category or sub category start appearing as recommendations for visitors when they visit those categories or subcategories. Some e-tailers have actually started adding more predictive attributes in the ratings, to help other individuals make better decisions. For example ToysRus.com lets visitors provide additional insights into ratings that can be helpful for other visitor’s decision making. In the below example, 24 users have not only rated the product but have provided tag based information on their ratings so that the information is much more meaningful to someone else who is looking at this aggregated information. For example 16 out of 24 reviewers think that this toy is suitable for imaginative play, an insight that might greatly help other visitors who are looking to purchase toys for imaginative play.

The next extension of “aggregate wisdom” recommendations is collaborative filtering. This is where a highly advanced algorithm does statistical match across different product combinations – and the recommendations are made purely based upon the affinities across various products. The good thing about collaborative filtering is that it minimizes the level of manual involvement from category managers and automatically finds patterns of product combinations based upon aggregate purchase behavior. This is what powers “People who purchased this product also purchased….” type of recommendations at Amazon. Although these type of recommendations require a relatively high implementation cost, they minimize the need for setting up manual business rules and can run on a “Auto pilot” mode to some extent. The downside with collaborative filtering recommendations is that they tend to produce “Averaging effects” which causes the overall most popular items to be recommended more often which means that they will be consumed and rated more frequently as a result.

Stages of Recommendations

The Expert Factor

What is missing in all above types of recommendations is the notion of expertise or authority. All visitors are treated equally in determining the recommendations. Although it is good to see statistically relevant recommendations based upon a democratic way of collecting insights, humans by nature would take recommendations more seriously if they are coming either from experts in the category or from other individuals who have similar tastes. For example, a serious audiophile visiting bestbuy.com may not be interested in the best selling home theater systems on the site. This is because the best selling home theater systems are more likely to be the ones that are purchased most by the average demographics, who tend to prefer mid-range audio equipment. This person would rather like to connect with and accept recommendations from other individuals who are experts in high end music gear. This is where the online retailers should start thinking about adding more context to the recommendations and reviews. The key is to identify as many predictive attributes as possible (e.g. Age group, interests etc.) and then connect the visitors with recommendations from other individuals who have similar attributes. This is the true power of online recommendations – where customers are able to get advice and recommendations from others like them – who they can trust more than the average crowd. The ToysRus example above accomplishes some of that through customer ratings, but there is significant opportunity to do more in this space. As pointed out in some of my earlier articles, social shopping sites such as Stylehive.com are recognizing this aspect of context based recommendations and are helping visitors obtain recommendations from style leaders or experts in different categories. This, I believe is the future of online recommendations, and those retailers who are truly able to unlock the potential will evolve as leading destinations for customers in their journey of online purchases.

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 intended by the Dataportability initiative, the user’s data can almost flow like a river across various social destinations as opposed to being locked in the confines of individual sites scattered in an unmanageable forest. This video does a great job of explaining what Dataportability initiative is all about. Until now, we have seen the social networking sites as the hubs and the users as their spokes. By making the data portable, the scenario will change – the users will become the hubs and the social sites will be spokes – users getting full access and control of the data they create on these social sites and they can take it anywhere they go.

This is exciting – however, it does raise some questions. If the data becomes so easily portable, will the social networking sites lose some of their competitive advantage, because the switching costs for users will get significantly smaller? Even in the case of Facebook, one of the key competitive advantages is the “social graph” – which means the network of connections and relationships between people on Facebook. Only future will tell if this will have a negative impact on some of the existing social networking sites, but one thing is clear - Social sites that just rely on “data lock-in” as the only competitive advantage will have to think harder about creating better products for users.

This is good news for the Indian context. Good, because it is still too early and there is only a handful of social networks in India that have seen meaningful adoption. This opens up various opportunities where new web 2.0 ventures can be built to ride on already established social graphs such as Orkut to offer unique capabilities for the Indian community. Now I am not saying that this will result in an increased adoption of the social networks in India – most of the barriers to internet and web 2.0 adoption in India still remain. However, I do believe that if you offer unique capabilities that add value for the Indian community, it will be much easier to bring people into your network because of data portability – riding on an already established social network is a lot easier to build one from scratch.

So what are some of the strategies to improve the likelihood of success for new or existing social networking ventures in India? The first and foremost, in my opinion, is to open up your “walled garden”. In other words, if you already run a social networking site or if you are intending on building a new one, you should make it easy for your users to take their data with them if they decide to move to a different platform. Ok, this does sound bad, after-all we are in the business of protecting our user base as opposed to giving it away. Now, I am not suggesting that we should start promoting the competitors on our site – all I am saying is that the user should come to your site ,not because he or she is “locked in”, but because they see something of value that they don’t see elsewhere. On the other hand, if they see that they have the option to easily move to a different platform in future, they might in fact contribute more content to your site. This is because they see less concerned about the risk of losing all their hard work associated with content contribution, in case a better platform becomes available tomorrow. Having said that, this does raise the stakes for your business. This means that remaining competitive will be more about proactively understanding what the customer is looking for, and offering products and capabilities that remain unique in the marketplace. Easier said than done, but it is possible – and besides, isn’t that what being on the edge is all about!

Another shift in focus should be from acquiring the user to retaining the user. It is always good to focus on building the site’s user base, and establishing some goals around where it needs to go. We have started to see a lot of stories and celebrations even in India for web 2.0 portals reaching a certain user base – like this one from BigAdda . Nothing wrong with that, infact it is good to see the Indian web 2.0 portals reaching a decent amount of scale. However, what is generally not talked about is how many of those users come back for the second time. It is easy to acquire new users (expensive, but easy). However, the real question is how many of those users stick around to contribute something to the social network. Isn’t that what defines a social network? I am not saying size doesn’t matter – however, in the end what makes a social network successful is how actively communities are participating in that network. Therefore, it is more important to think about what would make the user come back for the second time. That’s because there are a lot of reasons a user would have landed up on your portal for the first time –by advertising, by word of mouth or simply by accident. However, there is only one reason for users to come back for a second time – they see something of value that is worth their time.

Ok, so we open up the “walled garden” and we build some capabilities that make the user come back for the second time. How do we make the user stick and build a long term relationship with us? Is there any way to still “lock-in” the user for the lack of better words? The one way I believe we can still keep the users from switching is by offering some kinds of phased incentive program. I am not suggesting that we offer users monetary incentive to stick around – even incentives such as a better social status on the site as the users make more contributions will make it less attractive for them to switch to a different platform. Even if the users can easily carry their own data or content to other platforms, they may not be able to take the social status that they achieved on the current platform. There are a lot of sites which promote users to “Experts” or “Style leaders” and depending upon the context of the social network, some of these incentives can help maintain the stickiness with the platform.

I do think that initiatives such as DataPortability will eventually change the dynamics of online businesses – and will actually create significant new opportunities especially in the social networking space. However, there is an active debate going on about the pros and cons of DataPortability – especially concerns related to data privacy and security which I didn’t cover in this article. It is perfectly ok if you disagree with above view points, as long as you don’t post your comments on this blog! Ok, that was bad joke! I would in fact be very interested in your comments, especially if you disagree! Because having a balanced discussion on this trend will actually help establish the real opportunities.

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. The prices displayed on the comparison shopping page do not actually match the current price offered by the online retailers.

Granted, these are anecdotal examples and it is probably unfair to generalize and throw the entire comparison shopping platform under the bus. However, it seems that the very value offered by such comparison shopping platforms is questionable if, at the end of the day, customers have to actually visit individual sites to reconfirm the “true” price for these products. Even if the price comparison engine is correct 60% or 70% or even 80% of the time, how many customers would be willing to make a shopping decision based upon unreliable information? For customers to see value in these platforms, the pricing information has to be accurate close to 100% of the time. So should we blame the comparison shopping platforms for these reliability issues? Not entirely. As much as building an aggregate platform sounds simple, perhaps we need to explore the broader challenges in the Indian context that must be overcome to make aggregate platforms successful.


Challenges
Firstly, there is an issue about marketplaces. Most of the large online e-tailers are already an aggregate platform. Most of these online players offer a platform which brings together different third party sellers or vendors. In a lot of cases, these vendors are also selling across various online retailers. For example, a Nokia N70 is sold on Indiatimes shopping by at least 5 different vendors, at different prices. The same product is being sold at Rediff shopping by multiple vendors as well. A comparison platform should not only compare prices across online retailers such as Rediff or Indiatimes shopping, it must also do a price comparison among various vendors selling on these individual shopping platforms.


Secondly, there is the issue about mistaken identity. Imagine what would happen if you decide to use a different name with every employer you work for? Or you change the license plate of your vehicle as you drive from one state to another. This is sort of what happens in e-tailing today. Products have a different “name plate” across different online retailers – sometimes they are sold under different “name plates” even within the same online retailer. In this situation how can we expect a comparison shopping platform to show accurate prices across different retailers? An N70 may be called “New N70” or “Nokia N70” or “Nokia N-70 Music Edition” across various retailers. There is no standard code that is assigned to these products. Short of manually setting up the relationships for these items across different retailers, it is extremely difficult to offer an aggregated price comparison service. In US, retailers rely on few standardized IDs (such as the manufacturer code or the UPC or the GTIN) – this helps comparison shopping platforms to search across online retailers. In some cases, even the attributes associated with products are standardized, so it is easy to offer a detailed comparison on dimensions such as color, size etc.


Another related but important issue is the lack of product feeds available from various retailers. Although some online retailers have started to provide data feeds for product and pricing information, the general practice followed is that of “screen scraping” which means that the comparison shopping engine’s robot visits the online retailer sites and tries to interpret the pricing information from the online retailer’s web page. This method is extremely unreliable and is prone to consistency issues especially when the online retailers make any changes to the product/pricing information on the site. Even in cases where a data feed is provided by the retailer, these are typically not daily feeds, which means that if the product prices change on the retailer’s site, the comparison shopping engines are not aware of them immediately – thereby resulting in pricing inconsistencies.


So with all these issues, is there any future of comparison shopping in India? I certainly think so! I look at these challenges as opportunities for new business models which can create a win win situation for the online retailers as well as comparison shopping platforms.


New Venture Opportunities
Firstly, there is a significant opportunity to begin offering services related to content management and data standardization. This model is very common in US where third party service providers help online retailers in enrichment as well as standardization of online product content. The advantage to online retailers is that they are able to offer much more robust product content to the shoppers, resulting in improved conversion rates. On the other hand, this also helps improve the consistency and accuracy for aggregate and affiliate platforms.


Then, there is another opportunity to offer services around data publishing. Instead of the online retailers building multiple feeds for different comparison shopping engines and affiliate partners, what if there was a service provider that would take online retailer’s product and price information and integrate across various comparison engines and other affiliate partners. Again, this is a widely successful concept in the US market where companies such as ChannelAdvisor offer standardized integration services with over 35 different comparison shopping platforms. These services can take away the headache and integration effort from the online retailers and let them focus on improving the core merchandising and retailing aspects of the business. At the same time, these services can significantly improve the quality and consistency of product and pricing information throughout the online eco-system and, at the end of the day, allow customers to make more informed purchase decisions.


There are also several opportunities to improve the effectiveness of comparison shopping engines themselves. When customers are thinking about making purchase decisions, they certainly consider price. But a lot of times, they also consider other aspects such as other customer’s opinions about the products as well as the retailers. If your goal is to become a destination portal for customers to make better shopping decision, then the focus needs to be broader than just price comparison. Offering aggregated analytical information such as consolidated product reviews, sales rank, merchant reviews, shipping charges, promotional details will all help in improving the likelihood that the shoppers will think about your portal as the first destination in their online shopping process

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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 will probably reveal a long list of shoes, and the end users have to sort through a lot of information to really make their purchase decision. So what if we started to stir things up a bit? What if we can build something that can combine the networking power of Myspace or Orkut with the data crunching muscle of Google, and in the process bring a little more humanity to the act of shopping online. Social shopping sites can do just that—they offer new ways for consumers to find what they should buy and provide new opportunities for retailers to reach their customers. Taking our Men’s shoes example further, a similar search on social shopping site on the contrary will immediately point the users to the opinions of the site’s most fashion conscious and influential users – a much stronger factor in helping the users make their purchase decision. This is where psychology of human shoppers comes into play. Most of the online retailers, almost assume that people coming to their sites know exactly what products they are looking to buy. They hope that the visitors will search for the product they are looking for and then begin the purchase process. That is, however, hardly the case. Although a small percent of visitors may know exactly what they are looking for, a large number of them need help in deciding what they should buy. Especially, in the Indian context, word of mouth plays a great role in individual’s shopping decisions. However, that word of mouth spreads in a very ad-hoc fashion today. How many times we have heard statements like these – You shouldn’t buy that LG LCD television because my neighbor’s cousin thinks that LG is not a good brand for TV, or I know someone at work whose Aunt purchased a Bosch washing machine and they love it! If we were able to build a platform where these recommendations could be more structured and easily accessible, there is a potential to significantly change the buying behavior. Now the question is how do we make these recommendations more structured and available online? How do we get that neighbor’s cousin or friend’s Aunt to be online and make the same recommendations? The answer is we don’t really need to get everyone and their brother to be online for this model to work. We just need a small number of experts, early adopters and some knowledgeable product owners who have made good or bad shopping decisions in the past - we need to give them the right incentives so that they can actively contribute to the online community. So what kind of platform could we build that can enable all of this? I see the following ingredients that could make such a model successful –

• Ability for experts to make unbiased product recommendations and share their favorite products online.
• Ability for others to vote for the product recommendations or other content (such as reviews) posted by these experts.
• An incentive structure that rewards the experts based upon their level of contribution and the size of their following in the online community. The rewards could be monetary or a premium status that gives them access to additional benefits.
• Popularity driven navigation – ability for popular products, popular expert recommendations to bubble up to the top of the site.
• Ability for appropriate checks and balances to deter individuals who want to game the system for their personal benefits.

If these basic ingredients are there, a platform can be built that not only offers high quality recommendations for products but also keeps users closely connected with the style leaders and experts resulting in much more informed shopping decisions that would otherwise be very difficult. Stylehive.com, for example, showcases its top experts on the front page and lets people literally “follow” these experts. As these experts make recommendations or share products they like, they are immediately visible to all the users who follow these experts. The experts themselves are selected and voted by the online community based upon their contributions – building a self correcting eco system. ThisNext.com goes one step further – with the tagline “Real recommendations from Real People” , it truly “gets” the psychology of online shoppers and starts engaging them not when they are ready to make a purchase – but when they are ready to discover what to buy. Sometimes I wonder, why do most of the traditional online retailers build these artificial boundaries? They try to capture customers too late in the purchase cycle – and then get concerned when 9 out of 10 visitors leave without making a purchase. If we can extend these boundaries and start engaging customers when they really start the product discovery process, they will certainly build a strong loyalty and will keep coming back more often. This is where social shopping can really fill the void.

Having said all of this, let’s come back to the India scenario and the issue about internet adoption. First of all, I don’t want to discount the fact that the level of PC and broadband/internet adoption in India is a big concern. However, sometimes I feel that this issue gets played up much more than it should – it almost gets used as a “whipping boy” for all the things that are not working for internet and eCommerce in India. If customers see enough value in online shopping, I don’t think the adoption as a big hurdle. There are over 30 million Indians who are online today – this is nothing to sneeze at! Over 10 million Indians are registered on Orkut alone– making India #2 country on Orkut. People see a clear value in what Orkut offers, and as a result have adopted it. One could certainly argue that comparing Orkut adoption to eCommerce adoption is not apples to apples – but my point is that we need to think about the psychology of these 30 million users and give them a reason to consider online as a shopping channel. We need to think of ways the online channel can play a role in their product discovery and purchase process so that they can make much better informed decisions, compared to what they can do today. There is no question that over time, customers will see this value – and there is no question that the 30 million internet population will grow to 50 or 100 million in the coming years. The question really is, are we offering a strong enough value proposition to these 30 million people for them to shop online? Internet is all about connecting individuals with no constraints around geographical barriers. Are we doing enough to leverage this true potential and connect individuals with other shoppers or experts so that they can make much more informed shopping decisions? I strongly feel that the concept of social shopping, if implemented properly, will be very successful in India. It will take few years for this concept to fully mature, and for consumers to start changing their shopping behavior. However, if you are considering an investment in an eCommerce venture, this is a good time to start thinking about adding that missing Human touch so that your customers can not only start connecting with other customers, they can start building a much bigger connection with you!

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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, is that enough? Are there additional opportunities to leverage the motivations of Indian consumers, and improve standardization across online retailers? I believe so, and I will be sharing specific opportunities around price comparison and other aggregation platforms.

4. Online Marketing

Ok - this is not a new concept and companies have been doing it for years. The question is whether traditional approaches such as SEM or banner ads are enough? What are the opportunities for service providers to offer end to end services around execution of online marketing programs as well as measurement of the benefits? I believe there are significant opportunities in this space, and will share some specific concepts.

5. Analytics Services

Most online retailers use some type of web analytics product – whether it is Google Analytics, Omniture or Web trends – a lot of data is being collected. However, the question is what is being done with that data? What can service providers do to help business managers of these online retailers make more informed decisions and act on this data?

6. Fraud Detection & Security

Credit card fraud is a concern for most online retailers as well as banks. There is a lot of work being done in India such as 3D Secure to minimize the likelihood of fraud. However, I would argue that although several measures have been incorporated into websites to ask additional questions during the payment process, not much thought has gone into the implications of these additional steps on the user experience. How many “authentic” users are abandoning their online check out process because of additional “speed bumps” that they have to face? Are there opportunities for service providers to offer “non intrusive” services that can help detect fraud, and at the same time, improve the overall customer experience. I believe there are, and I will share some specific examples in this category.

. Specialized e-Commerce offerings

Today, with the exception of few online portals, most of the shopping portals look and feel the same. Most of them carry similar assortment of products, at similar price points and a level of customer experience that leaves a lot to be desired. So what are some specialized/focused ideas that can target specific demographics or unique customer needs? In this category, I will be discussing various opportunities for the NRI community, online concierge services, assisted e-commerce opportunities for mass market etc.

8. Loyalty programs

Today, the online players don’t look at loyalty programs as a strategic differentiator or a tool for building lifetime relationship with their customers. Most of the programs available today offer basic point accumulation and redemption options. This area has a lot of opportunities for 3^rd party service providers who can help execute integrated loyalty programs that reward the most profitable customers of online retailers.

9. Logistics/ Customer Service

Although this category doesn’t seem as exciting as some of the categories above, this is certainly a category that can help in strongly differentiating an online retailer from others. Ironically, this category has received the least amount of focus and investment among online retailers in India. There are several business models and opportunities available for service providers which can help online retailers significantly improve their overall service levels and consistency in execution.

I do hope the ideas that I will be posting during next several weeks will provide food for thought to entrepreneurs within this online space. So stay tuned and get your thinking hats on – let’s collaboratively build upon these ideas to help drive eCommerce in India to the next level.

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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

which can benefit a lot from community participation. I will put up a link to the Podcast if I am able to get hold of it – alternatively, you can also check at http://www.webinnovation.in which is the official site for the conference.

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