There is a perception out there that eCommerce is not really picking up in India and that companies are struggling to scale up their offerings. There is no question that the overall market is still pretty small in terms of numbers. However, we shouldn’t ignore that all factors are slowly moving in favor of eCommerce. Retail is getting more and more organized, availability of global brands is larger than ever, internet penetration is climbing and some internet retailers have started to focus on customer experience as a way to differentiate. Most importantly, and I can personally attest to this one , there are some extremely talented individuals who have recently launched new ventures and are passionate about making a big difference in the eCommerce space in India.

I’ve been thinking about this for a while - despite all this activity happening in the industry, recent startups are not getting a lot of coverage unless they are willing to shell out marketing money to advertise their offerings. Therefore, I have setup an eCommerce Directory that would  showcase all eCommerce related ventures and offerings in India . I think this makes sense -  given that Commercewiki has reached a Million page views , enterpreneurs can use this site as the primary marketing vehicle. Ok, ignore that last sentence because it is slightly exaggerated!! I dont think we are anywhere close to million page views yet but we do have access to the core community that has a strong pulse on eCommerce in India and insights that are based upon real experiences in this space. Quality is better than quantity in this context.

So if you would like to share your venture/ offering, please submit your listing here. It doesnt matter how small or large your venture is. The only requirement is that your business must support the eCommerce eco-system in some way.

I remain highly optimistic about all the eCommerce opportunities that are still out there in Indian market. I am hoping that this showcase would demonstrate all the excitement and energy that is currently going on and would inspire potential entreprenurs who are currently sitting on the fence to join this wave of transformation in online retail.

Update (October 09, 2009): Listings are now live under the eCommerce Showcase section. You can submit your listing here.

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? Largest market of non-travel industry is electronics, digital and lifestyle products. Major players in this are old pros Indiatimes, Rediff shopping, homeshop18, eBay & some new kids on the block like Cafegadgets.in, Gadgetsguru and numerous startups.Average margin is 7-8% in electronic and lifestyle product. If we assume 35% as the share of these portals, then it’s worth Rs 1680 Crores and a bottom-line of Rs 135 Crores. When it comes to bottom line are we all fighting for a piece of cake?Keeping in mind all these questions one must be forced to ask “Is E-Commerce Really Profitable in India??”. Well that’s a million dollar question. And it’s surrounded by so many “Ifs and Buts”. Currently most of the e-commerce portals are striving to break even. Weak pc penetration, Low broadband usage, reluctant credit card users and high cost of acquisition are the major gray areas in this vertical. According to CLSA Internet Report 2007, India will have 55 million internet users by March 2008 growing at 30% over next three years. At this rate it will breach 100 million barriers in next two years. Similar growth trends are predicted for broadband subscribers. Considering the past this is quite optimistic.Majority of the online shoppers don’t hesitate in using credit cards online provided the transactions performed by them are safe. Internet security is also major concern in this arena. We can win the trust of the customer if we have certifications like Verisign, Hackers Safe or Thawte Seal.

Internet advertising expenditure is increasing by leaps and bounce. Most of the advertisers prefer to spend pay per click, pay per action or through publishers in affiliate network. Not everyone can afford to burn money by spending on advertising. Internet advertising is pure overhead. It’s a Catch22 situation. One has to adopt “aggression with precaution” strategy. Most of the companies end up spending millions of Rupees just to reach potential customers in a flash without foreseeing the repercussions on balance sheet.

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.

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 –

• <!–[if !supportLists]–> Ability for experts to make unbiased product recommendations and share their favorite products online.
• <!–[if !supportLists]–> Ability for others to vote for the product recommendations or other content (such as reviews) posted by these experts.
• <!–[if !supportLists]–> <!–[endif]–>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.
• <!–[if !supportLists]–> Popularity driven navigation – ability for popular products, popular expert recommendations to bubble up to the top of the site.
• <!–[if !supportLists]–> 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. <!–[endif]–>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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