Doing eCommerce in INDIA?? !! why it will work.

Doing eCommerce in India ?? !! why it will work.

First things first. eCommerce has stayed in India, Ten years and counting.

It is only recently that is has become the flavor of the season for the VC’s for the second time. I remember in the 2000-2003 era, it was the same… the millions were less but the flavor was as strong … I remember meeting people during that time wanting to start eCommerce sites. 

Some survived, some changed hands, some perished or I should say got burnt in HELL… And now it’s a rebirth. 

Travel is the biggest example of this success. And me saying this was like saying that there is an elephant in the room. 

Why did this work! According to me for only one simple reason, digital delivery of the product. 

eTickets did not get into the rut of  last mile courier, cost of delivery of the product and the ecosystem of the GDS’s made it easy to manage product inventories. Will this survive with all the airlines now providing similar services directly on their site? We will have to wait and see. As of now its happy times (my perception) for the companies and the airlines and not to forget the investors, specially the investors as they have seen one listing already and I am sure at least one more on the anvil. I am sure the next big-ticket item to go the same heights will be online life insurance covers. 

Now the non-travel sector eCommerce is something of a worry as of now (early days of the round two).  But I am sure it will survive. 

Here is my take on it.

Like all starting retail shops in the market near you, the first most important
thing is to get customers inside the store. Once the user is inside, then let the
user experience, price of the product and the service support take over .

But to take that space in the market, you have to pay security deposit, high retail rentals, or if you have lots of monies (inherited), you buy the place. All of this the retailers understands is called investment into the business, which in most cases they don’t even think of recovering as that is the pillar on which there business is built. And if it is bought space then that investment will pay for itself in India with real-estate prices going up up away. 
Comparatively: An online retailer, needs to open a website by paying a couple of thousands dollars to developers and he is up and about. With payment gateway, logistics support for deliveries etc.

Now the advantage that a small retailer in a market has is that he has a captive audience to cater to, the foot falls in the market, enables him to scale the business to a certain level and for the next one year he will only think of recovering the operating costs, with some monies for himself in it. Bare Bone, no fat. If he survives for TEN years, is when he thinks he has made it big.

On the other side, an online retailer has to struggle to get this foot fall or visitor, and in most cases the first visitor is actually a paid 4 visitor by the website owner.

I think this is essential, as in the clutter of the eCOM shops; you have to tell that you exist; this is where the eCOM companies are spending most of the monies.

Now there are a few avenues in this line of approach.

Some of them are being tested out by various eCOM sites.

1. Coupon codes. : On the eCOM side, distribution is the key to success, and coupon distribution is one of the key distribution articles, it similar to flyers that the offline people send to entice people living in the locality to come and buy at there shop, and also give incentives to do so.
   
2. Discounts / Best price spiel: Another one, which is used effectively by the larger eCOM companies. They believe SCALE will Trip over everything on the Internet. Some companies have taken it to the level where they are selling stuff even below its buying price. Short-term solution with a long team impact. We have companies in the offline space who did exactly this (sabka bazaar is one such example, I don’t think they sold product below buying price, but good discounts on the MRP and that too on low ticket items)
   
3. Gather distribution lists: All the deal sites today in India are aggregating users, getting them to register for some instant gratification, which they plan to milk over a period of time by sending them products and services at discounts or as special user offers.  This is like the guest book at the normal retail shop.

Most of the good teams running the eCOM businesses know that they will not make monies now or on the first deal, it will be the 10^th -12^th – 20^th transaction or more that they will breakeven on the money used to acquire the customer.

Traditional business do not have these matrices to measure up to as they do not have to bear with the fact that the foot falls into their shop has a cost attached to it and they need to make sure that the footfalls buys. There is to some extent no need for this information.Except one stores that I know of that track a conversion ratio of walk-in to purchase. (Croma)

Interestingly, I am sure you would have noticed in a big mall near you, that shops keep on changing hands. One day it one brand and after three / four months or max a year, the shop changes the brand. Is it to say that offline retail commerce is failing?  

Having said all the above, the following points is what makes me think that ecommerce will stay and be the next big ticket for entrepreneurs in India.

1. Easy funding of projects (VC), similar to retail banking doing the first round of funding for the retailer for stocks.  The Risks are higher but so are the returns.[ This is Now, might not be the case middle of the year.]
   
2. Smart Technology being made available to test market the shop. Now you can setup a retail shop for as low as 2,000-10,000 per month on SAS platforms like MartJACK. and a few more.( I remember this to be as high as 10 -20 Lacs a few years back, there are a few companies still selling at this price. HUH!!). Test it out and see if a particular vertical works for you.
   
3. Last mile puzzle being solved by logistic guys. Courier companies and more deeply integrated into small towns. With some eCOM companies starting their own courier companies to ensure a great delivery experience.
   
4. “GST“:  this the Real fuel for eCommerce. This will enable eCOM companies to bill directly form there central warehouse and deliver the product, with out having to bother for state taxes / octroi / completely redundant documentation etc…
   
5.  Interesting payment options being made available. Now you have the following. 
1. Cash on delivery 
2. Cash before delivery (http://www.gharpay.in/) 
3. Credit cards 
4. Debit cards 
5. Cash cards 
6. Internet banking 
7. Instant conversion to EIM @ zero % interest. 
8. Mobile wallets 
9. Prepaid vouchers
   
6. Govt. Initiatives 
1. GOVT websites now take e-payments 
2. Utility bills are being paid online
   
7. Security 
1. One time Password (OTP) 
2. Instant notification for transaction to registered mobile phones
   
8. Social Media proliferation 
1. Get more feedback on before purchase information 
2. Flaunt what you just bought attitude. (self esteem and near real-time). 
3. Get friends to recommend your next purchase.
   
9. Comparison Shopping (another biggiee waiting to happen).
   
10. Online Media channel on a COST Per CUSTOMER available in INDIA now (last four-  five years, the scale is happening now).
    
11. General growth of users who are now transacting on the Internet for the following : Recharge( MOBILE, DTH, Insurance)  / Bank transfers / Online banking / Restaurant booking / buying deals online(discounts)

Growth in online traffic to eCommerce sites.

(Courtesy: Hindustantimes.com) , additional insights also available on eCommerce on the lnk below .. 

See link:: http://bit.ly/AANc9X

And of course the Multichannel digital marketing and offline marketing combined together will help the eCommerce company to delivery to both the users and its investors. So use them wisely. 

In the end, the only thing that will fail in the eCommerce industry will be teams and not the concept of ecommerce. Be ready for a long haul if you want to make an ecommerce company. If you are starting up an eCommerce site thinking that some one else will buy it out. BIG MISTAKE. think twice or maybe TEN times... :), Not all will get lucky.

Let me know your feedback. 

I will be writing on the basic digital strategy for eCommerce site in India. A start-up guide to the same. Hope you all like it. So keep watching this space.