Dead End... No Way!

India is a hot market for e-commerce. While highly evolved markets in the West took almost 50 years to move from mom-and-pop stores to online stores and the virtual environment, India has accomplished this in just 2-3 years. This reflects the evolving nature of the market and the Indian consumer. New information technologies are changing the face of e-commerce business in India.

We are at the tip of an iceberg and within a few years, will be able to tap the full potential of the Indian market. There are immense opportunities for all e-commerce business models to do well and reach out to the consumers across the county. The Indian e-commerce model is catching up rapidly with the global ones and we should expect rapid innovation soon.

India under the Scanner

E-commerce in India can be described as a fairly new model and at a quite early stage to be compared to the global model. Globally, the e-commerce industry is very well established and has gone through the learning curve where companies emerge and set the blueprint in place for others to learn from.

Apart from the over-spoken issue of internet penetration in the country, the big point of difference in the Indian e-commerce model as compared with the global model is the back-end.

In the developed economies, the back-end is completely in place and all that the teams have to do is to focus on the front-end value proposition. However in India, the key to a scalable and dependable e-commerce business is a two-pronged challenge.

Apart from all the good stuff on the front-end, the back-end ecosystem is a bigger mess - from payments to logistics. There is a clear opportunity for innovation in the payments space where a few models are evolving to try solving this issue.

E-commerce model in India is more price-oriented as compared to the ones operating globally. More and more websites are bitten by the discount/deals/coupons syndrome for attracting customers. And things won't appear to improve as only 10% of Indian consumers use comparative online shopping as compared to half of the online shoppers' population on a global scale using it.

The other things which do count in are uniformity of sizes of products on a global scale, whereas its absence is felt in the Indian scenario. Products like shoes, dresses, etc, which have respective sizes are playing a major role, not being a hit for the e-commerce segment in India. The reason being the variability in actual products of different brands even for the same sizes in India.

There are 2 types of e-commerce businesses running in India. One is on marketplace model and the other focuses on a vertical/horizontal model. Survival of any e-commerce site depends upon factors like its USP, building trust of consumers, proper STP (segmentation, targeting, and market positioning of brand), etc. Success purely depends upon the pricing and repeat buys in India.

The Indian incredulousness about online products still needs a long time to fade away. This phase looks to be a thing of the past for global markets as the products display on the website, their delivery, and the overall satisfaction for the global consumers is at a much higher indentation than that of the Indian online consumer.

"We at Fashos.com are mulling the opportunity to integrate a couple of interesting payment models within its process flow. On the other hand, no wonder the larger e-commerce players are trying the DIY model on the logistics front with setting up of their own logistics arms.

While it is a significantly different monster to try and manage, there is a separate skilled team that will have to come on board to build the competence, given that the ownership of the customer experience till the last mile is a critical component of the jigsaw puzzle," says Navin Joshua, co-founder of Fashos.com.

"If we look at the online travel e-commerce in India, this sector was the first to get to a tipping point. Almost 25% of travel is now purchased online. On the other hand, retail/non-travel e-commerce is still at an early stage but developing really fast. I feel that this category of commerce will surpass online travel in the next 3 years (in terms of transaction volumes)," says Ashish Kashyap, CEO, ibibo web.

Global Learning

There are 5 key foundations for making an e-commerce model successful; first is technology and user interface, second is trust, third is selection, fourth is price, and fifth is fulfillment/last mile delivery.

"Since the global e-commerce industry is much better established, we have a lot to learn from them. They teach us invaluable lessons on how to get the most from platforms like social media, how to smoothen logistics, and how to put technology to work for us, among other lessons. For example, a model like 99labels.com which is flash sales, is fairly new but is very well established globally," says Ishita Swarup, CEO and co-founder, 99labels.com.

The global e-commerce model has had ups and downs in the past. However a consistent success rate has been witnessed for the past decade due to factors which ease the global e-commerce growth. India has been slow catching up the pace in this stream. The main differentiating element seems to be the trust in the e-commerce segment and industry as a whole, shown by the Indian consumers.

Legalization of e-commerce transactions, fraud resistant e-commerce model, and consumer privacy right protection should be incorporated in the Indian e-commerce scenario from the west.

Cyber laws, IT acts giving consumers' legal protection as well as augmenting their confidence on e-commerce need to be adapted soon. These measures have been prevalent globally on a large scale.

New approaches to e-commerce business like the mobile commerce business, which is a 6-bn business in the US, needs to be looked upon seriously to keep on the inertia in this industry. Searching for new vistas, global e-commerce gives us multiple answers to implement from.

Headed to a Bust?

According to a report by Internet and Mobile Association of India, the e-commerce market has been growing at an average rate of 70% annually and has grown over 500% since 2007.

The industry is at the tipping point of e-commerce as more and more Indians are accessing internet to make purchases online. The increasing use of smartphones, laptops/PCs, and availability of internet to the remotest part of the country are aiding in the adoption of e-commerce by the masses.

With more than 300 websites currently operating in the sphere and hundreds more in the pipeline, it is obvious that e-commerce is here to stay. India is a huge market with immense potential for growth and e-commerce will get stronger and streamlined in the coming years. India is now catching up with the rest of the world. It is our view that it will be bigger and a substantial part of the shopping lifestyle in India.

But there is a big question of whether the e-commerce industry is headed for a bust? "No, it is not headed for a bust. There is now a big enough market and the customer is deriving disproportionate value from e-commerce. It is the buyer who decides the fate of an industry or a company.

E-commerce version 2 in India has a critical mass of repeat buyers - so the question does not arise that this is headed for a bust. Yes, indeed many companies will die - and a few will become winners. But that holds good for any industry," feels Kashyap.

According to Swarup, e-commerce is here to stay. Our lifestyles and the way they have evolved need e-commerce models to juggle responsibilities and their ensuing time commitments. Due to factors like time crunch and lack of stores accessibility, people are now much more comfortable shopping online.

Though there are a lot of players mushrooming in categories like flash sales, niche segments, full size catalogs, e-grocery stores, and other areas, eventually a few key players in each category will emerge as industry majors within the next few years. This will be determined by how the companies maintain their logistics and operating matrix, predict trends, and stay ahead in the game.

"Most global e-commerce brands have been built on minimum to zero advertisement. Sourcing efficiency will be a key success factor for Indian e-commerce. Indian consumers are bargain hunters. So, e-commerce players need to offer the best deals," informs Arindam Bose, MD & chief customer officer, timtara.com.

"As per my views, e-commerce is not presently heading for e-commerce bust, not at least in India. With booming rise in the online population as well as online shoppers growing at 30%, much market remains to be tapped upon. The ever increasing penetration of internet, persuasive value, and expediency are driving more and more urban consumers towards online purchasing of every necessity," explains Gaurav Singhal, co-founder, IMStylish.in.

Singhal further explains that macro trends like the increasing disposable income of the Indian consumer are also aiding the e-commerce growth in India. The current revenues from the e-commerce market in India with estimates of $1bn are far less as compared to China (with estimates of $70 bn) and other economies.

That is one area that needs to be considered. The skeptical investors have actually put brakes on the growth rate of e-commerce in India, with mortalities like taggle.com, nammagroceries.com, and Harisabzi.com not aiding the cause. Investors have to continue their bet on increasing internet users and changing demographic trends in the country. E-commerce will definitely shape up the new dimensions in Indian shopping scenario.

Survival Tactics

Talking about the survival of a particular model, Joshua explains that apart from a couple of calculated punts, there is an opportunity for many, but no clear winners at this stage. He further adds, "My personal view is that too many 'jump-the-gun' phenomena within the past year that managed to excite the community as relatively early movers, are facing real challenges when it comes to scalability.

A question to ask is the sustainability of the costs of acquisition. If an e-commerce player has built a business on the premise of a high acquisition cost, then lowering can be a slow and painful process. If one has a deal site orientation, then evolving that to a product play is also a transition that has its challenges.

None of these are insurmountable though. At the end, it boils down to execution of a value proposition, with a firm understanding of the customer. Doing the basics right at optimal levels of spends while scale happens, can be a very tricky equation. The team that can best manage this balancing act will be successful."

A Successful Model

India is a conservative economy where people are apprehensive about security issues in online transactions. For e-commerce to gain momentum in India, the industry should focus on those aspects of e-commerce that are unique to India.

Likewise, CoD or cash on delivery should be the preferred payment method as India is a vibrant cash economy, evident through the fact that close to 60% of Indian e-commerce transactions tends to be CoD.

The demand trend shows an increase for international consumer products when compared to in-country supply from authorized distributors and e-commerce offerings. Competition seems to play a major role in the growth of e-commerce in India.

E-commerce is profoundly a vigorous industry with too many players eyeing the same quiche. Thus the role of the key differentiator would be played by the investment and the trust on e-commerce by both investors and customers.

Also, there should be a combined effort from the government and the industry sector for boosting e-commerce via widening its customer base. The infrastructure needed for this is at a very fundamental level. PC, broadband, multi-city warehouse, without fail logistics support, broadband speed, etc, need to be seriously looked upon by the concerned institutions.

Government should also be lenient towards e-commerce companies which are highly undercapitalized. Alterations need to be done on the taxation structure for improving upon the e-commerce growth in the country. Enhancing e-education using measures like Zero based Proactive Learning Paradigm (ZPLP) for mobile, economic, and effective 24x7 educations could act as major gameturners.

On a final note, Sundeep Malhotra, CEO and founder, Homeshop18 says, "For e-commerce to expand further in India, it is important for our government to recognize e-commerce as an industry. The sector is unorganized right now and the government's commitment will help channelize the growth in the right direction.

Internet is the vehicle on which e-commerce will reach the next billion population in remote areas of our country and the need of the hour for the government should be to provide subsidies and encourage growth of internet to emerging markets within India."

He further adds that uniform GST and tax measures across states will also play a crucial role to make e-commerce a success story in India. Additionally, there is a need to have better infrastructure across cities and states to help virtual retailers deliver quickly and efficiently to hitherto untapped markets.

For consumer satisfaction, there must be judicial mechanism to fasten the resolution of disputes between e-commerce companies and consumers so that they return for repeat transactions. And lastly, as the fear of cyber crime increases, the whole industry must ensure that we fortify the online transactions procedure by making it safer and secure for one and all.