Ecommerce, Here To Stay

Internet is redefining the
way we work, talk and do business–even its most skeptic critic would
agree. In the US and elsewhere, the mind-boggling valuation of
internet and related technology based companies, portend of things
to come. Moreover, such high valuation is changing the traditional
way we would look at business. Profit is no longer the Holy Grail of
success and of high valuation in the cyber economy. Internet
companies like Amazon.com are valued in billions of dollars though
they are yet to make a profit. Such high valuation is not without
reason. The impact of such an economy is already evident and is
expected to reshape and redefine the market dynamics of traditional
business structure as we know it. It is gaining in importance with
each successive year and is expected to touch a whopping $3.2
trillion by 2003. According to figures given by Eric Fredell,
Officer, Ecommerce Task Force, ITA, USA, during the recently held
India Internet World, “The internet with a revenue generation of
$301 billion in 1998 would be the 18th largest economy in the
world.”


However, the big questions
for business players in a country like India are–will the internet
make an impact on their business? Given the poor state of
communication infrastructure, will ecommerce really succeed in the
country? Will consumers give up behavioral buying patterns developed
over many years and get bitten by the ecommerce bug? Many questions,
but there is one simple answer–Yes.


No doubt, the country is
plagued with its infrastructural problems. Our tele-density is still
a very low 2% compared to China’s 4% and the world average of 10%.
Along with poor tele-density, the PC penetration is equally dismal.
For the last fiscal, we sold less than a million PCs–for a
population of nearly one billion. Moreover, private Internet Service
Providers (ISPs) have been allowed to operate in India only
recently. The back-end infrastructure still remains the fiefdom of
the telecom giant VSNL. Correspondingly, internet penetration is
also insignificant in India to actually propel the ecommerce wave.
Compounding the infrastructural problem is the absence of cyber
laws. Only with the passage of the cyber laws, will such issues as
credit card transactions, digital signatures, signature
verifications, tax and tariff impositions and fraud be cleared to
prompt businesses and consumers to ride the ecommerce
juggernaut.


According to Shankar
Srinivasan, MD, Healtheon India, “The challenge for India is that
most of these factors are infrastructural in nature. Overcoming them
requires investment, vision, consistency in policy and political
will.”


From the consumer’s
perspective, the traditional touch and feel approach will have to be
done away with and a new buying behavior, click and shop, will have
to be adopted. How soon the consumers will take on this attitude is
anyone’s guess! Other consumer fears include giving out credit card
numbers and trusting the Indian system and security network, which
can pose hurdles for the B2C segment to takeoff.


Ecommerce
ahoy!

Inspite of all the problems mentioned, one common thread
amongst people, corporate and consumers, is that ecommerce is here
to stay. As GB Kumar, National Manager, Business Programs, Intel
Asia, says “Five years from now, all companies in India will be
internet companies, else they will not be companies.”


Let’s look at a few key
factors which assure the success of ecommerce in the country.

B2B: The action will be much hotter on the business-to-business
(B2B) rather than in the business-to-consumers (B2C) space. The very
nature of B2B will automatically override most of the above
mentioned problems, infrastructural or otherwise. So while the B2C
players would face most of the problems like credit card-based
transactions, tariff and others, the B2B players can have a field
run. Agrees Rajnish Kapur, DGM, New Technologies, IIS Infotech, “The
real boom will be in the B2B segment since it is not dependent on
penetration levels.” Trade and transactions in this segment does not
affect credit card and PC penetration as much as business entities.
Most of the organizations involved, in all probability, have been
dealing with each other and have a better mutual understanding
before they moved to the internet. Moreover, in the B2C space,
security concerns and old buying habits may take this segment some
time to take off. Agrees Gourish Hosangady, Country Manager, SAS
Institute, “Consumers would be wary of purchasing high-value goods
over the internet, so B2C commerce may take a while to pick up.” If
you are thinking as to why the B2B players would be keen to move to
the web, let’s look at the next point.
Sheer necessity: No one
will dispute the argument that any business will benefit if it cuts
down the processing time for any transaction. Ecommerce does exactly
that–it increases the process efficiency by reducing the transaction
time and thus can have a significant impact on the cash flows and
the bottom line. So if your business is not e-driven–there is a high
possibility that your competition is–and sooner than later they will
run you over. So to match competition or gain a competitive edge
over your competition, you will have to move over the internet.
Maybe today ebusiness is a novel term but Kapur points out that five
years from now, one would refer to ebusiness as just plain business.

So, in order to deliver products and services at competitive
prices, organizations will be either forced to adopt these
technologies or face extinction. An extension to
this logic
would be the ‘herd’
mentality.
Big business driving factor:
Business entities will themselves be the key drivers. The big
daddies of the industries will be the guiding and forcing factor for
SMEs to take on the internet. A good example is that of Cisco. Cisco
has mandated that it will deal with its suppliers, dealers and
partners only if they are web-enabled. The partners, liking it or
not, have been forced to make their businesses web-enabled. So if
the same happens in India and companies like HLL, Maruti, TELCO,
Reliance Industries and other major players in their respective
segments make it mandatory to have their dealers, suppliers and
other links in their supply chain on the internet, one can imagine
the ramifications. Sooner or later these companies should have their
supply chain e-driven, if they have to compete in the global market,
and this again leads to growth in the B2B segment.
Global
market: If you are looking at ‘the world as your market’, ecommerce
will fit in neatly with your plans. Globalization is forcing
organizations to achieve new levels of competitive edge in order to
enter the world market. As Partha Iyengar, Country Manager,
GartnerGroup, says, “If we do not get in sync with this phenomenon
reasonably soon, there is a real danger of being by-passed by the
rest of the world, which will not wait for India to get its act
together.” So if we are late to react, we lose out the early-entrant
advantage and a whole lot of market share.
It is imperative that
we hit the ecommerce bandwagon for the sheer efficiencies it can
generate. According to Parimal Ramiya, Senior Manager
Onlineindiacapital.com, “There are significant advantages attached
to ecommerce. For the seller, it cuts down on massive distribution
costs like transportation and trade margins. Taking advantage of
this, the retailer can cut down the prices of goods/services
offered.” ‘To be edriven or not’ can be easily decided if the
stupendous worldwide ecommerce growth is considered. Srinivasan
points out that the volume has gone from nearly zero to $150 billion
in barely three years, growing at the rate of anywhere from 100-500%
every year. To hone up your competitive skillsets and be part of the
rapidly growing cyber market, it is imperative to be on the
internet. As MS Prakash, National Sales Manager, Bharti BT, puts it,
“Ecommerce has put a potent weapon in the hands of marketers in
India and around the world–it delivers products and services at a
fast clip to customers, at a much lesser cost, while simultaneously
expanding the marketspace.”
No entry barriers: The good thing
about the internet is that you do not need deep pockets to have a
successful run. The internet is an upstart’s haven. So even if you
have a flourishing business in the physical world, it will not take
much resources and time for a new player to compete with you.
Remember the innovative Amazon.com grew from a nothing to become the
largest bookseller ‘in the universe’. All this while Barnes &
Noble, the dominant player with huge financial resources, watched
its market share being eroded by the upstart forcing it to get on
the ecommerce bandwagon.
If this can happen with Barnes &
Nobles, it can happen to your business too. Alternatively, if
Amazon.com can give Barnes & Noble a run for its money, so can
you to your established competitor. According to Birender Ahluwalia,
Marketing Manager, Federal Express for Indian Subcontinent,
“Ecommerce is offering a never before opportunity to Indian
companies to overcome physical disadvantages like location and size
of the company. This will further enable Indian companies to compete
effectively on the international scene.” This is equally true for
any company trying to upstage you in the same way as you can upstage
someone else in the global market. Since there are not many entry
barriers in ecommerce, new markets can be targeted. As David Ball,
CEO, USIT, says, “Emergence of new markets and cross market sales
will be the driving force for ecommerce as organizations will have
to face the threat of dwindling market share.” So to reach out to
newer markets, ecommerce can be the best tool for your organization.

Value for Money: Purely from the customer’s perspective,
ecommerce will be one of the key factors in propelling the B2C
growth in the Indian market. The driving factor for the B2C segment
will be convenience, low cost to end-consumers and a wider choice.
If you take a look at the products available on Rediff-on-the-Net,
the above point would be clearer. Most of the products are available
at discounts of 20-50% as compared to the physical world.

Moreover, the opportunity of comparing prices at two different
sites is just a click away and you then have the best option
available. As Dipin Kapur, Director, NetVision puts it “I feel the
concept of value for money together with the convenience factor will
be integral to the growth of ecommerce in the Indian market.”
Combine this with the easy entry factor and a cyber retailer can
have a large collection of products without much effort involved in
giving the consumer a wider choice.
Others: With the private ISP
becoming aggressive and also looking at the huge cable market to
provide internet connections, it is only a matter of time before the
subscriber number starts to look up. Moreover, the VSNL stranglehold
on bandwidth is expected to break as and when the government allows
the usage of gateways to the private operators. With this, the
corporate connections via ISDNs and leased lines are also expected
to shoot up. Along with more ISPs entering the market and bandwidth
becoming easily available, internet access cost is also excepted to
take a southward bend in line with the global price structure. The
bigger boost in B2C is expected once the government passes the Cyber
Bill. The Bill is ready and is waiting for Parliament’s
ratification. It is hoped that one of the top priorities of the new
government will be to process
the Cyber Bill and give it a legal
identity.
Another factor which will continue to see the growth
of ecommerce is the entrepreneurial spirit. So instead of a food
mart,
you have BabaBazaar.com, instead
of share shoppe you
have Onlineindiacapital.com to meet all your financial needs and
Rediff-on-the-Net to meet your need for books and music among
others. Though these are all dependent on the internet penetration,
people are already working out trends for areas of interest to the
consumer. As Manish, VP-North, IndiaWorld Communications puts it,
“To start with people will use ecommerce to pay their telephone
bills, electricity bills, booking of tickets and then move on to
other things.”
Going with trends
The answers to ‘why ecommerce
will succeed in India, can go on and on. Most of the problems
mentioned above would be more a hindrance for the B2C market to
takeoff, while the B2B market can continue its northward march. As
Ganesh Ayyar, CEO, HP, puts it, “Every business model in all parts
of the world will be impacted by the internet. India is no
exception.” Even in the fledgling Indian ecommerce market, B2B has
already taken off.
According to Dewang Mehta, President,
NASSCOM, “Of the total ecommerce market of Rs131 crore, the B2B
segment has conducted business worth Rs119 crore as compared to the
B2C market of Rs9 crore.” Like the worldwide trend, B2B will
continue to lead the ecommerce market by a huge margin. According to
NASSCOM, a few B2C segments in India have potential to do business
worth Rs4,900 crore to Rs12,600 crore and the B2B has a potential of
Rs12,700 crore to Rs40,600 crore by 2001. So in any country,
including India, the question is not whether ecommerce will succeed,
it is more of an issue of what is needed to make it succeed. The
government can only make the way smoother for transition towards the
internet but the final decision is with the organizations. Like it
or not, every
organization will have to have ecommerce as an
integral part of its business strategy. If it is early,
it can
decide the strategy for itself, but if it is later, then the market
dynamics will force the strategy
on it.
Therefore, the
earlier the better!

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