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!
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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!