Online Retail Boosts Up Brand Value

As opposed to luring customers through discounts, online retail shall push up brand appeal through quality service and prompt delivery

Thus far Indian e-commerce companies have been wooing customers through aggressive discounts, cash on delivery, wide product range and by sheer strength of marketing muscle. As a consequence, the Indian online shopper has been spoilt for choice with e-Commerce sites becoming commoditized. With most of the existing medium and big players having been in this space for at least 5 years now, they have built a critical mass of customers who have also re-engaged with them over a period of time.

Service differentiation not product differentiation

While it is possible for a home grown Indian product and brand to emerge and disrupt the Indian e-Commerce ecosystem, I do not see this happening as early as 2015. Most mature e-Commerce companies today are either horizontal or vertical marketplaces with a limited inventory of owned/ “private label” brands. Hence, it is unlikely this trend materially changes next year and we have some “product” differentiation. There will however be ‘service’ differentiation which will play out and enable companies to make themselves standout. This can be both pre & post sales service.

Online travel will continue to be the T-Rex

Travel will continue to dominate the India e-Commerce ecosystem staying at a three quarter majority as before. This would be on a 50% larger pie with the internet sector growing at a 50% CAGR for the last 5 years. The evolution of the travel ecosystem in India has followed the global pattern. It started with flight ticketing which now has a 70% online penetration, then came train ticketing with nearly 60% of train tickets today being booked via IRCTC, then came 4 & 5 star properties which again have nearly 60% online penetration and then came bus ticketing which has a 90% online penetration for Volvo bookings between major routes today.

However the budget & value stay segment (3 star & below) in India which has over 50,000 room nights getting booked on a daily basis, has less than 0.5% online penetration. This number does not even account for the even larger market opportunity in alternative accommodation. With some incumbent players establishing market leadership, new players coming in and renewed VC interest, this space is set to heat up. More customers should soon start booking value & budget stays online.

Mobile bookings, traffic to overtake desktop

Mobile bookings & traffic have been running neck and neck with traditional form factor (desktop & laptop) numbers for most of the mature players for a while now. Come 2015, the smaller form factor (mobile) should come out of the shadow of its big brother in terms of both traffic and conversions with increasing smartphone penetrations, dropping prices of electronics and rising disposable income levels.

Move over customer acquisition, enter customer engagement

The customer acquisition spree should slow down and companies will start looking at means to ‘farm’ their existing, large customer base. Innovative loyalty, referral programs should start taking wing to a greater extent incentivizing customers to repeat shop.

Shrinking look to book time windows

Mushrooming marketplaces, product discovery platforms, price comparison platforms, Meta search moving upstream to Google, faster internet speeds and increased mobile phone penetration would allow customers to be able to shrink their decision time window by quickly comparing product features, price and look for alternatives. This would pose a unique problem for marketers and they need to stay alive to this changing trend.

Online grocery shopping to gain traction

More and more Indians are online today and spending greater amount of time. This leaves them with lesser ‘offline’ time, time which they traditionally allocated for chores such as grocery shopping. The timing is right for online grocery shopping.

(The article was first published in PcQuest)