Ecommerce in India is maturing fast. Accessibility and affordability of Internet and smartphones are the means to achieve this as cash-on delivery and coupons help build trust. suchayan mandal checks out how the market has changed
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Shopping from home is the trend that has modified a major chunk of India’s urban consumers and made them comfortable in e-tailing. Ecommerce in India began almost 10-12 years ago through IRCTC railway
reservation. Yes, that worked as an inspiration for many e-commerce founders. None expected the “argumentative” and “choosy” Indians to be comfortable in buying something without using their tactile
sensibilities.
Online shopping of goods in India is expected to grow to $8.5 billion in 2016, according to Accel, a survey body. It also said last year there was a significant jump in average order value as there was a penetration of new categories like jewellery and home décor. Users are becoming more comfortable buying higher priced items online. The number of online shoppers in India will be almost 40 million by 2016. Last year was the rise of fashion e-commerce as GMV (gross merchandise volume) doubled since 2012. The survey further stated, 35 per cent of online GMV in 2016 would be influenced by women. The key factor in this growth is increasing supply of women specific categories such as jewellery, lingerie and motherhood products.
Evolution
Like any other revolution in the market, e-commerce in India is not a success story that occurred overnight. The introduction of Internet in India in 1995 marked the beginning of the first wave of e-commerce in the country, according to an Ernst and Young report. To top that, economic liberalization, post 1991, attracted MNCs, who triggered the growth of the IT industry. The implementation of liberalization policies led to the demise of the licence regime, and high taxes and import restrictions, as well as facilitated the growth of SMEs. This
led to the emergence of B2B, job searches and matrimonial portals like Shaadi.com and Naukri.com. It was in 1996 that the first online matrimonial portal was launched in India. A new concept took India by
storm. People unaccustomed to such portals deemed it as something unique. Such portals have significantly catered to various segments ~ NRIs, widows or widowers, divorcees and other special groups. Another
significant success in initial e-commerce was in 1997, when job-searching portals were operative. The growth of the services sector, following the launch of economic reforms in 1991, resulted in the creation of additional jobs. In this background, Internet proved to be an efficient medium that allowed employers and job seekers to
connect one-on-one. Low Internet penetration, a small online shopping user base, slow Internet speed, low consumer acceptance of online shopping and inadequate logistics infrastructure, dial up connections
– all contributed to a stale growth of the industry in its first installment.
The entry of Low Cost Carriers (LCCs) in the Indian aviation sector in 2005 marked the beginning of the second wave of e-commerce in India. Travel emerged as the largest segment. People began relying on Internet to search for travel-related information and to book tickets. As a ripple effect, the success of the online travel segment made consumers comfortable with shopping through the medium, thus leading to the development of online retail.
Wings of travel
Even today, about 76 per cent of e-commerce market is occupied by travel segments. Low Cost Carriers (LCCs) entered the Indian aviation sector in 2005, thereby flagging off the beginning of the second wave
of e-commerce in India. The decision of LCCs to sell their tickets online and through third parties enabled the development of online travel agents (OTAs). Prior to the entry of LCCs, air travel was considered a luxury meant only for the rich and for corporate travel.
LCCs changed the scenario by making air travel affordable for a large number of people. They developed their own websites and partnered with OTAs to distribute their tickets online. The Indian Railway had already implemented the e-ticket booking initiative by the time LCCs commenced their online ticket booking schemes.
E-tail
The growth of online retail was partly driven by changing urban consumer lifestyle and the need for convenience of shopping at home. This segment developed in the second wave in 2007 with the launch of multiple online retail websites. Entrepreneurs, among whom many were first generation and looked to differentiate themselves by doing something new, drove new businesses.
Social networking
In this phase of e-tail boom, social networking started changing the Indian online space. It has gone on to become an integral part of people’s lives. Initially used for staying connected with friends,
social networking websites have now emerged as a tertiary root in any company’s digital strategy. Termed as social commerce, it is a key avenue for ecommerce players to reach out to target customers.
Companies have started establishing their presence in the social media space for branding activities, connecting with customers for feedback and advertising new product launches.
Modus operandi
While the initial blueprint sketched an inventory model for the e-commerce business, unable to gather much funding, the companies soon adopted marketplace model. In the inventory model, companies had to
maintain their own warehouse. Logistics with market place model rests with the merchants. In market place model, the e-commerce company works as a relationship builder between the seller and the buyer. The
e-commerce takes the responsibility of the product bought by the buyer and ensures its authenticity. The seller arranges for logistics to deliver the product. In western countries, Amazon and most other
e-retailers are into inventory. Shopclues.com, however has been sticking to market place model from the very beginning. “On merchant’s list you will find TRM badge (rating badge). So buyer get to know TRM. Merchants have already been certified. TRM merchant badge has been calculated based on how fast the merchant delivers, how efficient he is replaces a prouduct and all these factors. This is calculated every month. Out of 50,000 merchants, 300 have that badge in website. If they have done well, we prioritise them and
promote them. You also have a mail option, where you can directly ask the merchant about the product,” said Radhika Aggarwal , CEO of Shopclues, who is pretty sure the merchants won’t shift to inventory
model even if more money is pumped in through FDI.
Penetrating cities
India, being a diverse country, the need of the people is quite varied. If the kitchens in Chicago, New Jersey and New York store the same spices and keep the same cooking pans throughout, India differs.
The kitchens in Chennai will be different from Amritsar and so will it be in Kolkata. So, to cater to the local needs, sellers need to sell products that are relevant in tier-2 and 3 cities. “We have almost
50,000 merchants selling in tier-3 cities. We make sure they sell genuine products. Being nearer to the buyer, merchants can deliver faster,” added Radhika.
“You go to Nature Basket or Food Hall once in a month, but you will go to your society market or Safal every evening. This is what weconceived. You shall be ab le to find a Rs 200 t-shirt and also a Rs 45,000 TV. Both at the best price. We have 50,000 sellers working with us. We are focused on tier-2 and 3 cities. We are also focused on regional brands apart from national and international brands,” she added.
Why so cheap?
Compared to many retail stores, e-commerce sites sell goods at reasonable and cheaper rates without compromising on quality. Though deemed by many to be the result of absence of middle-men, this isn’t
true in the market place model. The overall pricing strategy works in a way where some products are
given at a higher discount in order to capture market share or consumer mindshare. Individual product pricing can be higher or lower while the overall picture is kept in mind, so that the company as a whole can sustain
itself on overall profits or deep enough pockets to work on losses for some time. Just to be competitive in market, price is kept lower for products available across all portals.
Price is optimised when the overall cost to the company per product is optimised.) Also, with the
companies having a pan India approach, it is easier for them to use less manpower needed to deliver the goods.
Funding and investment FDI in B2c e-commerce is a long waited proposition. While mergers and
acquisitions are happening in the Indian context with largest fashion portal Myntra.com being bought by Flipkart recently, it was found that Premji Invest and Russian Firm DST Global Solutions Ltd are among the primary investors. “Mergers and acquisitions are good signs. Some form of maturity is coming to the industry. It won’t mature in next 8-10 years, but with companies ready to be acquired, I’m happy as an entrepreneur. In the
Silicon Valley, I have seen 10 companies getting acquired in an hour ~ that is a robust ecosystem. We need something like that,” said
Aggarwal. On FDI, she opined that anything needed for the growth of the market was a welcome step. If FDI gets effective, experts feel, e-commerce can take a step ahead. Many e-commerce can retain the preplanned
inventory model and bring in more effectiveness.
Payment factor
Indians were quite doubtful about paying online. The number of debit cards is on the rise due to the increasing access of people to banking services. King Charles I of England made postal services available to citizens
in 1635 for the first time. There were no stamps, and the cost of postage was to be paid by the recipient. Cash-on-delivery or COD is its modern avatar of that service and has taken Indian e-commerce to a new height. Apart from security concerns, black money is a reason for COD’s success, where buyers don’t want to be tracked by the bank for spending.
COD at times becomes expensive for the seller if the buyer returns a product, as the company pays two- way courier charges. The return rates in online shopping in COD transactions averages around 40 per cent, said an Ernst and Young report. While in the US, there is a third party tracking agency that tracks customers who return products more often and passes data to other e-commerce sites, it’s not feasible in India as of now. But again, COD is the pivot around which success of e-commerce has been built.
Discounts and sales
Coupons and mega sales are the buzzwords in e-commerce that pulls maximum customers. While Myntra and Flipkart offer coupon codes to avail discounts, Shopclues has its Sunday Flea Market and Jaw Dropping
Deals. “Suppose a merchant comes and says he has 200 card holders left and he is ready to sell it for minimum price ~ that is how it works. These are like Budh Bazaar or Mangal Bazaar! You don’t go to these
bazaars to buy an iphone but to see ‘kya hai’! If you have something that attracts you, you buy it. Sundays, we have a turnover of almost Rs. 6 crores,” said Radhika.
Discreet transaction
Buyers were often found to be shy about buying lingerie or products of sexual wellness in brick and mortar stores. Thatspersonal.com, a dedicated site for these products recently came up with delivering
products without even the courier guy knowing what is inside. So, women buying lingerie didn’t shy away from clicking.
“When we launched our website, a lot of customers informed us that they wanted to buy our products. However, they did not want the product to be delivered to their address,” said Samir Saraiya, CEO of Thatspersonal. “There were many different reasons but some of the common issues revolving around sexually active youth living with their parents (but did not want their parents to know they were sexually active), or people living in joint families or working couples that were not at home during the day and didn’t want the products to reach their home without them being around. The company innovated and worked out a solution where the customer can select a pick up location based on their PIN code. Once the product arrives at the pick-up location, the customer or the customer’s representative can pick up the parcel without anyone knowing what they have purchased. “We are the only website offering this service and we get 15 per cent of our orders from this unique delivery option,” he
added.
Even puja prasads can be bought online. With a price range between R 200 and Rs1.5 lakh, ArtisanGilt.com sells icons of spirituality, puja items, Vaastu or Feng Shui products and Zodiac signs. “We provide small sellers with a very large platform to reach out to customers globally, which not only helps them in their earnings but also in their branding,” said Rahul Garg, CEO of Artisangilt. From puja thali to puja stand, they sell all Godly needs.
With funds being pumped in, social media’s presence and appeal to youth, e-commerce is still in its salad days and will take some time to attain adulthood. Many smartphones beings sold only on online portals and fashion accessories and apparels being bought without trials, ecommerce is the future of the marketplace.
Shopping from home is the trend that has modified a major chunk of India’s urban consumers and made them comfortable in e-tailing. Ecommerce in India began almost 10-12 years ago through IRCTC railway
reservation. Yes, that worked as an inspiration for many e-commerce founders. None expected the “argumentative” and “choosy” Indians to be comfortable in buying something without using their tactile
sensibilities.
Online shopping of goods in India is expected to grow to $8.5 billion in 2016, according to Accel, a survey body. It also said last year there was a significant jump in average order value as there was a penetration of new categories like jewellery and home décor. Users are becoming more comfortable buying higher priced items online. The number of online shoppers in India will be almost 40 million by 2016. Last year was the rise of fashion e-commerce as GMV (gross merchandise volume) doubled since 2012. The survey further stated, 35 per cent of online GMV in 2016 would be influenced by women. The key factor in this growth is increasing supply of women specific categories such as jewellery, lingerie and motherhood products.
Evolution
Like any other revolution in the market, e-commerce in India is not a success story that occurred overnight. The introduction of Internet in India in 1995 marked the beginning of the first wave of e-commerce in the country, according to an Ernst and Young report. To top that, economic liberalization, post 1991, attracted MNCs, who triggered the growth of the IT industry. The implementation of liberalization policies led to the demise of the licence regime, and high taxes and import restrictions, as well as facilitated the growth of SMEs. This
led to the emergence of B2B, job searches and matrimonial portals like Shaadi.com and Naukri.com. It was in 1996 that the first online matrimonial portal was launched in India. A new concept took India by
storm. People unaccustomed to such portals deemed it as something unique. Such portals have significantly catered to various segments ~ NRIs, widows or widowers, divorcees and other special groups. Another
significant success in initial e-commerce was in 1997, when job-searching portals were operative. The growth of the services sector, following the launch of economic reforms in 1991, resulted in the creation of additional jobs. In this background, Internet proved to be an efficient medium that allowed employers and job seekers to
connect one-on-one. Low Internet penetration, a small online shopping user base, slow Internet speed, low consumer acceptance of online shopping and inadequate logistics infrastructure, dial up connections
– all contributed to a stale growth of the industry in its first installment.
The entry of Low Cost Carriers (LCCs) in the Indian aviation sector in 2005 marked the beginning of the second wave of e-commerce in India. Travel emerged as the largest segment. People began relying on Internet to search for travel-related information and to book tickets. As a ripple effect, the success of the online travel segment made consumers comfortable with shopping through the medium, thus leading to the development of online retail.
Wings of travel
Even today, about 76 per cent of e-commerce market is occupied by travel segments. Low Cost Carriers (LCCs) entered the Indian aviation sector in 2005, thereby flagging off the beginning of the second wave
of e-commerce in India. The decision of LCCs to sell their tickets online and through third parties enabled the development of online travel agents (OTAs). Prior to the entry of LCCs, air travel was considered a luxury meant only for the rich and for corporate travel.
LCCs changed the scenario by making air travel affordable for a large number of people. They developed their own websites and partnered with OTAs to distribute their tickets online. The Indian Railway had already implemented the e-ticket booking initiative by the time LCCs commenced their online ticket booking schemes.
E-tail
The growth of online retail was partly driven by changing urban consumer lifestyle and the need for convenience of shopping at home. This segment developed in the second wave in 2007 with the launch of multiple online retail websites. Entrepreneurs, among whom many were first generation and looked to differentiate themselves by doing something new, drove new businesses.
Social networking
In this phase of e-tail boom, social networking started changing the Indian online space. It has gone on to become an integral part of people’s lives. Initially used for staying connected with friends,
social networking websites have now emerged as a tertiary root in any company’s digital strategy. Termed as social commerce, it is a key avenue for ecommerce players to reach out to target customers.
Companies have started establishing their presence in the social media space for branding activities, connecting with customers for feedback and advertising new product launches.
Modus operandi
While the initial blueprint sketched an inventory model for the e-commerce business, unable to gather much funding, the companies soon adopted marketplace model. In the inventory model, companies had to
maintain their own warehouse. Logistics with market place model rests with the merchants. In market place model, the e-commerce company works as a relationship builder between the seller and the buyer. The
e-commerce takes the responsibility of the product bought by the buyer and ensures its authenticity. The seller arranges for logistics to deliver the product. In western countries, Amazon and most other
e-retailers are into inventory. Shopclues.com, however has been sticking to market place model from the very beginning. “On merchant’s list you will find TRM badge (rating badge). So buyer get to know TRM. Merchants have already been certified. TRM merchant badge has been calculated based on how fast the merchant delivers, how efficient he is replaces a prouduct and all these factors. This is calculated every month. Out of 50,000 merchants, 300 have that badge in website. If they have done well, we prioritise them and
promote them. You also have a mail option, where you can directly ask the merchant about the product,” said Radhika Aggarwal , CEO of Shopclues, who is pretty sure the merchants won’t shift to inventory
model even if more money is pumped in through FDI.
Penetrating cities
India, being a diverse country, the need of the people is quite varied. If the kitchens in Chicago, New Jersey and New York store the same spices and keep the same cooking pans throughout, India differs.
The kitchens in Chennai will be different from Amritsar and so will it be in Kolkata. So, to cater to the local needs, sellers need to sell products that are relevant in tier-2 and 3 cities. “We have almost
50,000 merchants selling in tier-3 cities. We make sure they sell genuine products. Being nearer to the buyer, merchants can deliver faster,” added Radhika.
“You go to Nature Basket or Food Hall once in a month, but you will go to your society market or Safal every evening. This is what weconceived. You shall be ab le to find a Rs 200 t-shirt and also a Rs 45,000 TV. Both at the best price. We have 50,000 sellers working with us. We are focused on tier-2 and 3 cities. We are also focused on regional brands apart from national and international brands,” she added.
Why so cheap?
Compared to many retail stores, e-commerce sites sell goods at reasonable and cheaper rates without compromising on quality. Though deemed by many to be the result of absence of middle-men, this isn’t
true in the market place model. The overall pricing strategy works in a way where some products are
given at a higher discount in order to capture market share or consumer mindshare. Individual product pricing can be higher or lower while the overall picture is kept in mind, so that the company as a whole can sustain
itself on overall profits or deep enough pockets to work on losses for some time. Just to be competitive in market, price is kept lower for products available across all portals.
Price is optimised when the overall cost to the company per product is optimised.) Also, with the
companies having a pan India approach, it is easier for them to use less manpower needed to deliver the goods.
Funding and investment FDI in B2c e-commerce is a long waited proposition. While mergers and
acquisitions are happening in the Indian context with largest fashion portal Myntra.com being bought by Flipkart recently, it was found that Premji Invest and Russian Firm DST Global Solutions Ltd are among the primary investors. “Mergers and acquisitions are good signs. Some form of maturity is coming to the industry. It won’t mature in next 8-10 years, but with companies ready to be acquired, I’m happy as an entrepreneur. In the
Silicon Valley, I have seen 10 companies getting acquired in an hour ~ that is a robust ecosystem. We need something like that,” said
Aggarwal. On FDI, she opined that anything needed for the growth of the market was a welcome step. If FDI gets effective, experts feel, e-commerce can take a step ahead. Many e-commerce can retain the preplanned
inventory model and bring in more effectiveness.
Payment factor
Indians were quite doubtful about paying online. The number of debit cards is on the rise due to the increasing access of people to banking services. King Charles I of England made postal services available to citizens
in 1635 for the first time. There were no stamps, and the cost of postage was to be paid by the recipient. Cash-on-delivery or COD is its modern avatar of that service and has taken Indian e-commerce to a new height. Apart from security concerns, black money is a reason for COD’s success, where buyers don’t want to be tracked by the bank for spending.
COD at times becomes expensive for the seller if the buyer returns a product, as the company pays two- way courier charges. The return rates in online shopping in COD transactions averages around 40 per cent, said an Ernst and Young report. While in the US, there is a third party tracking agency that tracks customers who return products more often and passes data to other e-commerce sites, it’s not feasible in India as of now. But again, COD is the pivot around which success of e-commerce has been built.
Discounts and sales
Coupons and mega sales are the buzzwords in e-commerce that pulls maximum customers. While Myntra and Flipkart offer coupon codes to avail discounts, Shopclues has its Sunday Flea Market and Jaw Dropping
Deals. “Suppose a merchant comes and says he has 200 card holders left and he is ready to sell it for minimum price ~ that is how it works. These are like Budh Bazaar or Mangal Bazaar! You don’t go to these
bazaars to buy an iphone but to see ‘kya hai’! If you have something that attracts you, you buy it. Sundays, we have a turnover of almost Rs. 6 crores,” said Radhika.
Discreet transaction
Buyers were often found to be shy about buying lingerie or products of sexual wellness in brick and mortar stores. Thatspersonal.com, a dedicated site for these products recently came up with delivering
products without even the courier guy knowing what is inside. So, women buying lingerie didn’t shy away from clicking.
“When we launched our website, a lot of customers informed us that they wanted to buy our products. However, they did not want the product to be delivered to their address,” said Samir Saraiya, CEO of Thatspersonal. “There were many different reasons but some of the common issues revolving around sexually active youth living with their parents (but did not want their parents to know they were sexually active), or people living in joint families or working couples that were not at home during the day and didn’t want the products to reach their home without them being around. The company innovated and worked out a solution where the customer can select a pick up location based on their PIN code. Once the product arrives at the pick-up location, the customer or the customer’s representative can pick up the parcel without anyone knowing what they have purchased. “We are the only website offering this service and we get 15 per cent of our orders from this unique delivery option,” he
added.
Even puja prasads can be bought online. With a price range between R 200 and Rs1.5 lakh, ArtisanGilt.com sells icons of spirituality, puja items, Vaastu or Feng Shui products and Zodiac signs. “We provide small sellers with a very large platform to reach out to customers globally, which not only helps them in their earnings but also in their branding,” said Rahul Garg, CEO of Artisangilt. From puja thali to puja stand, they sell all Godly needs.
With funds being pumped in, social media’s presence and appeal to youth, e-commerce is still in its salad days and will take some time to attain adulthood. Many smartphones beings sold only on online portals and fashion accessories and apparels being bought without trials, ecommerce is the future of the marketplace.
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