Indian E-Commerce - Poised For A Dash Or A Crash?

Published by MBA Skool Team, Published on May 31, 2012

India is one of the most sought after markets and yet has remained beyond the reach and understanding of the global giants, forcing them to come up with strategies which has not been put into practise in other regions of the world. With rural India having a mind of its own, India has been a challenge, positioning its diversity as a sword over every conceived marketing maverick that the world has to offer.

The internet has often been outlined as the clincher weapon for the companies, and the same has been reiterated over the world with companies like Amazon, E-Bay, the ubiquitous Google and the newest of IPO darlings Facebook cashing in on the power of internet and its sibling – ecommerce to take a pie of the moolah, a question that has no easy answers remains the power of this weapon in India – so is India the next big market that will be captured by the power of the internet?

Valued at Rs 50,000 crores in 2011, India e-commerce is estimated to be worth over Rs 1 lakh crore by 2015 by First Data. The clincher is not these numbers but the growth rate of the industry – 40 to 45% according to the report, as compared to the global average of a mere 8 to 10%. The numbers associated with Flipkart – India’s largest online retailer is staggering for any analyst: 2.6 million users, with daily revenues of Rs 2.5 crores. Ending 2011-12 with a top line hovering around Rs 500 crores, it is predicted to grow by four times in the current year.

The importance of the Indian market is not lost for the global leaders – Amazon and Wal-Mart. The government’s dilly dallying of retail FDI has been a spanner in the works for these two giants. Valuation of India can be estimated from the almost lame attempt by Amazon to have a presence ready for the Indian market when the government allows for FDI in multi brand retail – Junglee, a price comparison and e- market place site mimicking the very format which was used by Amazon when it was a start-up way back in 1995.

Online shopping has never been in the scheme of things for Wal-Mart till things started reversing in its home ground of US, thanks to an ever continuing recession and troubled Euro region. How is online shopping going to fit into the scheme of things for the Retail Giant – analyse its buyout of an Indian IT firm and setting up of @Walmartlabs in India outlining the strategy for the company as conceiving and implementing ventures to help in shopping over the internet and mobiles.

With projections of the industry valuating sales to be around $24 billion, it’s the exponential growth in the number of users which have led to a proliferation of websites wanting to take in a share of the pie. Currently with around 8-10 million online shoppers in India, 2015 will see the numbers to be around 40 million – a pittance when compared to the 145 million in China and 170 million of US, but add to the cauldron the following factors : largest democracy, growing economic clout, technological super-power, pitiable government influence over public, China’s government fist and US’ shrinking economy and Japan’s never ending tryst with disasters and the writing is clear – ignore India to your peril. This has been one lesson learned the hard way by E-Bay and though they have been trying their best to climb back, the firm is yet to gain any sizeable foothold in the Indian e-markets.

However, no coin is minted with just one side. There is another side to the whole story and with an equally interesting bunch of numbers – the writing on the wall is rendered to nothing but a mirage. Flipkart – the pinup boy of Indian e-commerce filed a loss of Rs 91.27 lakhs in 2009-10. Current estimates put the monthly loss for the online mega-store at almost Rs 6 crores – a figure that has not been refuted by the company but has been undermined as customer acquisition cost. With every customer being acquired at almost a cost of Rs 800-1500, an average transaction of Rs 300 for a book is never bound to cover up the costs. Hence for any e-commerce site, the onus is repeat transactions from its customers. However, it is here where the Indian sites falter.

There has been a complete lack of imagination from the Indian sites. The discounts and cost cutting and free shopping and the most widely favoured cash-on-delivery has been concepts tried and tested across the globe in more matured markets. Sites like Chumbak has been a novelty, using a differentiating concept for promoting its products through social media and using situational discounts to drive home the concepts of using its highly differentiated products.

Myntra and Yepme who deal with fashion clothing, has almost discounted the discounts concepts. This has helped them to achieve the break even levels faster. There has been another bunch like Indiaplaza who have no inventory and Uread which deals with books and have a shorter supply chain and hence better pricing.

The major players in the Indian market have so far followed the global e-commerce model to the T. Flipkart’s heavily popular delivery model is based on its warehouses strategically distributed across India and its slow and steady acquisition of local couriers, helping it to iron out its supply. But there is overlooked fact – India has 154668 post offices – the world’s largest postal network. With the Indian Postal Service being upgraded and facilities like online tracking for SpeedPost and address-less deliveries being made available, it’s a surprise that the Indian companies have not thought about going for a partnership with such a readily available delivery system, and instead building their own systems like Amazon did years ago. Also the costs are certainly on the higher side when using the alternate delivery modes.

Another major reckoner has been the neglected aspect of who exactly has been the shopper in these e-commerce sites? There has been almost no effort in the analytics of the patterns shown by the users in the websites. No customized offers or the clincher deals which can often steal the thunder from the serious long run players like Flipkart in terms of certain products like bags etc.

Research has shown that Indian mothers spend three times more time online than on television and almost 48% of the digital mothers share their online shopping experiences. Couple this with the fact that one in three users of internet in India is a woman, and with 60% of Indian netizens visiting at least one retail site every month,  these numbers call for an extremely customized study which will help the players to bring back customers to do repeat transactions.

India lives in its villages – an adage which still hasn’t changed six and half decades after the independence. But the power and aspirations of this huge market has been neglected even by the e-commerce players. Largely due to the paucity of intelligent thinking and inspirational ideas in a land of over a billion, these companies continue to focus on the same strata of time constrained, city bred, spoilt for choices urban population, ignoring the huge numbers who may not have the requisite exposure to procure the goods but with a bit of educational marketing and trust creation can trigger the volumes which has often been promised but never delivered by the Indian markets. Certainly this will need a different marketing strategy, and a really different channel of reach and distribution, reaching beyond computers and smart phones to simple phones, physical shops to connect the rural shopper and other eureka concepts.

The Indian e-commerce is ready for the dash but the sustenance of it will be forever a question, unless Indian e-marketers look beyond history and text books to create models and avenues of growth that encompasses the highly diverse and yet highly profitable Indian population. Guess, the answer to such challenges and questions lies in computerizing the best of Indian strategies- ‘E-Jugaad’ anyone?

This article has been authored by Unnikrishnan Nair from TAPMI.

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