E-commerce clicks with Indian consumers- The SoftCopy

E-commerce clicks with Indian consumers

With plenty of e-commerce sites offering online retail, a person can now sit in the comfort of their home or office and shop till they drop!

By Aishwarya Dravid, Aneisha Laming, Anupma Kumari, Anushree S. Pardeshi and Apoorva Sripathi

BANGALORE (Dec. 2)—Susanna Lazarus gears up for another day of shopping. She buys George Orwell’s “1984” from Flipkart, grabs a Fossil leather wallet in canary yellow from Snapdeal and then rounds it off with a sleek Morphy Richards coffee maker from Indiaplaza, all of which takes her about an hour. How, you ask? With a simple click of a button, of course.

Welcome to a world where shopping is made easier with the help of something called e-commerce. E-commerce, or electronic commerce, is a way by which one buys and sells products and/or services over the Internet. Susanna and perhaps a million others should thank Michael Aldrich, who invented online shopping in 1979. He first introduced teleshopping (yes, those annoying infomercials on television that are aired when channels have nothing better to show) in 1977, which later expanded to shopping via computer.

Flipkart a pioneer

E-commerce is becoming a phenomenon in India. With salaries and work hours increasing by the day, people are now finding it convenient to switch on their computers and log on to any of the e-commerce websites and order things to their heart’s content. But not all e-commerce ventures started out as a company catering to all goods and services.
Consider this: Flipkart, when launched in 2007 aimed to sell books, like Amazon. Now it sells everything from phones to cameras, and, of course, books. The founders—Binny and Sachin Bansal (they are not related) were, incidentally, employees of Amazon.

“Books were an obvious entry choice as they cost considerably less compared with electronic items. As a result, it was easier for a first time customer to trust us with their money and make that initial purchase from an unknown site,” says Sachin Bansal, cofounder and CEO of Flipkart.

In the 2010-11 business year Flipkart generated revenue of Rs. 750 million. The firm has 3,000 employees.
“As is common to most start-ups, Flipkart too had its share of hiccups,” Bansal says. “Setting up bank accounts, getting an online payment option, convincing publishers to share their inventory with us—all of this was a challenge for an unknown company.”

All these companies had proper backing. Venture capitalists have become full-fledged investors in them. According to Forbes magazine, investors such as Tiger Capital, Accel India and Helion Venture Partners have pumped in $82 million, $31 million and $35 million, respectively, into various companies, including Flipkart, Myntra and Letsbuy.

Trust key in growing business

With one buying a lot of products online, the question of safety naturally arises. From payments to shipments, a person is not really sure of what to expect because what he/she bought from the website could greatly differ. These companies have changed this outlook. They have enhanced technologies to prevent fraud and duplication such as voiceover-IP, which help bridge the gap between buyers and sellers.

More importantly, these companies have a “brand” associated with them that makes customers their ambassadors. Their publicity depends on word of mouth at first, and then on marketing.

“It was difficult to generate supplier confidence, and the inability to keep a large inventory was an issue,” Bansal says. “We continued to focus on delivering a positive customer experience at all stages, and this translated into strong word-of-mouth promotion for us. This is the base on which we have continued to build our operations.”

Many people now prefer online transactions to manual ones. Manikantan, a journalist says: “I like Flipkart for their collection of books and I find books that are not available in the nearest bookstore. Paying online is much simpler than standing in line for a long time.”

Net banking has never seen such good times.

To be successful, one has to have a vision of an excellent supply chain model. “You have to get the delivery safe and secure and at the right time. You need to have a nose for businesses such as these,” says Rajen Prabhu, former head of e-commerce at Citibank and a former general manager of PayPal India.

He adds that mobile phones also helped in speeding up their businesses. Bansal agrees when he says that with mobiles, especially smartphones, becoming more accessible to the average consumer, Internet access through mobile platforms is also on the rise.

Mobile phones the way forward

So what’s next? In March this year, the number of mobile phone users in India touched 500 million (not so hard to believe since autorickshaw drivers also have phones!), so wait a few years and m-commerce is going to make its way to India.

People now are using their mobile phones to book movie tickets, train tickets and banking. According to the Boston Consulting Group, though there are 500 million mobile subscribers in the country, only 240 million people have bank accounts. 42 percent of the population possesses at least one mobile handset, and 90 percent of these devices can handle basic financial transactions.

Arguments such as “mobile shopping and banking is only for well-off people,” or “online transactions aren’t trustworthy” are slowly dwindling. In fact, a lot of people prefer online transactions, especially while traveling. Sites such as Yatra, MakeMyTrip and the government’s own IRCTC (Indian Railway Catering and Tourism Corporation) cater to a wide variety of people. “I travel a lot for my work, and it makes sense for me to book my tickets online, and it’s not at all pricey,” says Ravi Mundoli, an entrepreneur in the construction, infrastructure, and project management fields.

A lot of hue and cry has been raised about the fact that e-commerce isn’t as popular in India as it is in the United States or Britain. But how does that explain the fact that more and more players are entering the market?

E-commerce companies are today making investments in technology and innovation that will later strengthen and nurture their business in the long run. They are not looking at short-term business solutions, but are interested in scaling up their operations over a period of time.

“The total revenue generated by e-commerce industry in India this year will be around $5.7 billion, out of which travel will be more than $5 billion. However going forward, by 2015, most of the growth is expected to come in through online shopping. In 2015, I expect the total e-commerce revenue to be $22.8 billion, and 45 percent of this will be online shopping,” says K. Vaitheeswaran, CEO of Indiaplaza.

The only hindrance to this may be availability of capital to actually start the business. Banks have also adapted to this format and have become adept at mobile banking, thus helping e-commerce move forward.

It’s not just the cities that are logging in to shop—even smaller towns are doing the same. This means online retailers have a lot to cheer about. Here’s to e-commerce that changes the way we shop!