The meteoric rise of smartphones and internet usage has changed the way connected Indians shop by creating a whole new world of deals, discounts and a deluge of brands. E-commerce in India, though still in a nascent stage, is fast growing to become not just a convenient and cost effective shopping option but also a wealth creating tool for entrepreneurs.
A favourable demographic dividend, rising disposable incomes and growth of the â€˜screenager generationâ€™ has resulted in a surge of popularity of B2C and B2B online transactions. While the initial impetus to the development of e-commerce in India has been provided by the travel portals, railways, and airlines; online services like banking, bill payment, hotel room booking, matrimonial sites, and job sites, among many others are now becoming popular. Whether it is deal Sites like Snapdeal.com, Online Retailers like Yepme, Jabong, Myntra or books retailers like Flipkart.com, practically every conceivable product/service segment has set up shop in the virtual world aiming to attract the â€˜value for moneyâ€™ customers.
Marketers, e-commerce players and agencies seem to have a positive outlook for the road ahead for this industry and the untapped potential that remains to be leveraged. According to Harneet Singh Rajpal, VP-Marketing, Dominoâ€™s Pizza India, there were some apprehensions in the consumersâ€™ minds at first, but in the last year and a half significant investments have been made by many e-commerce companies as a result of which people have started experimenting with online ordering. In terms of the core target audience of online stores, it is the internet savvy younger generation that most brands cater to. Each brandsâ€™ product portfolio is also therefore in sync with the preferences of this segment.
â€œMyntra sees an age group of 18 to 28, mostly comprising college students and first jobbers coming online and shopping,â€ says Ganesh Subramanian, Chief Merchandising Officer, Myntra.com. In terms of product categories, sports and casual lifestyle products – footwear, apparel and accessories are popular. Though when it comes to regions, demand for different types of products depends on the demography as well. Myntra is one of the well known e-commerce retailers and claims to having a registered user base of 30 lakh and five lakh customer traffic every day.
Of the total customer traffic that is seen on e-commerce sites, a significant proportion comes from the Tier II and III towns. With easy access, greater choice and improved payment options, more and more people from towns and cities are dipping their feet in the e-commerce pool.
Shailen Amin, CEO, beStylish.com is of the opinion that the adoption of e-commerce in these places is to do with the non-availability of products and brands in Tier-II and III cities along with the upsurge of mobiles and smartphones.
Myntra estimates that close to 55 per cent of its business is driven through these markets, with the rest of the business coming from the top 8 cities. Moreover, 60 per cent of the transactions are Cash on Delivery.
To be or not to be
While the number of people transacting online has seen a marked increase, e-commerce hasnâ€™t yet permeated through all consumer segments and groups. There still exists apprehension and discomfort which stops customers from embracing the medium fully.
A crucial factor is the relative lack of differentiation in the product portfolio of most e-commerce players. Fashion sites, for instances, offer the same brands with minute price variations as a result of which there seldom exists brand loyalty.
According to Amit Tiwari, Country Head, Media and Digital at Philips India, there is a lot of focus on deals but no brand imagery has been created. â€œThere is no connect between a customer and the brand imagery and the same products are available across sites. End of the day, it is not only the product that is driving sales but the deal, not just the strategy but the imagery. If brand imagery isnâ€™t created, there will never be audience attraction,â€ he appends.
Most consumers would therefore survey online and purchase offline which defeats the very purpose of an online store. The apprehension is also fuelled by the payment processes in place. Most shoppers are wary of using their credit cards and limit their online actions to only browsing and price/product comparison. Cash on Delivery has therefore, provided a respite to shoppers but at the same time, has also resulted in enhancing costs incurred by brands.
â€œThere is apprehension in terms of credit card usage as they think there is potential fraud associated with it which is why COD is still big. I personally believe it is a matter of time. We as a society are going through an evolution, we are slightly behind and we need to build that comfort level. The overall banking infrastructure and system in India is fairly mature but people need to get more comfortable with it,â€ opines Chandrakanth BN, Co-Founder & Managing Director, Theorem, a global technology company. With COD, servicing and reach also becomes a challenge.
Suneet Manchanda, Co-Founder & COO, Ladyblush.com, a shopping website exclusively for women, is of the opinion that what is critical for e-commerce players is to establish a wide reach, service more number of cities and pin code deliveries. â€œVolumes are waiting to happen but the courier companies donâ€™t see economies of scale from there. Awareness and willingness to pay is equal to a good opportunity for conversion. I am able to get the conversion but not the delivery sorted out,â€ says Manchanda.
For some others, Cash on Delivery helps to provide opportunities for greater interaction and engagement. According to Harish Bahl, Founder and Chairman, Smile Group, COD helps to provide a direct touch point and active communication with the customer besides creating a database of customers.
Timely deliveries, ensuring against damage during shipment, return rates of products, reversal of faulty transactions, and improving the poor bandwidth and supply constraints are some other factors that marketersâ€™ need to work on to drive greater traffic.
Another challenge, according to many companies, is to change the perception about online shopping and payment that Indians hold. Nikhil Rungta, Country Marketing Head at Google India feels that trust and awareness is low for e-commerce companies. Lack of adequate trust and brand recognition is the reason why transactions and buying is low on the internet. A major cause is because none of the e-commerce companies stand for any one particular thing,â€ he says.
Rungta goes ahead to cite the example of Indigo Airlines, which has been able to sustain its consumer base because of the brand promise of being on time, which it has stood by.
Samarjeet Singh, Director Founder, Iksula, believes that it is the industry that needs to remove the fear that customers have about trusting a brand online. â€œWe are fundamentally non-trusting as a country and that will take time to change. There is also tremendous opportunity in changing the widely held notion that we are a country with a bad delivery service. If e-commerce companies can deliver a clear value proposition and fast service, they can gather higher market shares,â€ he appends.
For Samarjeet Singh, convenience, price and hard-to-find products are the core propositions for any successful e-commerce venture. He goes ahead to add that return and profitability are higher in the later two propositions. â€œIt is today become increasingly important to create a strong proposition for consumers to transact and get to the pulse of the consumer. This will get you traction which will further get you the capital,â€ says Bahl.
To create a compelling connect and pull for the consumer therefore, differentiation and relevance remain the key. â€œToday, there are four crore shoppers online out of the 12 crore internet users in the country. Most e-commerce players focus on media categories. Stress should be laid on verticalisation and super verticalisation of e-commerce in India,â€ says Manchanda. For him, it was a natural choice to enter the womenâ€™s category considering there exists 25 to 30 per cent margins for this segment.
According to Neetu Bhatia, Co-founder, Chairman and CEO, KyaZoonga.com, cross selling and up selling work well and help to create engagement. â€œIf there is a compelling proposition, people who are online will find the brand. KyaZoonga, for instance, sold merchandise along with tickets for some major events to drive
interest,â€ she says.
Investments and cost of acquisition also play an important role in the success of an e-commerce venture.
â€œThe whole industry is becoming much more mature and understanding the meaning of profitability. Companies are moving towards sustainable and profitable growth rather than just growth,â€ says Manu Kumar Jain, Co-founder, Jabong.com.
What then is the golden rule for companies looking at cementing its place in the constantly evolving and growing e-commerce landscape? According to figures shared by Googleâ€™s Rungta, close to 70 per cent internet users in US are using e-commerce while in China it is 40 per cent. This signals there huge head room that exists in India and the opportunities that need to be leveraged.
Manish Vij, Founder, Smile Vun Group, talks about the right moves that need to be made. According to him, a customer should ideally be made profitable within one to one and a half years of his first buying. â€œCompanies who are focussing on building their brand and ensuring repeat customers through brand building initiatives coupled with a balanced approach of voucherisation and transactional tactical advertising will do well. The supply chain, categories and pricing needs to be right for a customer to have repeat purchase intent,â€ he adds.