E-Commerce in India: Past, Present and Future

Today, the thought of living without e-Commerce seems unfathomable to most of us, if not all. Be it online payment of bills, buying products from an e-tailer or sending gifts to loved ones, e-commerce has become a part of our lives in more ways than one.

Even though the first e-Commerce company in India (FabMall) was set up as early as 1998, the industry is still fledgling; but no one can refute the fact that it is an industry that is rapidly maturing. With FlipKart raising close to Rs. 1200 crore funding recently, experts say that this industry currently, is in revival phase for the third time.

Looking back at the e-Commerce story in India, the first wave of e-businesses swept across India in the late nineties. But this wave soon fizzed out by 2001, due to absence of a tangible revenue model. Sanjeev Bikhchandani’s Naukri.com, Vaitheeswaran’s IndiaPlaza and a handful of other companies alone were able survive this first phase of e-Commerce in India.

The second version of e-Commerce which took off five to six years later, saw a sharper focus on revenue generation. The companies had a tangible business proposition. Though companies were able to generate revenues and create repeat purchases, the biggest challenge was to deliver profitability.

The third phase of e-Commerce is what is happening currently, where investors are willing to trust the potential of this largely untapped sector in India. The year 2007 saw a flurry of start-ups stepping into the Indian e-Commerce market, with the confidence and wherewithal of making it big; FlipKart being the most notable of them all. Though the success stories of Amazon, 360buy, eBay and several other companies in the U.S were there to emulate, the Indian firms still needed to figure how to make their businesses profitable, entirely on their own.

Let us now take a look at success stories of four such firms that have marched their way to glory in the Indian e-Commerce space.

InfiBeam

Founded in 2007 by Vishal Mehta, InfiBeam has carved a space for itself in the Indian market as a leading online shopping portal.

Vishal Mehta Infibeam

The InfiBeam tale has its genesis in the entrepreneurial zeal of Vishal Mehta. After graduating from Cornell University and working with Dell Computers for nearly a year, Mehta admitted himself for graduate studies in the Sloan School of Management, MIT which further consolidated his management skills, thereby strengthening his aptitude.

By the time he graduated, the market health was not too good, and with the Internet Bubble bursting contemporaneously, e-commerce prospects looked bleak. So, Mehta joined Amazon in 2002 and worked there for nearly five years before starting up on his own.

The beginning of InfiBeam was not an easy affair. Choosing to self-fund the early phase, Vishal Mehta had to sell off his car, his home and some of his long-term investments, to be able to pump-in the initial capital into InfiBeam.

InfiBeam’s first foray into the Indian online market scene was as an exclusive automobile portal. Today, in its online retail offering, InfiBeam has a plethora of products ranging from Books, Mobile phones, Computers and Accessories, Cameras, Watches, Health Equipment, Apparel to Cakes, Chocolates, Flowers, Combo Gifts and much more.

In 2008, InfiBeam acquired Picsquare, a leading online photo service in India with an associated customizable product selection, which was a high demand during birthdays, festival seasons and other community events.

InfiBeam’s business model has been primarily two-fold. Its initial mode of operation was the consumer business it started with, online. The next mode it incorporated (since 2010) was the technology infrastructure business.

InDigi, InfiBeam Logistics and Buildabazaar are a few ventures in the technology infrastructure business direction undertaken by InfiBeam.

In February 2010, InfiBeam became the first Indian company to launch an eBook reader, called the “InfiBeam Pi” which was received quite well all over.

We see that this brainchild of an Indian entrepreneur has come a long way within a short span of six years. And it is raring to march ahead and reach the next level of success, even more determinedly in the years to come.

Zomato

Zomato, founded in 2008 by Deepinder Goyal, is an Indian website that provides information related to restaurants, pubs etc. Currently, Zomato covers 14 cities in India and 17 cities in other countries, with 115,700 restaurants listed.

Zomato’s excellent user interface provides in-depth information such as scanned menus, mapped coordinates, contact details, pictures and ratings for all the restaurants that it covers.

Deepinder Goyal - Zomato

It was when Mr. Goyal, an IIT Delhi alumni, was working at Bain and Company in New Delhi that he struck upon the idea of an online restaurant information service. He noticed people queuing up at the pantry to order food, when he realized how easier it would have been had they been able to access these menus online. Thus, he left Bain and started Zomato (then Foodiebay) out of his apartment.

Initially, Zomato struggled to convince investors as they encountered the chicken and egg problem – customers find value only if they had the most exhaustive in-depth information about restaurants and restaurants find value only if there are enough customers. Hence, they constructed a solid content platform that was appealing to the customers. Info Edge has invested $ 6.5 million in Zomato since 2010.

zomato

Currently, Zomato is trying to implement intelligent Optical Character Recognition systems to supplement their existing dish ontology. Zomato also employs certain spam control techniques in order to maintain neutrality of the content on the website and to ensure that the content is useful to the users.

The revenue model of Zomato is based mainly on the sale of advertisement space to restaurants on the basis of a lot of people visiting Zomato.com and describing their preferences regarding geography, dining options etc. Advertisements on Zomato are hyper-local in nature i.e.; it lets you target customers on the basis of location, time of day, weather experienced etc. Zomato has served more than 105 million foodies since 2008 and the website has millions of users every month.

The immediate aim of Zomato is to expand into other cities in India and to increase its international footprint. Going by the interest and dependency shown by its users, Zomato is here to stay.

OlaCabs

Bhavish Agarwal had graduated from IIT Bombay in Computer Science and had worked with Microsoft Research India for a couple of years. Having always had the desire to do something on his own, he was on the lookout for a new venture. He had often thought how it was possible, with a little thought, to improve customer experiences in the cab services. Gradually, he realized that his academic background and work experience would enable him to address these issues with the help of technology. In December 2010, Bhavish Agarwal, along with Ankit Bhati, a fellow alumnus from IIT Bombay, came up with the idea for Ola Cabs.

OlaCabs

The vision behind Ola Cabs is to provide hassle-free, reliable and technology-efficient car rental service to Indians. Ola Cabs does not provide cab service itself. Instead, it is an online aggregator of car rental services. The Ola Cabs team conducts thorough background checks on the cab operators and the drivers before operating with them.

“There is a lot of supply and a lot of demand for taxis in every city, but there is no platform that connects the two. We believe that technology can bridge this gap and add a lot of value to this space,” says Bhavish Aggarwal.

Ola Cabs has a network of 1,500 operators and 4,500 cabs across the four cities of Mumbai, Bangalore, New Delhi and Pune now, with cars ranging from TATA Indica to BMWs and limousines

The OlaCabs app allows users to book cabs with a single touch on their smartphones. Ola Cabs also uses ‘heat maps’ to efficiently manage the demand and supply of cabs in various parts of a city at different points in time. The traffic alerts are made using information from various sources including social media. These help in guiding the drivers to reach their respective destinations in the shortest possible time. These measures help in inventory management of Ola Cabs.

The response so far has been great for Ola cabs. There are customers who use Ola Cabs multiple times for point-to-point services, in a day.

This is perhaps, just the beginning of integration of technology to bring ease in the process of availing taxi services in the country. The road ahead might not be easy, but with the aid of innovation, Ola Cabs might be able to give its customers the experience of smooth rides.

Myntra

Myntra, headquartered in Bangalore, was started in the year 2007 by Mukesh Bansal along with two of his friends at IIT Kanpur. Myntra mainly deals in all fashion and lifestyle needs ranging from apparel, accessories, cosmetics and footwear from over 500 leading Indian and international brands. With a turnover of almost $100 million, Myntra intends to become the largest player in India E-commerce retail industry.

In initial days of its operation, Myntra operated in the segment of personalized apparels and accessories like T-shirts, mugs, and personalized cricket jerseys. The business was an almost zero-inventory model with a focus on supply chain automation and fulfillment.

In 2010, Myntra pivoted into the B2C model and expanded its catalogue of products from personalized items into fashion, lifestyle and tech gadgets among others.

Myntra

This transition from Business model from B2B to B2C not only brought about a significant change in terms of increase in sales, but also in its administrative body. Two of its cofounders left the company and moved on to jobs in different companies.

Myntra was announced as a winner of the Red Herring Global 100 award in 2010 for its recognition under the leading private startups from North America, Europe, and Asia for their innovations and technologies across their respective industries.

The year 2011 saw phenomenal developments in Myntra as its brand building campaign named ‘A fashionable new age’ was launched in TVC which featured Myntra ‘juxtaposes new-age fashion with old-world grit’ which promoted its offering in sports casuals.

In 2012, its Out of Home campaign in chief metropolitan cities was done in order to build brand awareness and promote online shopping.

Services like free shipping, cash on delivery and 30 day return offer with 24 hours dispatch were the highlights of its campaign named ‘Real Life mein aisa hota hai kya’ in July 2012

Myntra is India’s largest online seller of branded apparel. With the approximate annual revenue of $100 million, it is second only to Flipkart.

Surely, the online e-commerce startup has a lot more to discover and fulfill its dream of becoming the largest online retailer.

The E-Commerce Ecosystem

The nexus between service providers, logistic teams and payment option providers ensure that the goods produced by manufacturers reach the customers at the right time, right place and in perfect condition. Any glitch in the performance leaves the customer dissatisfied which may ultimately lead to losing the customer to a competitor. Managing this ecosystem is the primary task that an entrepreneur has to undertake in order to run a successful venture.

There are various industries which come together to provide the necessary back-end infrastructure to an e-commerce company. E-commerce industry has a wide eco-system in place, which takes both time and effort from each stakeholder to come together and provide superior customer experience resulting in customer loyalty, which is rare in this industry. Let us define some of the key industries that form the building blocks of an e-commerce site.

1. Basic infrastructure providers: Industries ranging from web and internet, mobile operators, hardware and software service providers, real estate, government and other basic utility providers.

2. Product sourcing and distribution network: Even though an e-commerce company delivers a product, it is basically a service provider. Manufacturing industry, suppliers and vendors, warehouses and inventory, and transportation logistics and shipping form the most crucial component of e-commerce industry.

3. Revenue collection and management: Managing the financials of an organization is one of the most challenging tasks, every shareholder wants the largest piece of the pie and you have to struggle to manage the funds as well as build your bottom-line. Investors are bullish about the e-commerce industry but they are also wary of it because of its inability to generate profits in the short-run. Choosing the right mix of mode of transfer and payment gateways can increase profitability and satiate the investors to a great extent.

4. Advertising partners:  According to 2012 e-Commerce Report from Channel Advisor – IMRG, the average conversion rates for visits to sale is 4 percent. This showcases an immense need to bring more traffic on e-commerce which would lead to higher number of conversions. Search engines, online media, print media, social media, events management companies are the collaborators for the public relation activities of these companies.

5. Associations and external support: In a fast-paced environment where the business models are changed pretty frequently with changing technology the consulting firms, industry experts and networking forums like TiE, Nasscom etc. are essential for survival of an e-commerce firm.

An entrepreneur is not born with an idea, he develops one. But what is more important than generating an idea is its execution, managing every stakeholder and setting each piece right in the jigsaw puzzle to make a beautiful picture. This is what also goes in managing of an e-commerce firm.

What lies in the future?

With the increasing middle class and time-strained young professionals, the e-commerce industry is expected to experience a major boom in the next decade, perhaps reaching USD 260 billion by 2025, according to a report by First Data Corporation and ICICI Merchant Services. Over 75 million netizens are expected to shop online by 2017, up from the present 10 million Indians in 2012. For this industry to grow as expected in the future, it is required that it understands the dynamics of Indian marketplace and the psyche of consumers.

1. Consolidation will happen: Unpractical business model, sales promotion through offers and heavy discounts has led many e-commerce firms to fail in the past. The investments in the industry are drying up and the rate of acquisitions is expected to increase in the coming years. Some of the recent acquisitions being SherSingh and Exclusively acquired by Myntra, LetsBuy acquired by Flipkart and Esportsbuy.com acquired by Snapdeal.

2. Customer experience will be the growth driver: Customer experience encompasses every interaction a customer has with the service from placing an order to interacting with the customer service team, to the actual delivery experience. Better service ensures that the customer would buy again from your site rather than your competitors.

3. Looking beyond the metro cities: With increasing employment opportunities and higher disposable income with the youth, tier 2 and tier 3 cities are seen as the growth market for the e-commerce industry. Building a robust supply chain can ensure penetration into this market.

4. Overcoming the gigantic drawbacks: The e-commerce industry is marred with persisting issues such as high customer acquisition cost, high inventory carrying cost, lack of adequate laws and policies towards e-commerce, expensive cash-on-delivery model and high cost of fulfilment. A way has to be found to move out of this death-trap if the e-commerce companies have to flourish in future.

The path ahead may be tough and would require diligent efforts on the part of entrepreneurs and investors equally, but it definitely exists. Indian firms are required to have a mixed approach by embracing globally tested strategies along with a localized flavor in their enterprise, to stand the test of time.

^This article written by Amrita Agrawal and I, was published in INCUBATOR, the annual entrepreneurship magazine of IIM Shillong. Link to the magazine: http://issuu.com/icube.iims/docs/incubator_-_issue_1_-_september__13

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s