R Jagannathan: How is e-tailing different from retailing?
Biren Ghose: The concept of e-tailing is to effectively e-enable a phenomenon that is part and parcel of our everyday lives. E-tailing offers a delivery channel of convenience that takes away the pain of shopping. It is taking advantage of the technology boom. It is the marketing window of technology.

Kumud Goel: Thanks to the Internet, today you have access to infinite amount of knowledge on what to look for and how to make a selection. I think what e-tailing is doing today is to convert this knowledge power which is now freely available at home. Sitting at home I can cut through the clutter. Therefore, e-tailing empowers the prospective buyer to take a decision. Thanks to this knowledge shift, we can talk about a perfect market place which is a major benefit of e-tailing.

RJ: Can traditional retailing and e-tailing co-exist?
K Vaitheeswaran: I think both retailing and e-tailing will continue to co-exist for quite sometime to come. We don't see e-tailing as a complete alternative to physical shopping. Clearly, both will co-exist. What will happen is this: people buying on the Net will start increasing slowly. Quickly after some time, there would be an exponential jump with people realising that this medium definitely offers significant convenience. For need-based products, the Net is becoming a very convenient way of buying. We strongly believe e-tailing will expand the market in the case of impulse-based products such as books and music. The Net offers you an opportunity to buy irrespective of where you are. This will clearly expand the market. After a period of time, we believe both retailing and e-tailing will reach their plateau and continue to co-exist with each other.

Viraj Savant: Retailing is coming of age in India. We have not seen large retailers in India until now. E-tailing offers tremendous advantages and transfers these advantages to the consumer.

RJ: What is the size of the e-tail market? How large will it be in the coming years?
BG: If financial services and travel services were to be included, the e-tail market would be a huge one. Various forecasts by research agencies estimate that the e-tail market is $180 million large in South and South East Asia. As far as India is concerned, the e-tail market should be anywhere near $10 million.

KG: Research reports are known to have gone wrong. The greatest growth in e-tailing will come from class B and class C Indian towns. My gut feeling is that 10 per cent of the Indian population would buy at least once on the Net by 2001. The internet is going to spread like wildfire in our rural and semi-urban areas. One estimate is that there would be as much as four million Internet connections by 2001.

KV: The e-tail market should be anywhere close to Rs 75 to Rs 100 crore. However, the rate of growth will be substantially higher. This is because when PC-penetration increases, the rate of growth will accelerate. During the next five years, the e-tail market will increase ten times every year.

RJ: How important is logistics in e-tailing?
BG: We are very young in this business. We started with a target our delivery should take place in 72 hours irrespective of where the order comes from. Of course, the net has to work in partnership with hundreds of people including couriers, banks and credit card companies. All kinds of partnerships will emerge on the Net. It is important to create your own logistics.

I think those who are rushing into the Net business just with Rs 5,000 or Rs 10,000 are very enterprising. But, they are ignoring one very simple fact that to be an e-tailer it is not just enough that your customer is able to approach you on the Net. What is important is when your orders come into your administrative module. And then your supply chain has to be e-enabled for the whole system to work smoothly.

We are currently offering 54 well-known brands across as many as 18 categories of products. The truth is that most of those with whom we have allied for these brands are not online. So I don't have any method of tracking online inventories of each brand. These are the issues that will be technologically solved provided that the entire value chain is completely de-linked. This is is not the case today. We have already set up a logistics setup in the home shopping segment via television. We are in a position to leverage our existing knowledge and physical bases to do that.

Finally, the most important issue which everyone shopping on the net has thrown up is what happens to the customer when he has a problem with the merchandise. Of course, you can send an e-mail and then get an answer. But, we found that with our 102 physical locations, we have a huge advantage. My customer can go with my invoice and what he bought from me to 102 places and get the refund. So, the key issue here is to satisfy a customer who has a problem.

KG: E-business has to take into account sales tax, octroi, and other local charges. There is no way you can work around them. Some innovative e-tailers have worked ways around them.

I think rationalisation of sales tax is must and octroi is a going to be a big problem. Even the best and the biggest companies have no idea.

The practical problems are many. Logistics is a very big problem. We have tied up with Gati and other local firms. A lot of hard lessons are being learnt. Logistics is one big mess which has to be sorted out. The Fedex and Blue Dart in India are very different from their counterparts in the USA. You know they have excellent systems in USA where they can actually promise a 24-hour delivery. So, logistics is something we will have learn. Believe me, logistics is the scariest part of this business.

RJ: Where do e-tailing margins come from?
KV: If you look at the balance sheet of Amazon.com, you will see that they are definitely making gross margins on the items they sell. I think the reasons for not making money is that gross margins several times over are being reinvested for customer acquisition. The same concept applies here too.

In fact all of us must be making gross margins on the items we sell. We are also trying couriers, though the cost is higher. Retail margins are around 25 to 30 per cent. Most of this would go to cover the initial set up cost. People come to the Net expecting goods to be cheaper, which will put further pressure on e-tailers. Largely, over a period of time we have to pass on the efficiencies of this new media to the consumer.

VJ: I think the minimum period that will take for an e-tailer to make money is three years. There are people who think the easiest thing about e-tailing is to put some four items and exit in six months by selling off. However, this will not work because of the pressure on margins.

RJ: What e-tailing models will be successful?
VS: There are going to be different categories of players who will define their modules through innovative marketing, innovative price reduction and by getting the customer online at a cheaper cost. There could be various ways of making a customer migrate from a real life store to an online store. For any B2C successful module, one will have to invest in a large B2B module. 80 to 90 per cent of the capital will have to be invested in setting up of the supply chain. Many of our clients have been told that they need to invest large amounts in the back-end system and they need to set up a centralised inventory management system which will keep track of all the goods at one centralised point of delivery. For making money, there are going to be large opportunities for everybody. There should be a consolidated effort, not just in one segment. We have to go through a certain stage where one will be able to make profits earlier and may require to invest that in other segments to acquire customers. Over thenext three to four years, we are definitely going to have larger segments. There will have to be a convergence of all these modules.

BG: The concepts of a portal and an e-tailer are actually very complicated and are different. Most of us are not portals in that sense, we are basically e-tailers. We don't intend to be portals in the conventional sense of the word. We have taken a stance in our module that we would go by an umbrella strategy wherein we are trying to build a concept of an e-mall. There, I am effectively a manager of space. So, that is the concept. We are saying that the mall in the international context is a re-builder of space in which branded merchants come and create their own store fronts and create their own marketing postures and positions. So that is one level of it. If it is a module going forward, in a market which is yet to segment itself into varying niches, we really do not know which product category is going to outdo the other.

RJ: Which business model will you put in your money now?
BG: It could be a combination. At one level, it could be B2B or B2C. If I was a venture capitalist, I would put my money on that. But, where I would not put my money is on a model where the person running the business has no clear concept and where the clarity of what he is doing is not clear. It is a question of how much muscle you can create through marketing. We are looking at customer acquisition. So, someone told me a magic figure when I started in November that another very large horizontal portal had managed to acquire some 30 to 35 thousand people who had transacted on their site last year. Being a sunrise industry, we don't have traditional goals you really look at. So, we invent our own best on the basis of our intelligence, on a little bit of optimism and on lot of enthusiasm. But, marketing is really the front-end of the game.

It is not that easy to put up a shop. We started our first shop in November 1999. During January this year, we went out to interview a number of outlets. We are investing substantially in upscaling these. There are certain elements in our business whose nature is such that the capex model calls for creating a new front which needs to have new features. You can spend endless sums of money on personalisation today. There are other investments, besides marketing. Technology is certainly one of them. Then there is the whole process of brand building.

RJ: Is there something called customer loyalty on the net? How to acquire and retain an e-customer?
KG: All of us are trying to acquire this fictitious customer. This customer is very smart, he knows where he will get his goods cheaper. I don't think customer is someone you can acquire today. Our customers range from kids 10 years of age to those 70 years old. I think the customer is extremely witty. I don't think in e-business it is possible to get a customer for life because in another 10 months there will be another few e-tailing sites. We are trying to outdo each other on prices and giving free gifts. Despite our experience, I cannot say how to nail this customer to our site. This customer is very smart, he is going to visit 25 other sites all through the day. I am very foxed at this customer who is the biggest mystery of life. I think low prices tempt customers. One of the ways the customer can be acquired is to look at the customer's purchasing power. Virtually, everyone spends about 10 to 15 per cent on excise and there is a 15 per cent logistic cost. So, ultimately 25 to 30 per cent is thecost getting across to the customer. If the Internet becomes a powerful media, there can be a substantial reduction in the cost. This could be passed on to the consumer.

Companies such as Sony have spent considerable fortune in building up their distribution networks. And they find that someone buys on the Net at 30 per cent cheaper, it upsets the whole value chain they have created. That is one big constraint. In India, disintermediation is going to be very difficult. The real game is this. Whether one can get something at a substantially lower price. In e-tailing companies, credibility and pricing will be major issues.

KV: Let us not talk about acquiring the customer for life. But, it is possible to keep the customer with a particular retailer for a reasonably long period of time, may be one to three years. Brand loyalty on the internet is very convenient because competition is just a click away. So, it is possible to build strong brands on the Net. The consumer will not shift unless he has very strong reasons. If his experience is not very pleasant, he will not come back to you. The Net can be a pain to use. Only retailers who offer overwhelming value can successfully retail on the Net. The trick is here. If the internet store is constantly innovating and offering new values to the consumer, there is no reason for him to shift. What we are very clear about is the need to invest continuously in acquiring customers.

The fundamental difference of e-tailing is this. It is not just a new medium of offering products. In e-tailing we are trying to change the buyer area which is not very easy to do. You can run a promotion today and you will get customers. You stop the promotion tomorrow and obviously the customer forgets. Some of them might be waiting for the next promotion. Because, the consumer today is not used to the net. In fact, all of us are being brought up buying in the brick and mortar.

We are speaking specifically here about the online media which is more or less the cheapest media available. We have found that that every 60th customer who logs in becomes our customer. This figure may change drastically over the next couple of years as we get comfortable with the usage of the net. Repeat visitors are going to come in. There may be different categories of customers coming along. Shopping will not be restricted only on the price count, there will be a lot of other things. It will be a reinvention of market strategy that will come along.

RJ: Where would e-tailing be in a couple of years? How soon will the concept catch on?
BG: It is difficult to understand this e-tailing concept through a conventional medium. We are struggling to do three or four things. We are effectively trying to build or sell a concept rather than sell a product since we are creating the market for the first time. A lot of our time goes in selling the idea on the Net. All of us in our own way spend enormous amount of time trying to explain simple things to very enlightened people in very large companies.

We believe in our wisdom that the first time a person is converted into a Net- shopper, it is going to be a lasting impression. There are many ways of doing it. We are trying to create the phenomenon of making a person shop with us for the first time, because we feel that it is a very special moment in his buying behaviour. The idea that came to us to make his buying simple is to build a type of currency, not only on our site, but also across other sites. And we introduced a concept called e-chips. This was a multi-pronged marketing tool which helped us build a loyalty programme.

On day one, we came up with a concept called virtual pass book on our site. There are apprehensions that credit card may not be safe, that the site may be hacked and credit card will be exposed. But, today you can directly transfer from your bank and buy a certain number of e-chips on my site. So, effectively you have got a debit card, which you can use it. The customer can redeem the benefits of e-chips across the world. I have never seen anyone talking about bandwidth. As far as e-tailing is concerned, the whole business of cyber laws and payment gateways offering various online solutions are major hindrances.

KG: One of the mistakes we made was this: we did not make the project report and we did not understand the implications of e-biz. Honestly, we started with the approach of get-rich-quick that was our first motivator. We had no idea of what the cost of e-biz is going to be.