It’s convenient, it’s quick and you can get discounts and special offers that you won’t find anywhere else. That’s what online customers in India are discovering as they surf the net to locate the ‘best buy’. As of now, there may be just 100 million internet users in India, but their browsing and online shopping habits are making internet companies spruce up their shopping portals and put their best foot, nay, deals forward. For e-commerce sites in India, finally the customer is ready to look beyond the ubiquitous train ticket or travel package. Heralding the second wave of e-commerce in the country, the last four years have seen the advent of what can be called ‘desi’ internet companies in shopping, daily deals, travel, matrimony and jobs.
In its report titled ‘E-commerce Market in India’, IAMAI (Internet and Mobile Association of India) estimates that the internet commerce industry in India will grow by 47% to reach the Rs 46,520-crore mark by the end of 2011. The size of the e-commerce market was Rs 19,688 crore in 2009, and around Rs 31, 598 crore in 2010. In 2011, the bulk (about 80%) of e-commerce will be accounted by online travel transactions, which include booking of rail, air and bus tickets, hotel accommodations, purchase of tour packages and travel insurance. E-tailing, which includes purchase of durable products such as electronic items, cameras, mobile phones, hard disks, home and kitchen appliances, as well as personal items such as apparel, jewellery, toys and flowers, will constitute about 6% (Rs 2,700 crore by the end of 2011) of the overall e-commerce market. Online classifieds, which include services such as online dating, matrimonial, and jobs, will have about 5% (Rs 2150 crore) share in the e-commerce market by the end of 2011.
The online shopping space today can be divided into three categories: First, product shopping which is no more restricted to the original internet trailblazers such as Rediff and Yahoo but has a number of Indian startups such as letsbuy.com, yebhi.com and fashionandyou.com, among others.
The second is group buying or daily deals websites such as SnapDeal.com and Mydala.com that have managed to deliver volumes for merchants, besides convincing venture capitalists to pump in substantial funds. “Everybody may look at US-based Groupon as the first mover globally, but group buying webistes in India are evolving as general purpose deal websites,? says Alok Mittal, managing director of venture capital firm Canaan Partners India, sharing how the last one year has been path-breaking for daily deals websites. ?Most of these players are able to attract more than one round of funding from venture capitalists who have been keeping a close watch on internet companies for the last 10-15 years. Currently, the annual investments in the group buying space stands at approximately $25 million,” he says.
The third category comprises websites with niche offerings. For example, Smile Group, which runs the private sales site Fashionandyou.com and group buying site Dealsandyou.com and has recently launched BeStylish.com, an online shoe store. More such websites are in the pipeline.
Like any other growing industry in India, e-commerce too has many challenges to face. While internet on mobile is picking up, internet penetration in the country is still very low as compared to the US and Europe. Experts in the domain are unanimous on how a majority of the traffic on internet in India is coming from metros, with Delhi and Mumbai being the hotspots. Nitin Khanapurkar, executive director, advisory services, KPMG, refers to ‘credibility’ as one of the major issues faced by e-commerce websites in India. He says many customers are still wary of sharing their financial details on these websites. “There is a need to come up with new payment models. For instance, that day is not very far when we will have a new breed of credit cards with very less credit limits.? Online shopping sites also need to keep tabs on the changing retail scene in India, he says. ?Gadgets tend to do more volumes in a mall as compared to a portal. The websites in this space must work towards creating virtual bazaars online,” Khanapurkar says.
Alok Bharadwaj, senior vice-president, of imaging company Canon India sees e-commerce and teleshopping as the next potential sales channel for the company’s cameras. “Our estimates are that online web based e-commerce in digicam industry is around 3%. Our online focus is on building a strong photo community for regular customer engagements. As of now, only 2% of Canon’s camera sales are via online sales,” he says. He complains how some websites in the e-commerce are so focused on creating attractive deals for the customers that they ignore the marketing guidelines of the brand. Warranty terms are altered and brand positioning is compromised. According to him, this is one of the reasons why e-commerce is still not the focus area of big brands in India. “At this point in time, the volumes from e-commerce websites is less than what we are getting from teleshopping. At the same time, there are websites like zoomin.com and letsbuy.com which are offering the desired virtual experience,” he says.
In this issue of BrandWagon, we look at some of the Indian start-ups dominant in the e-commerce space. Led by founders who trash the do’s and dont’s of e-commerce of the Western world, each company has a unique business model and the ability to anticipate consumer behaviour.
For the Bargain hunter
Website: Mydala.com
Launch Date: 2009
Founder: Anisha Singh,
CEO (34)
The story so far: Launched in November 2009, Mydala claims it offers ?daily deals on the best stuff to do, see, eat, and buy across 9 cities in India?. The company started off with services such as restaurants, health and beauty and recreation.
“The idea was to provide great discounts. We spent the first few months trying to convince merchants to provide at least 40% discounts. Initially, they wondered what we were talking about,” recalls founder Anisha Singh. The website’s first tagline was ‘The power of group buying’ which made consumers believe that they would have to come and buy in groups. “This was not the case and we changed our tagline soon,” adds Singh.
Depending on what the merchant demands, a deal on Mydala can go live at five or 400 hits. Also, there are some merchants who deal only with Mydala. As opposed to other group buying websites that are present in many cities, Mydala is currently present in nine cities including metros and mini metros. Says Singh, “Unlike some websites in this space, we do not like to make false claims that we are getting deals in 50 cities and more. Rather, we have a separate tab on our website called “All India deals” which covers deals across cities and towns other than the nine cities we are active in.?
While Mydala has a million registered users, its deals are visible to another 5 million surfers through its alliances with other portals.
“Unlike Groupon which says that 70% of its audience are women in a certain age bracket, we have a mixed user base spanning college students, young professionals to old housewives,” she says.
Singh adds that daily deals websites have now become a regular marketing vehicle for small-time merchants in
India who were earlier relying on bulk SMSes, local search engine Just Dial and leaflets. Additionally, the website is working with big players such as amusement park company Essel World and internet-based travel agency Cleartrip. “These players have a media budget. Still, they choose to be present at a daily deals website,” adds Singh.
The way forward: ?Customer satisfaction is the key to growth in this segment,” says Singh. Interestingly, every member of team Mydala takes customer support calls. The company has no plans to diversify into more categories. “I do not think enough is being done in the existing categories. Currently, most of the websites are sending random deal updates to subscribers. Why should we spam our own users? For instance, if a user wants deals on clubs only, he should not be getting any information on other services.” With the objective of personalising its deals, Mydala has revamped its website recently.
Shopper’s haven
Website: Yebhi.com
Launch Date: 2009
Founder: Manmohan
Agarwal, CEO (41)
The story so far: As a former chief executive officer of retail chain Vishal Retail, Manmohan Agarwal knew supply chain management was crucial in this business. So when Agarwal started online retail store Yebhi.com, he went for an inventory-based model. He started by selling shoes on bigshoebazaar.com in late 2009 and later changed its name to Yebhi.com. In November 2010 the company started retailing apparel brands, followed by bags and artificial jewellery. Yebhi follows a four-step cycle ? identify which products are in demand, buy those products, ensure quality checks and finally sell them. The website also has end-of-season sales. While around 1 lakh visitors check out the site on a daily basis, only 4% of them actually make a purchase. “The first transaction happens only when a customer sees a great deal. Once we are able to service the customer well, trust is won,” says Agarwal. Yebhi has three types of customers: those residing in the smaller cities, professionals who work for long hours and do not have the time to step into a shop, and finally, the customer who’s always on the lookout for the best bargain. Currently, 65% of Yebhi’s sales come from tier 2 and tier 3 cities. Interestingly, Yebhi’s Facebook page is used to handle customer grievances.
The way forward: Yebhi started its journey by selling 200 shoes a month. Today, all products put together, the company ships 1 lakh units each month and plans to touch 3 lakh units by the end of this year. Agarwal wants to focus on building customer trust and add offer more variety. Another task in hand is to convert the fence-sitters into active buyers and put a robust system in place to handle volumes.
In the Right Company
Website: SnapDeal.com
Launch Date: 2010
Founders: Kunal Bahl, CEO (28) and Rohit Bansal, COO (28)
The story so far: Small businesses such as restaurants, spas or salons had never used the internet to advertise their wares or to acquire customers as they were primed to serve the local market. It was only last year, that they started stepping forward to work with internet companies to boost their sales. Says Kunal Bahl, co-founder, SnapDeal, “I remember speaking to a few people in January last year. Within the next eight days we launched Snapdeal. Spas and salons were the low hanging fruits in the market then and it made sense to target these.” Initially, SnapDeal struggled to sell deals, but as time passed, the company optimised its positioning, marketing and value proposition for its clients. Right from the beginning, Bahl focused on one vision for SnapDeal: developing an e-commerce platform that helps sell perishable inventory. Last year, the company acquired Bangalore-based Grabbon which helped in scaling up its operations. Today, SnapDeal is present across 50 cities in India, and is doing 30,000 deals every day. Bahl shuns the group buying model ushered in by US-based Groupon. “We look at customer delight and don’t understand why a customer should wait for a deal to materialise. You cannot copy and paste American and European models to Indian companies. Indian internet companies have been leading in jobs and travel, matrimony and now in deals as well,” he says. According to him, the biggest advantage of tying up with a daily deals website is the higher volumes the merchants are assured of as it is the same customer who goes to a salon, visits a restaurant and goes for a movie.
SnapDeal recently started offering deals on tattoos. This has become one of the most profitable categories for the company. Personal care, dining, and fashion accessories are other categories which are doing well. Shares Bahl, “We did 250 deals on the first day of our launch in Lucknow recently. It took us five months to reach the same number when we started operations in Delhi.” A big chunk of SnapDeal’s transactions are done through net banking and audit teams are in place to ensure that last-mile confidentiality is maintained, both online and offline. The website also offers deals on big brands such as Reebok, Hyatt, Ramada, Gucci, Coach and Versace.
The way forward: With a 70% market share in the group buying space. SnapDeal aims to be present in 100 cities by the end of this year. Bahl sees more categories joining the fold. The website plans to launch a cash-on-delivery payment mode soon which is expected to give a significant push to its sales.
The career coach
Website: Naukri.com
Launch date: 1997
Founder: Sanjeev Bikhchandani, executive vice-chairman (48)
The story so far: One of India’s oldest websites, Naukri.com was started in 1997 by Indian Institute of Management graduate Sanjeev Bikhchandani. Info Edge, the parent company of Naukri, looked at jobs as one of the revenue streams. In those days, Naukri had only two services on its website: job listing and resume writing. Each contributed around Rs 1.5 lakh to the kitty every month. It was in 2000, that Info Edge got its first VC funding of close to Rs 73 million from ICICI Information Technology Fund. By investing in technology and some savvy marketing over a period of time, Naukri broke even in 2003.
Once Naukri was established, Info Edge ventured into other categories such as matrimony (Jeevansaathi), property (99acres) and education (Shiksha). Jeevansaathi has a strong presence in North and West India and has grown to become the third largest matrimony website in India. Naukri has been able to maintain its edge despite biggies such as Monster.com entering the market. Today, Naukri has 25 million registered users. The company relies on television and internet as part of its media plan. In fact, Naukri went on to create one of the iconic characters of Indian advertising ? Hari Sadu.
Currently, Info Edge is betting big on e-commerce portals. Its most recent investment is of $3.5 million in online private sales portal 99labels.com. ?We liked the idea and we liked the team and their ability to execute. The e-commerce market is poised for take-off in India and this is the right time to enter. The space in which 99labels operate holds tremendous potential as a vastly scalable business,? said Bikhchandani, founder and executive vice-chairman, Info Edge India. Last month, the company invested Rs 10 crore in Policybazaar.com, a website for financial products comparison and Rs 9 crore in group buying site Mydala.com. It has also invested in two start-up ventures ? Applect Learning Systems Pvt Ltd, which runs Meritnation.com and restaurant listings site Zomato.com (earlier Foodiebay).
The way forward: Naukri is leaving no stone unturned to make both search and match better on its websites. Says Hitesh Oberoi, managing director and CEO, Info Edge, says, ?At times, it’s difficult to understand what people are looking for on both Naukri and Jeevansaathi. For instance, what type of job change a user is looking for? Does he want to change his industry or is he comfortable looking at openings in cities other than the one in which he is currently based? This complicates things. Also, people do not want to fill up the forms.?
Info Edge will focus on analysing user behaviour to fine-tune the results on its websites. It is also using social media to drive traffic to its websites.
Between the Pages
Website: Flipkart.com
Launch Date: 2007
Founders: Sachin Bansal, CEO (29) and Binny Bansal, COO (28)
The story so far: With over 10 million titles (books) available and currently speeding along at the rate of four 4 books sold every minute, Bangalore-based Flipkart.com is the largest online book store in India. The company was started in 2007 by IIT Delhi classmates and later, colleagues at Amazon.com, Sachin Bansal and Binny Bansal. Before you jump to any conclusions, please know that the two of them are not related to each other. Flipkart started with books and have, in just over three years, spread across the country, with 7.5 lakh registered buyers in cities and small towns.
“We did very basic research before starting the website. We tracked all that was selling well online then. In fact, we managed to run the company for two years without any funding,” says S Bansal. When asked if e-commerce websites can do well only in metros, he says, “Almost 50% of our sales come from tier 2 and other small cities. E-commerce makes more sense for these markets as the larger than life retail experience is missing here. Now, in order to achieve this, there is no need to make the website very visually appealing. Rather, we choose to focus on making post sales experience better,” he adds.
In the past one year, Flipkart has diversified into new product categories including movies, music, games, mobiles and electronics. The company claims to have consistently recorded repeat purchase rates of more than 70%. The company crossed the Rs 75-crore revenue mark in March 2011. Flipkart has a team of close to 1000 employees and currently operates from offices in
Bangalore, Mumbai, Delhi and Kolkata.
The way forward: Customer satisfaction hold the key to future success, says S Bansal. “For instance, cash on delivery has become a comfortable and hassle-free mode of payment. We will endeavour to make things simpler for our customers,” he signs off.
The High-flier
Website: MakeMyTrip.com
Launch Date: 2000
Founder: Deep Kalra, CEO (41)
The story so far: Drawing on the customer insights gained while working at GE Capital, AMF Bowling Inc. and ABN AMRO Bank, Deep Kalra started MakeMyTrip in 2000 which soon became the largest online travel company in India. Says Kalra, “I just wanted to build a successful model on the web and both online travel and stock broking caught my attention then. I chose the first one and we had a dual launch in October 2000 for Indians in India and Indians in abroad.”Within three months, the company observed how people in India were just “looking” and not “booking”. On the other hand, NRIs were seriously booking and the company decided to focus its marketing initiatives around this lot.
The Indian market opened up for the company in 2005 due to two reasons. First was the advent of low cost carriers (LCC) which did not offer their inventory to the local travel agents over the global distribution system (GDS). “We built direct connects with the websites of all the airlines, put together all the inventory in real time and presented it to our users and this was the beauty of what we could do,” says Kalra. Second, the Indian Railways website had started doing well in terms of daily bookings. Booking airline tickets online was a natural progression. That same year, two private equity firms ? SAIF and Sequoia Capital showed interest in MakeMyTrip. The company chose SAIF. Says Kalra on a light-hearted note, “I can make a presentation while sleeping. We prefer individuals who will be great decision-makers on our board rather than big names.”
The way forward: Kalra says that people are now comfortable about buying online. “For instance, if 100 million people in India are on the web, of this, 30 million can be considered as buyers. The next level will see reliable user-generated content gaining importance. Hotel bookings have started doing great and we are seeing some impressive numbers there. Now, hotels will do well only if the users are comfortable with maps, visuals, reviews and other information that will serve as a confidence-building measure. Besides, a lot of applications for mobile users will come,” he says. Currently MakeMyTrip commands 11% of domestic air ticket sales and 48% of the online travel agent (OTA) market in India.