Naturally, when The Economist and BusinessWeek had cover stories earlier this month titled E-commerce takes off and E-biz strikes again, I was intrigued. Here was an area wed all taken for dead, so what happened According to The Economist, e-commerce sales in the US this year are likely to be $120 billion, ironically, the figure estimated in 1999 by Forrester for 2002 was $100 billionso, if you look at it, the pundits were wrong by just a year! Amazon.com had net sales of $5.3 billion last year and eBay is expected to reach $3 billion in net revenues this year.
In addition to the figures above, a single travel company, InterActiveCorp sold $10 billion of travel online last year, online pornography was a $2 billion business in the US last year and the list goes on.
Intrigued, I decided to do some research to figure out just what was happening in India. While I cant claim to have found every single piece on e-commerce in India, what I found was interesting.
Online advertising touched Rs 125 crore this year, and B2C e-commerce, it remains true, hasnt really taken offat Rs 150 crore, its around what the malls in Gurgaon alone sell in a year. What is interesting, though, is that (according to a Dataquest article in April) Yahoo! India gets 50 per cent of its revenues from mobile applications, Rediff gets 20 per cent and India Times gets under 10 per cent! That is, they have the best ringtones, screen savers, picture messages and such other products, and consumers pay anywhere between Rs 3 and Rs 15 to download them.
Not true, I said, and got my nephew to do a snap poll of twenty of his 20-something friends, all of whom, of course, have a mobile. My instant survey showed Gen-Now uses the Net to regularly download ringtones and screen savers, keeping up with the latest film stars, music and icons in this manner. Given that there are 35 million mobile users in India compared to just four million for the Internet, its obvious theres a lot of money to be made from this segment. Talk about a new ring to the Net!
Whats interesting about The Economist piece more than that of BusinessWeek is that one of the reasons for the renewed interest in e-commerce is that customers are getting more comfortable in using the Net, to buy, compare or just use for mail.
Retailers and service providers are, therefore, bundling together more products and services to offer complete packages to customers. For example, Lands Endwhich is a catalogue companyretails its clothing from Sears as well as on the net. Well, it now offers custom made clothes on the Net. So, you punch in your vital stats the system works out the perfect fit for your measurements. In the case of booksellers like Amazon, to cite another example, their site actually allows you to search the text of more than 120,000 books. Equally interesting is the merging of online and offline activity. Consumers are now surfing the Net to check out prices as well as competitor offers, but theyre finally going to the online store to pick up deliveryat Sears, The Economist reports, 40 per cent of online sales, excluding garments, are now picked up in the store.
Frankly, in a situation where customers feel hesitant about putting out their credit card numbers on the Net, this offers a more acceptable solution as you can now pay in the store.
Which brings me to the point about why this e-commerce boom isnt going to get easily replicated in India, even when the government finally gets its act together and makes broadband access cheaper. Sure, broadband access will make surfing a lot more pleasurable and, to that extent, there will be more people willing to try e-commerce sites, but the real issue is different.
For one, the US has over a hundred years of catalogue shopping, and so customers know that what they see is exactly what theyre going to get. We know that this doesnt hold true for most products in India where even the clothes you get from your tailor differ from batch to batch.
Even more critical, of course is the back office functioning. If a companys advertised a product on the Net, but doesnt have the stock when a customer clicks on it, theres a serious issue. It may not matter when the number of customers is less, but when there are lots of buyers, this is going to be a critical issue. Ive worked in various department stores, and believe me, we could have hiked sales by 30 per cent if we didnt have stock-outs of popular productscustomers came back once, perhaps twice, if they didnt find a product, but no one came back after that. Few companies I can think of have good back office automation in India, in the retail space.
Namita Jain is a retail consultant. She can be contacted at firstname.lastname@example.org