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During the dotcom boom ± Ecommerce was the sunrise industry, the
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one that would change the face of the world. While Ebay and Amazon
± the twin pillars of Ecommerce in US did bring about paradigm shift in
USA, the tech pundits in India are still a bit iffy about Ecommerce in
India.

The Ecommerce market is expected to touch 9210 Crore INR in 2007-

08, E Tailing or E RE-tailing market is only about 1150 Crore INR
according to a survey conducted by Internet and Mobile Association of
India and Indian Market Research Bureau (IMRB).

For the purpose of this article E-tailing is defined as Ecommerce sites

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including auction sites that sell groceries, apparel, CD¶s, books,
electronic items, gifting item etc but exclude travel, digital downloads >> read more ?
and online classifieds sites.

The top E-tailers in India are indiatimes.com, fabmart.com, rediffshopping.com. They have managed
to retain their lead due to innovative business strategies, supply chain model and changing urban
lifestyles

Why
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E commerce and ETailing, from a business perspective offer an opportunity to cater to consumers
across geographies, no operational timings, unlimited shelf space ± and all this with miniscule quantity
of infrastructure. For a country like India, this business model is a good way of growing the
consumption driven economy.


h

The growth in the E-tailing market is driven by the need to save time by urban India. Besides with
over 2.5 billion internet users, access to internet has also played an important role in growing the
markets. Changing demographics (youthful India), changing lifestyles and exposure to the developed
markets sure give a fillip to this fledgling industry. The soaring real estate costs in India have certainly
inspired many an online venture. Also E-tailers have developed many innovative promotions to lure
customers and there by growing the market.




h

But then all is not well in the E-tailer¶s paradise. The cost of customer acquisition is pretty high in
India ± about 1100 INR/customer which eats into the margins, as most goods retailed are low value
items such as books, CD¶s and electronic gadgets. High margin goods such as apparel are not very
popular because of the touch and feel factor. Most Indian¶s are not comfortable using their credit cards
for shopping and there is always a fear of ³what you see may not be what you get´. There may be a
problem with complaint resolution, especially after receipt of wrong goods or delayed delivery.

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The Indian Retail industry has always thrived on personalization. The grocer, tailor or even the mom n
shop apparel store owner knows the preferences, remembers customer¶s taste, budget and previous
purchases. They sense the customer¶s mood too ± which no CRM software can claim to do.

Trying to personalize each customers experience ± might be one way to grow.

The Indian consumer is still very need oriented, not very impulse or deal oriented like the American
counterparts. Hence it might make sense to create real consumer centric promotions constantly that
provide real value to the Indian consumer. Slowly but surely this is happening in India.

There have been horror stories about receipt of bad or wrong goods, delayed deliveries, no response
from the company ± which adds up to not trusting the online retailers. Through this changing ± albeit
slowly, thanks to automation and technical integration.

ah





1. 

 

h ± A good 24/7 customer service through email, chat and toll free phone is
what the E-tailers are providing. Customer complaint resolution ± whether, delayed delivery, product
quality, wrong product delivered will certainly work towards long term customer relationship, retention
and acquisition.

2. yh
Most customer complaints and delivery returns can be traced to the supply chain vendors or
merchants. They are in fact the most important internal customers. It is important to have the supply
chain vendors or merchants well integrated into the system ± both technically and strategically.

3. 


 

E-tailers always search new and innovative business models. Case in point being US based Power
Reviews ± where it provides free review technology to E-tailers and all it asks in return is that the
reviews collected on the retailer¶s web site are syndicated, which is then aggregated on the
Buzzillions.com, its sister website. Some Indian sites simply collect orders over a period of time say a
week, order in bulk from the vendor and finally ship it to customer at a discounted rate. The customer
is told beforehand about the delivery date, of course.

4.  
h 

 

All the E-tailers are present on comparison shopping sites is of paramount importance ± especially
since people now visit these sites before they place the order. Being present on well known sites such
as compareindia.com andwize.com is a very good idea. Also they encourage customer to write the
product reviews ± nothing authenticates their offering to an undecided customers like a good product
review.

ah

Though much is yet to be achieved, remember E-tailing is a new industry in India. With broadband
internet access still accessible to entire population, this industry may see an explosive growth. Most
growth drivers are in India¶s favor ± demographics, economy, changing lifestyle, exposure to new
ideas. It is just a question of creating a sustainable eco system for E-tailing, which is at an inflection
point. Time to fasten the seat belts!

Chillibreeze's disclaimer: The views and opinions expressed in this article are those of the author(s) and do not reflect the
views of Chillibreeze as a company. Chillibreeze has a strict anti-plagiarism policy. Please contact us to report any
copyright issues related to this article.

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Out of 5 ³chilies´, our editorial team gave this article.. ?

e-tailing, or e-commerce can be described as transactions that are conducted over an electronic
network, where the buyer and merchant are not at the same physical location, for example plastic card
transactions via the internet.?

According to a recent study:?

© Presently there are 4 million Internet users in India and the number is growing.
© Computer Hardware, cinema, Books, Music cassettes /CDs, travel tickets and gifts are sold
through the net in a big way.

M M
a

Reasons for e-tailing becoming a hot opening can be attributed to many factors viz.?

© 






e-tailers do not have to maintain expensive showrooms or warehouses in prime locations, they
operate through their web sites and thus save drastically on the real estate costs. The real
estate costs in the metropolitan cities are sky high. Besides this, maintenance costs of a virtual
store vis-à-vis a physical store is much less.
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© c
y  
y
Easy and comfortably -obtained info is another advantages that shopping on the Net offers. On
the Internet, product information is just a few clicks away, all accessed in the comfort of a
home. Traditional retailing stands out in stark contrast: the consumer searches frantically, runs
up and down, grills a poorly trained store assistant who is unable to help him out. In the
bargain, valuable time is lost. Simply put, shopping on the Internet for, say 15 minutes could
save a two-hour trip to the mall. Consumers prefer to save this time so that they can devote
more time for their professional and domestic priorities.
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 © 




h
h

 

The greatest benefits of online commerce is its ability to establish interaction en-masse.
Interaction refers to the ability of reaching customers on an individual basis and react
appropriately to responses of individual customers. Interaction is a vital tool for mass
customization. Examples are many and include online marketing of flowers, software books and
education. This has also led to greater satisfaction among the online buyers. According to a
research agency, 82% of the online buyers have been found to be satisfied with their
purchases.
?
© 

 
A supermarket has limited area of operation. It caters to customers of a city (and/or its
suburbs), but a web site can be accessed from any part of the country or for that matter from
any part of the world, thus increasing the potential customer base.

ahh 

Most of the e-tailing ventures have not been as profitable as they were expected to be, the reasons
being: -

© One estimate is that India has a mere 4 million Internet users, mostly are from metros.
According to web analysts many areas of retailing, Internet is unlikely gather a sizable slice of
market. And that could be several years to come. , Especially in businesses where margins are
thin.

© Despite a higher Internet penetration, cities like Mumbai or New Delhi might not be a haven for
an e-tailer. Reason: for things like grocery, there is a shop out there at every nook and corner.
All that an individual has to do is just make a phone call and the goods are delivered at his
doorstep. Thrown in along with free home delivery is a month's credit.

© Cheap labour Thanks to easy availability of domestics at an affordable wage bill, quite a few of
the rich customers hire them for doing domestic chores, which include shopping. The usual
Indian aversion to use credit cards. Thanks to low penetration of credit cards and the lack of
popularity of debit cards, e-tailing might find it an uphill task to catch on.

© Mounting competitive pressures

The market for online buying is still at a nascent stage. The turnover of the sector is relatively
small and many players have already entered into it. Thus many e-tailers are eyeing a small
market, exerting more pressure on operating margins.

© Shopping is still a touch--feel--hear experience

Unlike the Americans, Indians do not suffer from 'time-poverty' and shopping is still considered
to be a family outing. Hence this type of an environment creates a problem of customer
retention.

In e-tail, customer retention by 5% leads to increase in profits by 25%. Most people buying on
the net do it out of curiosity and a repeat purchase is unlikely.

© Inadequate information provided when the customers discerns it certain products like clothes,
cosmetics etc. involve higher customer involvement. Most customers are comfortable buying
books and music on the Internet because the information required making a purchase decision is
simple.
 But not so when a customer has to buy, say a blue Trouser. Here the customer wants to know:
Which shade of blue is it? How does it feel on skin? How easily does it crease? This problem does
not crop up in traditional retailing. In cyber space, on the other hand, the buyer is normally
starved of crucial information. Only the seller knows about the true quality of trouser. This is a
clear case of " information asymmetry".

Wh



What kind of retailing model is going to deliver the goods in the Indian scenario?

 For an answer, consider the following. The most important cost advantage of e-tailing
comes from whittled down shop front costs and elimination of intermediaries and
economical distribution. For example, book e-tailing means giving out with big shops
replete with slow-moving stock. Consider the case of Amazon.Com, where the orders go
straight to the wholesaler. That means the working capital costs are cut down drastically.
Not just that, an e-tailer is paid before he pays his distributor. The implication: need for
lower working capital.

 Collaborative commerce ( e-commerce)

An e-tailer may collaborate with some manufacturers and suppliers. Something that
Easybuymusic.com has done. It has hooked up with warehouses of music companies and
their distributors. So every time an order is placed with easybuymusic.com, it scans the
warehouse closest to the customer. In most cases the distribution costs are substantially
lower since fulfillment is done locally

 Create economic value

E-tailers should create economic value for the customer rather than a curiosity value.
They should find out reasons, as to why customers should buy from a web site rather
than a brick and mortar store and try to communicate this reason effectively.

 According to the KSA annual consumer outlook, the consumers are more comfortable
buying certain items. An illustrative list with a percentage of the consumers are: books
and music 47 per cent, home furnishing 29 per cent, sports apparel 25 per cent, casual
clothes 21 per cent, shoes 14 per cent, groceries 9 per cent and tailored clothes 9 per
cent.

e-tailing in India can be a success if the e-tailers change their business models and understand their
customers more.
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Faculty of Marketing
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100 ft Ring Road, BSK III Stage, Bangalore-85
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