“We are sitting at the verge of a perfect storm” – Darpan Munjal on ecommerce in India

Written by: Madhur

On Aug 5th, 2007

Ecommerce has been one of the recurring themes here at iLeher. On this topic we have have covered various stats, strategies, and new ventures. The reason why its so interesting to study this area is its at nascent stages, its upcoming and most importantly its rise will create new avenues for generating revenue for Internet companies across the board – including logistics, advertising, transaction processing, referrals and lead generation. I am personally very excited to watch new companies and businesses coming up in this space and observe how this market shapes up. Web 2.0, community sites are all great (and good to see Indian companies are getting noticed), but ecommerce is what will directly impact lives of general people. An example is how it has changed the rules of the game in travel industry.

Various issues that have been discussed are how our market is different from others in terms of customers, logistics, pricing models and what is it that will get us to the tipping point and more. We discussed these issues with Darpan Munjal, the CTO – eCommerce at Indiatimes.com. He has closely seen this industry as he led the ecommerce division of Sears Holdings (A $55 billion retailer in the US). He has shared some excellent view points on the topic of ecommerce with us. Some of the important points that he touches on in the conversation are:

  • the current underlying infrastructure supporting the ecommerce eco-system in India
  • the value additions that online shopping sites can provide to customers
  • pricing models
  • muti-channel retail strategies
  • supporting businesses to online retailing

Read on below for his insights on all these topics. Love to hear your views/questions.

1. How do you think ecommerce is a different ball game in India compared to say US?

US is a mature market. There, the retailers are using the online channel not only to sell products and services but to build relationship with their offline customers as well. The eco system that supports eCommerce growth is also fairly mature. There are fraud monitoring services, content management services, return processing services, A/B testing services, reverse logistics services etc. that make it easier for online retailers to focus on expanding their core business. In addition, the multi-channel aspect plays a huge role. Take for example Sears – over 70% of our customers used to research the products on Sears.com before making the purchase in one of the 1000 locations. India, on the other hand, is still in the early stages of eCommerce where customers don’t see a lot of benefits in shopping online. For this to change, the online retailers must first focus on improving the end to end experience so that they can build trust with their customers.

2. How do you see the impending arrival of online stores of Reliance retail and Bharti-Walmart? How will it affect the current online retailers like rediff and indiatimes and others?
New entry into online space is extremely necessary in increasing the overall adoption of eCommerce in India. As more organized retailers enter this space, there will be better awareness and adoption of eCommerce across the consumers. I don’t think it will hurt the incumbent online retailers such as Indiatimes or Rediff, because the size of the overall pie will increase significantly as well. Also, having more competition in the market place is always good for the industry. It pushes companies to innovate and excel at doing what is right for the customer.

3. There are quite a few players in the ecommerce space in India, but the numbers don’t seem to indicate that Indians like to shop online. When do you think we will hit the tipping point?

We are sitting at the verge of a perfect storm. As retail gets more organized, customers will be exposed to consistency in product assortment and their trust in retailer’s ability to deliver will increase significantly. With better awareness and trust, the concept of network externalities will come in that will further give a strong boost to the eCommerce eco system. There are several reasons why customers don’t like to shop online – some of these reasons are global, while others are specific to Indian context. However, at the most basic level, it comes down to the fact that the Indian customers don’t see enough value or advantages that an online channel offers over traditional B&M channel. Therefore, as the online retailers offer compelling reasons for customers to shop online (e.g. Better access to inventory, transparency in product content, convenience in shopping, better price and value), the effect of all above factors will result in an explosive growth.

4. What is Indiatimes’ strategy on ecommerce space in India?

Although I can’t discuss the specifics of our strategy, it is fair to say that the rules of the eCommerce game will change and Indiatimes will be one of the leaders that will drive that change. We have the legacy of a great brand and an established eCommerce presence. Now we need to take the customer experience to the next level.

5. In India there’s the concept of max retail price and so there is not much variance in the price for the same item offered by different merchants. As a result there is not much price advantage that customers can avail by shopping online. Do you think that’s a negative for ecommerce to become popular in India?

I actually think that it is an opportunity that can help the adoption of eCommerce. With organized retail, there will be a significant change in pricing models. There are hardly any retailers in India today that offer “Hi Lo” pricing. The online channel offers a great vehicle for testing different pricing models. There may be constraints in reducing the item price online due to restrictions imposed by suppliers, however the online category managers can be creative in offering bundles, combo deals, site wide incentives, free shipping etc. to make it a compelling value for the customers.

6. One of the reasons online travel has taken off in India is because a lot of intermediate travel agents have also resorted to online travel sites. As a result the usage has picked up independently of the Internet penetration at home. Do you think such a model exists in online retail?

Absolutely. If we think about individual store owners, they can play a huge role in eCommerce adoption in India. In US, the concept of “Buy online, pickup in a store” accounts for over 40% of online sales for multi-channel retailers. Sears was one of the first retailers to pioneer the “Buy online pickup in store” model and initially there was lot of skepticism in the value of that model. However, over time and with sophistication in technology integration, this has become the most successful success stories of multi channel retailing. What is less known is the fact that the reverse of this model is fairly successful as well. Individual store owners can think of building kiosks or workstations to leverage the online channel in offering virtual and expanded assortment for customers who are walking into their physical store.

7. Anything else that you’d like to add in general about ecommerce scene in India and/or what Indiatimes is doing in this space.

For eCommerce to be successful in India, the online retailers must build their eCommerce platforms using open technology standards such as web services to help fuel the growth of the entire value chain. This will not only help the online retailers to vertically integrate their businesses with other partners, but it will also give a significant boost to the supporting businesses (such as price aggregation services, inventory lookups, vendor content upload etc). These supporting businesses will not only improve the overall ecosystem but will also have a positive impact in the overall customer adoption.

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Entry Filed under: ecommerce

8 Responses

  1. 1. Sumedh said on August 6th, 2007 at 10:04 am

    How about vertically focused ecommerce?

  2. 2. Tarun said on August 8th, 2007 at 11:43 pm

    Great article Madhur, web 2.0 is great but i think India has a great opportunity in web 1.0 e-commerce model although the challenges are also great as your article highlights. But i guess it is just a matter of time before it becomes huge in India.
    I guess one of the reason that impends the progress is overall low penetration of technology in Indian consumer/corporate landscape.

    Cheers

  3. 3. Vivek Garg said on August 9th, 2007 at 4:48 am

    @Sumedth .. What do you mean by vertically focused ecom? Did you mean verticals doing transactions on their site ?

    @Tarun. I agree that its matter of time. Companies will have to sustain themselves till that happens.

  4. 4. mohit said on August 10th, 2007 at 3:03 pm

    Retail getting more organized and online stores will come up quickly..I think its a bubble going on right now.. and it wont burst soon

    http://www.linkedzone.com

  5. 5. Sumedh said on August 16th, 2007 at 8:22 am

    @Vivek. By vertical I mean a business focusing on a niche…in US you find all sorts of niche web e-businesses from lengerie to furniture.

  6. 6. Ashish said on August 25th, 2007 at 7:44 pm

    We should also look into the growing popularity of performance based advertising and the emergence of comparison shopping sites such as tolmol.com and bechna.com in India. The growth drivers for e-coomerce would still remain the penetration of computers and availability of low cost broadband connection

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