With the increasing Internet penetration, ecommerce is steadily growing in India. In the travel sector, it has reached a tipping point where buying tickets online has become quite commonplace. I believe it hasn’t reached that stage yet in the other sectors, but it is surely inching there. The number of sites selling stuff online is increasing at a good rate too - there are at least 150+ decent sites doing retail over the Internet. Surely, a lot of these have started off with focus on NRI customers, but it is not difficult for them to switch gears and start focusing on the customers in India, when there is demand.
Start of the concept
As the number of sites increase, how do you know where to go and buy stuff. Surely ebay is the current leader, but as other sites start becoming more and more competitive, it becomes a pain to find out the site offering the best deal. In comes the concept of comparison shopping sites. These guys build an index from the product inventories of as many online shopping sites as they can get the data from and provide search on this index. As a result, users can come to the site, search for products and see what each online merchant has to offer and eventually click out and go to the merchant site to do the transaction. The way these guys make money is by charging the online merchant for driving traffic to their site (mostly cost per click). As with the standard CPC concept, this marketing channel is very effective and accountable for the online merchants as they pay only when they actually get the user on their site. With more than 150+ shopping sites out there, you’d think someone would have seen an opportunity and started a comparison shopping engine. You didn’t think wrong. Surely, we are starting to see some traction in this area with the early players being bechna.com and ultop.com. Check them out, these sites do not have a lot of stores in their index, but its a good start. We will definitely see more players entering this field and will try to offer more and more value in terms of better user experience, having more items/stores in the index etc. Obviously, the more items and stores that a player has, the better job it can do by helping users find the best products and best prices.
How to scale?
Now the next question then is - how do these players get the data? Couple of options here: they can get data feeds directly from online merchants or they can scrape/crawl the shopping sites and extract data from there. The first method is an easier technological problem, because of the fact that data feeds that they get are much more structured compared to unstructured HTML from the websites (which ofcourse does not mean that no one takes this approach. Sometimes this is pretty much the only way to go. more on this approach in a later post). But the problem is that as more and more comparison shopping players come up, it is not scalable for the online merchants to provide data feeds to each of these players. Providing data feeds is not the only problem, the online merchants need to track how much traffic a comparison shopping site is generating so that they can pay appropriately and measure their ROI. As the industry matures and comparison shopping becomes popular, we will see “middle-men” in the form of data feed aggregators coming in, who will collect data from the online merchants and supply it to anyone looking to create a comparison shopping site. This is also a very attractive business as each these middle-men get a cut from the revenue that comparison shopping sites generate. Have not seen any player doing the data feed aggregation in India yet. To give examples from the US market, a few examples of comparison shopping sites are shopping.com, shopping.yahoo.com, pricegrabber.com, shopzilla.com etc. A few data feed aggregators are linkshare, commission junction, etc. In europe there is kelkoo, pricerunner to name a few.
Ofcourse the concept of comparison shopping is not limited to online shopping sites only. There are sites like Rediff Product Search and CompareIndia.com that actually build their index from data feeds from the local retailers, so users can find out who is offering the best deal and go and buy the products from the physical store.
Whats in the future?
I think bechna and ultop have an early foot in the door, but it will be interesting to see how they evolve and which other players come in by the time the concept really hits mainstream. Ofcourse aggregation and distribution of data feeds still looks like an open opportunity today (from my research).