The Hindu Business Line : Sold on the Net

The e-commerce market in India, currently pegged around Rs 255 crore, is expected to grow to 4,000 crore by 2006-2007. According to the Internet and Online Association, while railway, airline and bus ticketing comprises almost 63 per cent of the market, the remaining 37 per cent comprises categories such as books, music, DVDs and festival shopping. .

Going by these statistics, the online retail industry definitely seems to be on an upswing. But aren't these figures too good to be true? Are Indian consumers actually willing to shop on the Net?

K. Vaitheeswaran, Chief Operating Officer, Fabmall, says the online retail market has matured and he attributes the growth to Net banking and railway ticketing. "With banks encouraging customers to do their transactions online, people find the Internet a reliable and convenient medium. This segment has also started shopping on the Net. Our customer base has grown dramatically from 2 lakh in 2002 to 5 lakh this year."

K. Sundararaman of Sify says Indian customers are slowly getting used to the convenience of online shopping, and many are increasingly using it for gifting. "This medium is not only growing rapidly but also evolving with more vendors realising its potential in India."

More and merrier

At online malls like Fabmall, Sify or Indiatimes, plenty of options are available. Apart from the usual books, music and flowers, one can also shop for home appliances, jewellery, handicrafts and even apparel. Or take a tour of the sari collection of Chennai-based retailer Pothys, on Sify Mall.

But are Indian customers, so particular about first getting a feel of the products they buy, actually willing to buy a sari or a microwave online?

Sundararaman says products such as a microwave or a TV generate at least 30-40 orders a month. "Most customers already have their preferred brands in mind. Many prefer buying online because they can peacefully decide on the brand, unlike a physical store where they may be shown 10 different brands and confused!"

Fabmall gets at least 30-40 orders every day for semi-precious stone-studded jewellery, and even apparel and saris are catching up. It sells at least 6-10 saris and salwar kameez sets every day and even gets repeat orders.

While actual sales of apparel may not be too high, what moves fast are gift vouchers. "A large chunk of shoppers prefer to buy gift vouchers of Shoppers' Stop, Raymond or Louis Phillippe, instead of buying clothes per se," says Sundararaman.

Many apparel brands use online malls to sell excess stock, mostly offering standard products such as plain white or blue shirts at discounted prices. "The consumers know how an Arrow or Allen Solly white shirt looks and for them it is bargain shopping."

Apart from the growing number of online shoppers, both Vaitheeswaran and Sundararaman feel that a cross-section of vendors is also beginning to realise that the Net is a convenient medium to sell products, without making any real investment. Though online retailers sound upbeat, Arvind Singhal, Chairman, KSA-Technopak, says that the online market is still at a nascent stage. "By and large, Indian consumers have just begun to acquire some extra disposable income and might probably revel in the `joy of shopping' for some years to come. Shopping on the Net is more about convenience and saving on time, and only a few categories could appeal to the Indian consumer at this stage." He feels online retailers should concentrate more on speciality categories currently under-served in India by brick-and-mortar retail, especially in small towns. Logistics permitting, health and nutrition supplements, sports gear, health maintenance equipment, small kitchen appliances and basic furniture can be vended on the Net.

Suresh Kumar of Mindspark Consulting feels that online retailers should concentrate now on low-risk and low-value categories "that do not involve much deliberation or too many choices or things such as size, colour or fit." He thinks retailers should adopt a `click and brick' business model that is complementary, and the offline point actually drives the online brand and sales.

How reliable?

"Will the shirt I buy on the Net be of good quality? Will it be delivered to me?" This is a common apprehension most consumers have when shopping online. There is also the fear that their transactions would be misused, especially if they pay by cheque or credit card.

Kumar says it is crucial for online retailers to enhance the customer's comfort level on reliability and security.

"They should provide an efficient and friendly `human' point of contact to address doubts or problems related to transaction. The closer and better the online retailer gets to delivering WYSWYG (What you see is what you get), the more would the customer's faith in this shopping model increase."

As far as logistics is concerned, Vaitheeswaran of Fabmall says, "We ship out around 20,000 consignments every month and less than five shipments are returnedbecause either the customer's house is locked or the address can't be located. We now ask for details of the nearest landmarks to offset the second problem, but sometimes it is still tough. In such cases we e-mail the customer for fresh landmarks or ask for a convenient delivery time. In rare cases, we cancel the order and refund the money."

Sify has a system that enables customers to track their order online. On the unavailability of products Vaitheeswaran says, "Since Web stores work on a virtual inventory model, sometimes we get orders for unavailable items. Nearly 95 per cent of our orders get shipped on time, three per cent get delayed and just two per cent are cancelled due to non-availability. This ratio can be improved upon, but considering the range of items, 100 per cent availability is almost impossible to achieve."

On the other hand, Sify has an automated system that removes unavailable items from the display.

Brand building

Log into any online mall and you will find virtually similar merchandise on all the different sites. In many cases, the vendors are also the same.

For instance, Aapno Rajasthan is a vendor that sells apparel, handicrafts and upholstery in almost all online stores. Doesn't this lead to commoditisation?

Sundararaman says this is unavoidable. "But our focus is to increase the number of users and not create brand differentiations. Only when we gain critical volumes can we bargain with vendors for exclusive merchandise."

In order to generate volumes, Sify has tied up with Web sites such as HDFC, sitagita.com and eprarthana.com that offer shopping options. Similarly, Fabmall has partnered with Indiaplaza.com, which is a gift shop catering to NRIs in the US. The company also focuses on unusual merchandise.

"We are selling the entire series of comic collections like Amar Chitra Katha, Tintin and Phantom. One cannot find these in any physical store. We are also working with Crickinfo to launch Sachin Tendulkar's autographed portraits, which would contain a certificate of authenticity."

Off the Web shelf

Rajeev Mehta, Managing Director, Surat Diamond Jewellery, fondly remembers the first online sale he made in 1999 when a pair of diamond studs was delivered to an American nurse working in Texas. "The first deal is always special." He says that the online medium definitely has a future.

The biggest challenge is to win the trust of buyers. "A customer doesn't get to see the sales person or feel the product; the driving factor here is quality and affordability. Apart from convenience, it offers 100 per cent money-back guarantee which few brick-and-mortar stores offer. Once a retailer establishes his brand image, he will automatically attract customers."

Prateek Goenka, CEO, Village Crafts, which goes Aapno Rajasthan, finds the online business module highly lucrative. Aapno Rajasthan, which sells typically Rajasthani apparel, gets 50-55 orders every day.

"Online retailing is hassle-free. Since there are hardly any overhead charges, we are able to sell at a lower margin." The online business contributes almost 50 per cent to the overall growth of the company that has a store in Jaipur. The company plans to sell apparel brands such as Natalia and Fabindia, which don't have a presence online.

With time becoming a major constraint, Goenka says people are willing to forego the `touch-and-feel factor'. "They start with buying products of low value and if they get quality and price, they are even willing to buy premium products."

Online retailers are confident that they have a great future ahead. Vaitheeswaran says his company broke even this year and is making profits. Analysts too feel that with increasing Internet penetration and changing lifestyle, there is a potential for online retailers in India.

"Online shopping will certainly be an important retail channel. However, the tipping point could well be in 2009-2010," says Singhal.

Picture by Shaju John

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