Ecommerce Mania in India and Lessons from K. Vaitheesawaran

From diapers to condoms, we have all of it being sold online now! Exclusive portals have mushroomed which specialize is just eyewear to even portals that sell ‘adult’ stuff; we have it all! Lots came and many closed down too but then those that have stood the test of time in the ecommerce industry in India include names like – Flipkart.com, Jabong.com, Myntra.com, ebay.in, amazon.in, homeshop18.com and fabfurnish.com. A business trend clearly adopted from the West, ecommerce in India has surpassed the stage of ‘infancy’ in India at lightening speed. With high internet penetration, people in the smallest of towns and villages are connected to the online shopping world. A company called SalonWares that has introduced brands like Kent Brushes and Andis Trimmers in India reveals that they have people from villages ordering Kent shaving brushes and hair brushes worth Rs. 7000 and above! And whoever thought India is reeling under the economic depression phase!

The revolution of the ecommerce industry in India was started in a way by indiaplaza.com. Taking lead here was the sale of music It was gradually that other products were added to the list and then indiaplaza came to be known for its tempting bargains offered on books. It does sadden me to see the demise of indiaplaza.com today. Reasons could be many – from not being able to keep pace with the changing dynamics of ecommerce in India or it could also be young minds coming together and raising funds for the launch of their ecommerce projects and offering things that youth fancy and in the way that they fancy!

Appended is the journey on K Vaitheesawaran, founder- indiaplaza.com that I had collated for the magazine I was spearheading a few years ago –

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Taking India Online – Indiaplaza.in

 

Once upon a time, long ago way back in the previous century (actually in 1998 but 13 years is a long time on the internet) while I was working for Wipro, I was assigned a special project where I had to contact several people outside India.I was using the phone when someone suggested I should try email.I had no idea what he was talking about (seriously) and one of my friends helped me get an Hotmail id. While using Hotmail I saw an ad promoting a store selling books on the internet. I clicked on it, landed on the site amazon.com and as far as I was concerned, this click changed my life. I spent hours every day browsing through this site, absolutely fascinated by the concept of selling stuff online and felt that this was something waiting to be replicated in India.

In 1999, along with a few friends I got an opportunity to co-found India’s first e-commerce company www.fabmart.com.We did not face much of an issue getting our seed funding. Our challenge was starting the business itself.

Since we were attempting to launch a unique concept, we faced serious challenges communicating the business idea with employees, suppliers and customers.

We decided to launch our site by selling music CDs and cassettes. We started off by meeting music companies and requesting them to sell their music on our site.Most of them were perplexed with our business and had a simple response – please buy whatever you want for your stocks and we can supply. When we said we wanted their meta data to upload on the site, they were like what?

We also struggled to hire employees for our company. It was the time of the IT boom andmost potential hires felt we were a technology company offering e-commerce solutions to companies globally. When we said we were a retail company, many smart people declined to join us.

The third biggest challenge we faced was to acquire customers. These were the early days of internet commerce and customers had a lot of concerns regarding delivery, privacy, security etc. We realized that gaining the trust of customers was critical to our success and we launched a series of trust building measures like secure log in, SSL technology, 7 days no questions asked guarantee, 24 hour call centers, cash-on-delivery and many more, all of which are industry standards today and has been copied by other e-commerce companies.

When you pioneer an industry you are faced to learn most things through trial and error. We got a few things right and we also made several mistakes which helped us learn new things and also build our business slowly but steadily. One key mistake was an error of judgment. We assumed that ecommerce in India will grow very rapidly. After a few months we realized that we had just signed up for the marathon and not the 100 meters sprint event! When the dot com bust happened followed by 9/11, our goose was truly cooked. There was no one interested in funding our business and we had to use all our wits to survive.

We had started off by selling music online and briefly considered focusing only on music but after a few months when we noticed that the growth was slow we decided to expand into new categories. In retrospect, it was the best decision we ever took and this laid the foundation for the Indiaplaza promise we make today of great selection.  Retail margins in India are the lowest in the world for any category and unless on online shopping company expands into multiple categories, it is difficult to builda profitable business. So we expanded into books, movies, music, watches and groceries within 6 months.

Our grocery decision helped us survive the next few years. We started our online business for music and books with one warehouse in Bangalore. However, for grocery we expanded into warehouses in multiple cities like Bangalore, Mumbai, Chennai, Hyderabad and Pune. We saw a lot of customers ordering grocery online but the business was losing money.To reduce the losses we opened an offline grocery store in Bangalore in January 2002 purely as an experiment. Within six months the offline venture started growing significantly and it allowed us to open many grocery stores in Bangalore.

So now we had an online store selling multiple items and also offline grocery chain. To reflect the new business, we renamed our company and brand to Fabmall, India’s first integrated online and offline Retail Company. The online business continued to grow slowly while the Fabmall offline grocery chain was exploding. In December 2006, the Fabmall grocery chain was acquired by the Aditya Birla group and renamed More.

We continued to run the online business and we were beginning to observe early signs of the oncoming growth. We had risen funding from the Indigo Monsoon Group, USA and I also felt that going forward, it made sense for us to rebrand the online business. The Indigo Monsoon Group had recently acquired a website in the USA which was focused on helping NRI gifting to India. This website was called indiaplaza.com.

I decided to merge the two companies and changed the new brand to indiaplaza.com

In my view brand names are very important. They must convey the type of business in a simple manner to customers and also build a connection with them. Indiaplaza does both because it explains to customers that it is a place where Indians can meet and shop and also the wordIndia which can build a strong emotional connect with consumers. The brand has worked beautifully for us.

Over the last 13 years since we pioneered online shopping in India, many things have changed.

The biggest change has been in the market size. When we started 1999, less than 3 million people used the internet in India and hardly 20 thousand people were shopping online. Today over 7 million people shop online in India and the internet user base has crossed 100 million, which means many millions of new shoppers will go online.

The other important change relates to comfort. Thanks to ATM machines, online bill payment and online purchase of train and air tickets, millions of customers have become comfortable with online transactions. These customers have graduated from buying tickets to low value products like books and today happily look for deals for mobiles, cameras and other electronic gadgets. What’s more, consumers are now beginning to lap up apparel, footwear and other lifestyle items online.

The third important change relates to investment. In the dot com boom and bust period, over hundred e-commerce companies were launched but we are the only survivors today. Most e-commerce companies had to close down because they were not adequately funded with capital. However, in the past few years, a few hundred million dollars have been invested into e-commerce companies and this is a clear sign that e-commerce is finally here to stay. For a company like us, it is a matter of great satisfaction that our pioneering efforts years back have led to the creation of a thriving industry.

I do have one concern though. Most e-commerce companies have been reckless in their efforts to grow the business. They have focused on topline growth and ignored profitability and sustainability. This is an issue since the business then requires a never ending supply of capital to keep growing which is not possible.

At Indiaplaza we have been clear from the beginning, we are running a business and a business must make money. I hope that all e-commerce companies also start looking at this for the overall health of the industry. Internet retail is here to stay and must grow in a healthy manner.

Ten Things I Learnt over 13 Years in E-commerce

 

1. Retail is about detail.

 

2. Consumers are disloyal by nature, any business that is built on the LTV (lifetime value) theory of consumers is likely to fail.

 

3. There are no online shoppers and offline shoppers. There are only shoppers and they will shop where they find value.

 

4. Offline retailers will continue to struggle in e-commerce as long as they keep repeating things that worked for them offline. The digital medium is different, very different.

 

5. Offline retailers have an intrinsic advantage in e-commerce due to their warehousing, inventory and the benefits of scale. They are just not using it well.

 

6. Anything can be sold online, this is limited by the e-tailers imagination, customers are quite open to try out new things.

 

7. Traffic and sales are easy to buy. The key success parameter in e-commerce is conversion rate %.

 

8. There is too much of myth about the looks of a website. Customers don’t value this highly, all they need is a site that is fast and reliable not sexy and award winning design.

 

9. Cash on delivery is inconvenient for customers. They realize this after a few transactions.

 

10. Single category online stores may find it hard to survive, they will face competition from multi-category internet retailers like Indiaplaza and single category focused offline retailers who have higher scale.

 

(This article is by K Vaitheeswaran, Founder & CEO of Indiaplaza.com – India’s first online shopping company. K Vaitheeswaran is also known as the father of e-commerce in India. He is a serial entrepreneur in the retail industry and the views expressed are his own. He can be reached at vaithee@indiaplaza.in)

 

 

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3 thoughts on “Ecommerce Mania in India and Lessons from K. Vaitheesawaran

    1. Hi,

      Thanks for stopping over to visit my blog. Happy to learn about you at a time when I am just on the verge of closing my feature / article on niche eCommerce portals in India. This feature is for the July issue of Images Retail magazine which is an eCommerce special. Please do share your email address and I shall send you my questions. I am associated with the Images Group as a Contributing Editor.

      Best,
      Zainab

    2. Appended are my questions for the story –

      Will be great if you could please respond to the appended queries max. by June 21, 2014.

      – To begin with, please share with us the inception of your eCommerce portal. What led to the idea, the execution phase (time taken to put the idea into execution), funding / seed capital, team structure

      – The initial set of roadblocks and challenges faced and how did you overcome the same

      – USP of your portal and target group of customers and targeted cities

      – How was the initial response? How did you reach out to people to let them know about what you had to offer? (the various ATL and BTL activities / events undertaken)

      – Journey till date – any anecdotes / milestones you may want to share

      – Current team structure and HR policies in place

      – Vendor relationship management in place and training extended to them (if incase you have various other brands listed on your portal).

      – How do you take care of customer service? Systems and procedures put in place? How do you address customer grievances specially when social media remains at their disposal to talk negative about your portal?

      – If you could please talk about your warehousing facility and also logistics. Is there a third party logistic or do you do it in-house? Challenges faced in both the cases and how do you take care to do away with them?

      – Any plans to get into brick and mortar format?

      – YoY growth / MoM (if launched since less than a year) growth and any funding received so far?

      – Pulling a page from your experience book, how have the dynamics of eCommerce changed in India since last two years? Challenges that the industry still faces?

      – A note on your future plans


      Best,
      Zainab Morbiwala
      Contributing Editor
      Images Group
      Mobile No. +91 98200 34030
      Eml – zainabmorbiwala@imagesgroup.in

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