I read recently that there is a lot of private equity action in the Indian e-Commerce space, where significant investments are happening in mature start-ups which have achieved some scale already. There are not many such companies, but a few which have spent resources on creating a good brand image and prompt service delivery.
While the potential for e-Commerce is huge in India, and that is the exact reason for the private equity investments, the challenge of creating an all-India brand which can be trusted has been underestimated. Startups generally assumed that they would build their new companies offering some unique product or service, and the customers will come. This has always been the traditional mistake that most companies anyway make. Customers in India are rather finicky and want to be absolutely sure that they get value in whatever commercial endeavour they embark on. They are not impulsive buyers.
I know of many friends who do comparison shopping (essentially price comparison) before they zero in on the other features such as delivery, etc., If a well-established player offers free shipping, that becomes a very good draw, as most new online customers spend only a little to start with and test the online waters. Most customers would spend somewhere between USD 10 to USD 30 per transaction whey they start off, just to ensure that the purchase goes off well, and they are indeed deriving the benefit of a better price, a better choice of products for their need, a quick delivery, a refund mechanism, a defective product return policy, et al. Indian consumers are choosy, and will only gradually evolve into repeat or big ticket buyers.
The categories of products that the Indian consumer will try to buy at first would be low risk, low involvement products – may be a DVD, a pair of shoes, a book, etc., The big issue in big cities in India is the travel time for anything, and especially shopping during a discount season (as is the case now) with the milling crowds and rains and what not. So, it may not be a bad idea to sit at home and do online shopping, correct ?
Wrong. Most Indian women would rather go out there and enjoy the pleasure of shopping in nice malls with discount offers luring them to every shop or deal. Indian men may be an online customer most of the time, as they may not like driving out into the maddening traffic. All these may be conjectures and an e-tailer can only figure out the dynamics via suitable market research.
I believe e-Commerce in India will be big, and could be atleast 10% of all consumer commerce by the year 2020. Here we may be talking very big numbers – may be of the order of USD 30B. Don’t know really, but gut feel only tells that with enhanced broadband access and adoption of a variety of devices (including mobile devices), and better service quality from e-tailers, the e-Commerce segment is destined to grow rapidly in India, more than any other market in the world.
Once Indians get used to the idea, they will shift in a dynamic and big manner to e-Commerce. However, that would require building some solid branding, service quality, and offering wide variety at prices better than the usual shop prices.
Let us see how it goes, but I am shopping on selected websites like Flipkart, Infibeam, Fommy, etc., which have all given outstanding service.
21st July 2012