E-commerce e-rrupts in India

(Apologies for not posting regularly, work's been a little busy. Below is an article of mine on the growth of E-commerce in India that was published. Citation of this in any reproduction would be appreciated)

You know things have come full circle when your mom tells you to check the internet for better prices before buying a TV. Unbeknownst to me my mom, who I thought was rather vary of the internet as a medium to buy/sell things, had been actively browsing the net, buying travel tickets, perusing ebay and other property sites and even indulging in online stock trading ! That’s when two things hit me. E-commerce is a reality in India and that my mom is officially more net savvy than me. Considering that I actively cover the digital space looking for the next big trend, this fact is greatly embarrassing.

But on a more serious note, the E-commerce trend in India requires a serious look considering that more and more people in India are using the net not just to chat or to look for more information but also to buy and sell commodities. That’s why the Consumer E-Commerce Market in India 2006-2007 Report released by the Internet and Mobile Association in India (IAMAI) is particularly useful as it offers insights on the size and drivers of the E-commerce Market in India.

According the report compiled by IMRB, the B2C E-commerce industry for the year 2006-07 was computed to be around Rs. 7080 crores. Further more, the market is set to grow at a whopping rate of 30% and is expected to be worth Rs. 9210 crores by the end of 2007-08. To fully understand the implications of the report it is important to understand E-commerce and what it consists of

E-Commerce
E-Commerce is generally defined as the buying & selling of products & services over the internet or other internet based computer networks. A vast array of commerce is conducted in this way through activities such as electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems.

Traditional commerce, which consisted of a physical market place, with physical products and physical payment methods was forced to evolve with the advent of the internet. The physical products were displayed on the virtual world and were thus available electronically. The online payment system through credit and debit cards also ensured that even the transaction was purely electronic

E-commerce in India

The E-commerce market in India has been largely spurred on by the huge upsurge in the online travel industry due to the entry of low cost carriers. The IAMAI Report, based on feedback from key players in the e-commerce industry, divides the E-commerce sector into the following verticals

1. Travel, comprising Travel aggregators, Tour Operators, Hotels and Railways
2. E-tailing, comprising Online Retailers and Online Auctions
3. Classifieds, comprising Online Jobs, Online Matrimony, Online Property, Online
Automobile and General Classifieds
4. Paid Content Subscription, comprising research, articles, exclusive videos, etc
5. Digital downloads, from Internet to Mobiles and internet

As mentioned earlier, The total market size of B2C and C2C E-Commerce industry in India is around Rs. 7080 crores at the end of 2006-07. It is expected to rise to Rs. 9210 crores by the end of 2007-08.

Following is the break up for B2C and C2C E-Commerce Industry in India for the year 2006-07 and 2007-08:

The above figures show that along with online travel, the digital downloads segment is
expected to be one of the main contributors to the Online Non-Travel Industry in future due to an increase in mobile subscribers across the country.

E-commerce Usage in India
The adoption of E-commerce in the country correlates directly with rise in the internet usage in the country. According to I Cube 2007 Internet in India Report, the internet base in India grew by 40% to reach 46 million

As the base of internet users gain more awareness and exposure, it is expected that they will spend more time on the internet and graduate from basic internet applications like email & chat to using the net for advanced applications like finding information and making transactions online.

As shown by the above chart, E-commerce activities has risen to being 5% of the overall internet activities in the country. Although the bulk of the internet activities is still Email, E commerce is projected to grow as online transaction norms and other entry barrier ease over time

Facilitators and Barriers For The E-Commerce Market in India

As a marketer, it is important to understand the reasons behind the growth of the E-Commerce industry in India inorder to come to a decision on if your product is ready for the e-commerce route.

According to the I Cube 2006 Report, the top 6 reasons for buying online are:

Clearly consumers favour transacting online when time is a constraint. Another major reason is the convenience afforded by shopping from home. One of the biggest advantages of having a virtual store is that a wide variety of products can be displayed as space/retail rent is not a major constraint

For E-commerce to make rapid strides in the country, we also need to look at the barriers that are impeding consumer activities in this arena

As seen above, the biggest concern still remains product quality and the absence of the touch-feel experience afforded by physical products. Online payment transaction security is also a major concern given the spate of credit card frauds and phishing related incidents

E- commerce is undoubtedly the future of shopping in India, although, as shopping in this country is an experience in itself, it is unlikely to supplant the traditional mode of shopping. For this sector to grow robustly concerns regarding online payment has to be
addressed at the earliest. Internet users have to be educated about transacting online & their apprehensions in revealing credit card details must be allayed. Inorder to compete with the traditional store fronts, more customization and variety has to be incorporated.

An interesting way forward would be to supplement traditional store fronts with an online portal to service customers who are bogged down by long queues, who have little to spend on shopping and who are looking for more variety. A great example of this would be trying out a dress in a traditional store and on not finding the exact colour or size, going online and ordering it off the store’s online portal.

I would definitely recommend all those working in the digital media to check out the various internet and mobile telephony based reports available on the IAMAI website - http://www.iamai.in/, especially the “Internet in India 2007” report. These reports offer an invaluable insight, one that may save marketers a lot of money from that cash strapped marketing budget.

iPhoney

So the big news of recent times was the launch of the Apple iPhone 3G in India less than 11 weeks after its glonal launch and the big shocker was the price point - 31,000 for the 8GB model and 36,100 for the 16 GB model - roughly 4 times the US price.

Frankly speaking they got it wrong. India is an extremely price sensitive market. People here no matter how affluent will always look for value for money and will not splurge good money on things like design. Its in our DNA. Let me state that its not the question of price for the indian consumer but if the price is justified at all. Thats the moot point. Once we are convinced that its worth the price, only then we'll go for it. Thats why all the companies around the world have a special strategy for India because we are firm about things and what they are supposed to cost.

Thats why the iPhone strategy is baffling. Are they really asking the Indian consumer to pay 4 times the price of what consumers pay in the US after not being able to avail the 3G facilities because (this is classic) 3G is not functional yet in India. Are these people for real? The folks at Vodaphone are defending their strategy by saying that they wanted to position this product as an aspirational product rather than as a mass product. When did mass become a bad thing anyhow?? and how does a product which does not have facilities to forward an SMS become an aspirational product??

Apple doesn't have cult status in India. They don't have frenzied fanboys who'll wait in freezing cold for a midnight launch. They can afford to be arrogant in the US because they have managed to cultivate a loyal legion who'll lap up whatever Apple offers and be its evangelists. Not in India. They don't even have an India office. What they needed to do was create that loyal base in India to ensure that they had some presence in the fastest growing telecom market in the world. Granted in the US, AT &T heavily subsidizes the price of the phone by keeping the user locked to the service for 2 years but I hear in India too its on similar lines. One needs to pay activation charges and the sim is locked to the phone.

The telecom operators could have played it in a smarter manner. I'm sure if the price was attractive enough, people would not have minded sticking on with the same service provider. They've lost a brilliant opportunity to control a captive market. The ones who are gaining in this mess are Nokia and Sony Ericsson. All they have to do is come with a phone which costs half the price and double the features and they can pretty much kick IPhone's butt. They really don't get the indian consumer do they??

McIdea

I'm often amazed at how McDonalds has this uncanny knack of making me buy what it wants me to buy. As a marketer, in my book, thats a bloody coup. Marketers are generally wont to begin with the matching the cutsomer's expectations. This is what you want, this is how we'll match the need - very rarely do we go on the path of telling the customer what he should have instead, because in our world, the customer is king. But MacDonalds has the gall to tell you what you should have. I'll tell you how

I generally go to MacDonalds to have a quick bite when I'm in a hurry or if I'm not too hungry. I have a set preference - Chicken Mexican Wrap. Always. Unless MacDonalds is running some special offer and then my world goes topsy turvy. The special offers on combo are generally the high priced combos and with them you get a free something that's really attractive and tempting. Right now there's a Fear Factor offer going on and one gets a penknife free with every combo. Now do the math please. Initially I was going to spend Rs 65 but because of the combo offer - Burger+Fries+Coke I pay Rs 117. Thats Rs 52 more than I intend to spend. Now consider that MacDonalds buys these penknifes (If they do that at all!) on large volume discounts from its supplier, so its fair to assume that each costs Rs 10. But since a joint promo is paid for by the company doing the promo - in this case - fear factor, we can negate the Rs 10 that Macdonalds had to shell out. Plus the extra food might be considered at Rs 25 extra. So net profit for MacDonalds from this offer - Rs 27. and thats just me. Multiply this by millions and you know why they call it the Golden Arches.

Sheesh! these buggers (or burgers?) are geniuses. Instead of looking down on cheap fast food. We should be genuflecting in front of these people. I have learnt a big lesson today.MacDonalds has learnt succesfully to tap into the culture of the mileu they operate in. They have low price entry barriers, playing very well in the Indian Psyche of low prices and then they upsell through the combos. The upselling usually takes advantage of the mood of the market. During Diwali, MacDs had a combo offer where they were giving out Daandiyas!!. And these things were literally flying off from the shelves. People were falling over themselves to get one of these. And again I'm sure the profit per person must have been something close to Rs 40. MacDs has been successful because they've adapted themselves to the Indian Psyche. No just talking the language but reflecting the culture in the menu too - Tikki, Tikkas and what not. I hear the they even have an all vegetarian outlet in Ahmedabad. Thats the one lesson MNCs need to learn from MacDs. Adapting the brand to the local culture but yet maintaining the brand identity. Who knows once we perfect this we may we even develop the gall to do what MacDonalds does - Change the customer's mind. I'm sure then we'll be lovin it too!

Best Practices: Marketing by Being Neutral

Lets face it, we all hate a sales pitch. A direct full on, obvious, loud, insensitive sales pitch. It brings to my mind, images of door-to-door sales people selling encyclopedias. Its the worst possible method to sell encylcopedias, because, the person selling it does such bad job of it and it also makes me feel guilty when I slam the door because, really, who buys encyclopedias on opening one's door?

Encyclopedias are not a commodity, so inorder to sell it, the person buying it has to be convinced that she really needs it. Nobody these days bothers with the convincing, they just straight away move to selling their product and that's what makes a sales pitch such a turn off.

BUY MY CREDIT CARD,BUY MY CREDIT CARD!!!



No, the first thing that any sales person must do, is to convince the buyer that she needs another credit card because of whatever reasons. Once a strong need has been created, the sales person can then swoop in and sell her the credit card.


The first step of creating a need in the buyer's mind is very important because it builds trust with the buyer. To the buyer you're like a third party neutral observer giving advise and most importantly there is no agenda in what you're saying. For, in a full on sales pitch, you'd hardly believe a word of what is being said because you are aware all along that the sales person has an agenda and that he's out to get you.


That's why behaving like you have no agenda can sometimes be the best marketing tool. Take for example, this page I landed on: http://www.lsfnetwork.com/importance-web-analytics.html
when I was doing some research on a web analytics article.


LSFnetwork is a internet based marketing agency. they do everything from media planning to search engine marketing and more. But look how they "sell" their products and services on this webpage for search engine marketing: http://www.lsfnetwork.com/sem-services.html






They first give solid statistics. Make a claim about web users and then provide third party articles on the right side bar. These articles give tips, elucidate web concepts and even provide strategies on marketing. Anybody who has a business would be interested in learning about all these. In all these articles, the LSFnetwork pitch comes only in the last paragraph but the thing is, the moment I come to the last paragraph, I'm convinced that LSFnetwork knows what its talking about, knows the internet better than I do and so I'm convinced that they can do the job.


All they did was appear neutral by putting in relevant resources. These resources project them as a company that understands the medium thoroughly and ergo built trust with me. Then when they sell me their stuff, I'm more receptive to their pitch and it does not sound like hollow sales talk.



I think its a brilliant strategy!



I think this strategy is pertinent to tech companies especially because tech products need the most amount of convincing. Technology is a difficult place to market products in, especially when its changing so rapidly. Customers will buy only when they are convinced about the product and no amount of sales talk is going to do it.



And customers will be convinced only when they see a product that meets their need and they see a product coming from a company that understand that technology thoroughly and seems confident about it. That's why "Thought Leadership" image is so important to tech companies these days. Customers will buy only from a company that truly seems like its an expert in a domain because it gives confidence to the customer. That's why I think its very important to be neutral sometimes in marketing technology products