Many Thanks E-commerce boom!

by · September 26, 2012

[The article has been contributed by  Gunjan Veda’s CEO of INDIAreads.com]

In recent times there has been a spurt of articles on the future of e-commerce in India. From the euphoric this-is-the-place-to-be-in conviction three years ago to the doom and gloom the-dotcom-bubble-is-about-to-burst prediction, we seem to have come a full circle. The takeovers, mergers and reduction in VC funding notwithstanding, entrepreneurial enthusiasm remains unabated and new e-commerce ventures continue to sprout. After all, even the biggest skeptics do not question the future of e-commerce in a country which has the third highest number of internet users in the world – 121 million at last count; they only doubt the sustainability of existing models of e-tailing and with good reason.

According to Avendus estimates, currently e-tailing accounts for just 13 % of the e-commerce market in India. The last few years have seen the emergence of big e-tailers undertaking multi-brand retail with the help of big bucks from angel investors. In fact in 2011 alone, Indian e-commerce ventures received over 500 million dollars in funding. But e-tailing in its current form in India grapples with a number of issues. For most players, cost of customer acquisition ranges between Rs 1500 and 5000 per customer. Poor logistical support and the popularity of CoD has led many companies to establish their own delivery networks – a highly untenable proposition. Since distribution channels  are unreliable, most e-tailers are forced to maintain in-house inventories creating problems of inventory management, dead stock and warehousing. All this is forcing new entrants and smaller players – the ones without PE funds – to explore alternate business models. Some prefer to rely on order based procurements, while others are simply providing online webfronts to existing retailers, claiming margins or relying on advertising and intelligence revenues.

With a few big players dominating the multi brand e-tailing segment and offering mega discounts to grab market share, the new entrants have to rely on innovation to attract customers. Thus they are either looking at niche products and market shares or turning to the service sector which does not suffer from the same disadvantages as the e-tailing segment. For one, there is no inventory to be maintained. Furthermore, as  internet based services advertise the convenience factor, people are willing to pay. For instance in an online bookstore, they are always angling for maximum discounts, but when it comes to online book rental service, they are willing to pay subscription charges to get books delivered to their homes.

Similarly, who doesn’t need plumbers or electricians? Bills need to be paid, groceries bought, the laundry done but in an urban landscape dominated by nuclear families where both the husband and wife are working, there is little time to take care of these necessities. And this is the segment that e-commerce is now eyeing. So while zoomin and snapfish save you a trip to the photostudio when you want to get prints developed, printvenue takes care of your business printing needs. Foodpanda allows you to sit in your university hostel and order food from various restaurants. No need to browse multiple sites; they keep the menu and prices for all restaurants.

Easyfix takes care of your carpentry needs, chamakdirect of the laundry. You can sit home and rent books with INDIAreads, book movie, concert and game tickets with bookmyshow and do your grocery shopping from your local vendors through deliveryoncall, gopeppers etc. Yes urban living just got simpler. Thank the e-commerce boom.

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