The Mouse Trap Reinvented

Have money to burn on the weekend? Looking for essential luxuries? Off you go to Shopper's Stop, Crossroads, Kids Kemp and the like. But wait a while. How about browsing the Net to find that special pair of jeans or handbag? Or, even groceries and vegetables, apart from computer products, books, cassettes and CDs? Nah, that's not your idea of weekend shopping. Isn't it? No problem, join the gang. Only about 2-3 per cent of all retailing worldwide is done through the Net. In India, the figure is a wee 0.1 per cent.

Virtual shopping made its debut in the west in 1995-96 with the launch of the e-tailing giant Amazon, and in India two years later. At Rs 25 crore, it's early days yet for the Indian e-tailing market. But lucrative forecasts about the future size and viability of the market have prompted many shopping sites to vie for a slice of the cake that's still largely unbaked.

These impressive predictions have also helped to attract a slew of venture capital funding. According to K. Ganapathy Subramanian, managing director of Bangalore-based Jumpstart Fund Advisors, e-tailing sites till date have received anywhere between Rs 15 lakh and Rs 100 crore as angel funds. Popular sites include fabmart, jaldi, rediff, sify, firstandsecond, indiaplaza and maalamaal. Many of the originals have fallen by the wayside, partly due to an overspend on brand building through flamboyant advertising, but mainly because of a severe consumer inertia.

Says V.S. Sudhakar, managing director, Fabmart Pvt Ltd: "Making any change in buying habits is difficult." Shopping is still a family outing in India and not many are yet so pressed for time that they'd automatically go in for virtual shopping. Even in the US, sites like etoys and cdnow routinely go bust, while the legendary Amazon has yet to clock a profit even after five years in the business, 25 million customers and $4 billion in sales.

The other most common woe of e-tailers is lack of infrastructure. Read slow downloads, bandwidth problems and a low PC penetration of only around 7 million. In an industry which believes that if a consumer has to click more than three times to get what he wants, e-commerce will not work, infrastructure is often the only thing that keeps red ink away. And the experience of most Net shoppers has seldom made them return for more. Out of an estimated 8-10 million Net users in India, only 2-5 per cent shop online.

And even among those who do, fear of using a credit card on the Net is the worst obstacle. Unfortunately for them, that scrap of plastic also happens to be the most convenient way of payment on the Net. This in itself is enough to keep most Indians away from clicking to buy—at only four million, card users are but a fraction of our mainly urban population of PC users.

There are other problems too. Says Balachandran K. Unni, director e-shopping, rediff.com: "The target age-group for most shopping portals is between 18 and 35. Most people in this group don't get to use a credit card very easily. Only 20 per cent of those who surf have credit cards,"

Perhaps we've jumped a few queues while transiting from Karol Bagh shops to Internet stalls? Agrees R.K. Caprihan, chief executive, jaldi.com: "In western countries, shopping malls came first, then catalogue shopping, and finally e-tailing. In India there was no gradual progression—we moved in too fast."

Yet the scope remains huge, with predictions of the Indian b2c e-commerce market touching Rs 500 crore by 2002-3. So, naturally, e-tailers have already started implementing the valuable lessons learnt during the shakeout. Most important of them being value-addition. Take jaldi. After spending crores on marketing and advertising, they have realised that pageviews have no meaning. They are now trying to make their site more user-friendly. The first step at jaldi is to educate the consumer and hence their buyer's guide. They also offer live chats with salesmen who can guide you through your shopping trip. Plus, they are adding new revenue streams—jaldi's planning to become shopping engines for smaller shopkeepers as well as formulate e-commerce strategies for other companies.

Adding to the consumer behaviour experience is another maxim—not everything hot-sells on the Net. Worldwide, information, entertainment and education products lend themselves to highest purchases on the Net. Amazon started out by selling just books (one out of every 20 books sold in the US is on Amazon) and today though they may sell may other things, only their books business is profitable.

It's the same experience in India too. Firstandsecond.com, a portal that sold only books till March, has broken even after a year of operations. Says G.B.S. Bindra, president and ceo: "A brick-and-mortar store can only house about 10,000 titles at the most. But we have one million titles. And the day a book is released in the US, you can buy it on our site."

Shopping all over the world is a touch and feel experience. Hence, unlike clothes, jewellry or perfumes, books and music are ideally suited for the web. For the same reason, branded groceries should ideally do as well. But they don't because of logistical and distribution problems. Explains Bindra: "To deliver 20 kg of packed atta through courier is very expensive. It will eat into your margins. But if you offer groceries on your site, you can't say I will not sell atta because it is too cumbersome to deliver."

Besides getting the right product mix, some dotcom analysts argue that pure play e-tail sites have a bleak future. Instead, they say that a clicks-and-bricks-kind of model will work best. "It makes more sense for a Fodworld to go online because they have already built brand equity and have their distribution in place," says a venture capitalist. But others like fabmart's Sudhakar argue that shopping on the Net is all about trust. If a webstore is able to build trust, he feels, it can sell anything.

But while e-tailers continue to learn news lessons, things are changing, even though excruciatingly slowly. This speed could pick up in the near future. On an average, a person takes three years from the day he sends his first e-mail to begin shopping on the Net. Today, this gap is down to two-and-a-half years.

E-tailers are full of beans—convinced that their business will really take off in the next 18 to 24 months. One reason for this optimism is a distinct rise in the customer base. How? Many more 22-year-olds will soon turn 25 and enter the age group that will drive the sector. A new generation of Net-savvy, mouse-happy young achievers with money to spend and no time to spare, is waiting to take wings. And with it, e-tailing.

But till then, however, question marks will continue to be raised about the future of this nascent industry. "Expecting too much too soon has led to the belief that e-tailing has not clicked," says Subramanian. But now that dreams have been replaced by hard reality, expectations too have been tempered. There are no more fast tracks or tricks to success, just plain hard work and rough rides before you hit the post.