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Lessons from China on Ecommerce

Comscore recently published its report on Global ecommerce related internet traffic throwing up some really interesting data. Amazon accounted for 20% of the worldwide ecommerce traffic. Ebay accounted for 16%. And here is the surprising one: Alibaba.com accounted for 11% of the global ecommerce traffic. That 11% translates to a whopping 160 million unique visitors.

Alibaba.com is the company which owns Taobao.com, China’s version of Ebay, and almost owns 75% of the Chinese Ecommerce market with it. Approximately USD 60 billion worth of transactions happened on Taobao.com in 2010.

In China, in the online space, C2C is significantly larger than B2C. However, overall ecommerce business is approximately worth USD 110 billion for 2011 – 12. And the other players having a stake in the pie are Paipai.com, 360buy.com, DangDang.com and Xiu.com The Ecommerce industry is growing at compound annual growth rate (CAGR) of 90%. AT Kearny estimates that by 2014 it would be a USD 175 billion market. With numbers like that you have to take notice of the possibilities that await a market with a population of 1.3 billion, and a middle class of 200 million and some 160 million internet users.

I recently met a very senior IBM executive, based out of Shanghai and he was telling me how almost everyone in his office buys groceries online and gets it delivered at an hour time slot convenient to them, typically the hour before the end of the office hours. You know the ecommerce market penetration is super high when people are buying groceries online.

A big part of the Chinese ecommerce growth has also been also due to the Logistics industry growing along side it. In the 4 large cities in China, that is, in Beijing, Shanghai, Guangzhou and Chengdu same day deliveries are increasing quite rapidly. However, the logistics is nowhere near the same efficiency levels when it comes to tier 2 and tier 3 cities, where rising income levels is fueling ecommerce.

So the large ecommerce players are investing a lot of money in bigger warehouses and some are venturing into starting their own distribution systems. Some are in the process of buying out a few of these logistics companies. Whats heartening is that the ecommerce companies are realizing that logistics can make-or-break their businesses, and are seeing it as a huge competitive advantage in the time to come.

In India, I believe we’re probably 3 – 4 years behind the Chinese ecommerce market in terms of the ecommerce environment to mature to the levels that we see in China today. However, there is a sheer possibility of serious innovation in the Indian ecommerce market in terms of scaling up rapidly and the entire eco-system growing with the knowledge of learnings from global markets.

It is indeed an exciting time to be in this market. Can’t wait to get all my grocery shopping done on my android phone on my way home from work, and the order being delivered to me within the hour. That would keep the Mrs happy. :)

Referred Report:  http://www.comscore.com/Press_Events/Press_Releases/2011/8/Amazon_Sites_Visited_by_1_in_5_Global_Internet_Users_in_June

Murali Balan is the CEO of Tenovia Solutions, an Ecommerce product and services company. Its product, 10Commerce, can be viewed at 10Commerce.com

E-Commerce In India – The Second Coming

 

Very interesting article which was Forbes’ cover story for their July issue.

http://business.in.com/article/boardroom/ecommerce-in-india-the-second-coming/27042/1

 

 

 

Buzz in the Investment Community on Ecommerce in India

Just attended a Proto.in event yesterday in Mahabalipuram, which mostly consisted of panel discussions featuring VCs from leading Venture Capital and PE companies, and founders of exciting start-ups.

One point stuck out quite a bit from the event. Rahul Khanna, MD, Canaan Partners (a $3 Billion global fund with a presence in India) shared the following statistics about the deals in the Indian Ecommerce industry:

Jan 07 – Dec 10 => 3 year period => Number of deals: 28; Deal Size: $60  million
Jan 10 – June 11 => 1.5 year period => Number of deals: 32; Deal Size: $102 million

So the last 1.5 years has seen more deals than the previous 3, and the deal sizes have been approximately twice as well. (Maybe the numbers might be off a few million here and there, but basically the point remains).

That statistic should be a boost in the arm for those folks who have started their Ecommerce ventures in India.

How mobiles devices get used online

The Nielson Company recently came out with its research report which showed how users use their mobile devices. With there being such a dog fight about attracting customers online, I think its time that the Indian Retailers start using mobile Commerce as another medium to engage the customer.

 

 

Distribution Systems Evolving in Ecommerce

The landscape of Supply Chain in E-tailing is drastically changing for the better. Here is a look at some of the improvements taking place at the leading online retailers in India.

Large distribution centers: Improves order fulfilment with higher inventory levels that are directly under your control compared to a 3rd party.

Improved technologies: Deeper integrations with supplier inventory reduces the chances of received orders not getting fulfilled because of stock unavailability.

Better tools and systems: Better scanners, conveyer belts, automated packaging systems, automated labelling systems have decreased the time taken at multiple points of procuring and packaging.

Smarter Analytics: Predictive analysis is being used increasingly to anticipate customer order patterns and stock accordingly.

Production Panning: Increasingly, Ecommerce companies, who are more aggregators than manufacturers, are planning their sales and promotions and going directly to the manufacturers with a set of orders and an delivery schedule based on demand. This backward integration has not only cut out the middlemen, but also given better controls to the Ecommerce companies.

Infrastructure-as-a-Service: The TATAs own a company called Drive India, which basically provides large scale infrastructure to any company that requires it. I believe this IaaS model will grow in the Ecommerce industry.

Better talent: As the Indian Ecommerce market matures and customer orders increase and the investments pour in, better talent is getting attracted to the sector. And with the influx of better talent, the supply chain built around the Ecommerce trade is constantly improving in quality.

Sustainable Packaging in Ecommerce

Was at Coonoor (a gorgeous-sleepy hill station town in the Nilgiris) over the weekend, and was amazed at how the entire town, and increasingly the entire region, is saying no to plastic.

They have the same retail chains who dole out plastic bags across India, providing cloth / paper bags at the checkout counters. Incredible. Amazing what a little firm initiative from the local government can do.

Makes me wonder when the same focus is going to come into the world of Ecommerce. Today some of the leading online retailers are still dumping the customer with excessive non-sustainable packaging. Its time all of us in the industry looked into this and did something about it.

I’m starting today by trying to find vendors who supply sustainable packaging materials so that I can recommend them to our clients.

I’m convinced that it will make a difference for the customers as well to know that the company that they shop with is green. It should be a differentiator and for those e-retailers complying with it should be making some noise about it.

The Art of the Cart

Never before has so much attention been given to the shopping cart as now. With the customer’s mail box getting flooded with coupons from deal sites, the customer has become a lot more price conscious. Getting a customer to come to your site, and be excited enough by your product to add it to the cart is great. But to get the customer to carry that cart all the way through checkout is a completely different ball game.

The E-commerce game revolves around the cart. With conversion rates at E-commerce stores ranging between 1% – 7%, and each percentage point becomes ever so important. There are many things that can be done to fix the cart. Here’s a look at what some of the leading etailers in India are doing to keep their shopping carts conversion rates high. We looked at flipkart.com, ebay.in, infibeam.com, shopping.rediff.com, and myntra.com. Here are the findings:

1. Infibeam.com


I loved the bit where they point out the availability of Cash-on-Delivery as a payment option for the items in the cart. I like how “Proceed to checkout” is the main highlighted button, whereas everything else is in a lighter colour, such the “continue shopping” button.

2. Flipkart.com

The blue-eyed boys of Indian Ecommerce have a fairly straight-forward shopping cart. Its one of the few that show the cart in a ajax pop-up. (Landmarkonthenet.com also does the same). The ajax part is nice, because it doesn’t wait for a page to load. However, I believe that this can somehow reduce the conversion rate.

 

3. Rediff.com

Rediff’s cart is probably the simplest no-frills cart amongst the major retailers. Not what I would recommend. The only good part perhaps is that they have no other element in the page.

4. Ebay.in

Fantastic cart. My favourite. Not surprisingly its probably the one of the most successful site in the Indian Ecommerce market, and I’m excluding their auction related sales. Its got a bunch of options that a customer might want to see including help through live chat, product thumbnails, payment options, discount / savings information, next steps, and very importantly, it does a very good job of cross-selling.

 

 

 

5. FutureBazaar.com

Probably the most expensive platform in the history of Indian Ecommerce yet. Their cart doesn’t disappoint. Its got almost all the elements laid out well. I think their design could be much better, but they seem to get most check marks as far as the cart essentials go. I like them showing the progressive steps of the cart along with the live chat help icon.

Also like the fact that they provide a very prominent place to add any coupon details. Many site leave this to the final page before they provide this option. I think the earlier you allow your customers to see the benefit the better it is.

 

Also they do a good job of cross-selling, which is so crucial. If you can even get 10% of your customers to add something from the suggested list, thats a huge revenue.

 

 

Murali Balan is a Director at Tenovia, and shares Tenovia’s mission of helping businesses do business online. He has around 10 years of experience in Ecommerce technologies and business practices.

Cloud Computing and Ecommerce in India

Its time that Indian Ecommerce companies started getting up and about on cloud computing. And when I say its time, I mean yes there are a few companies that dabble in it, but I’m talking about something like 25 – 40% of the Ecommerce companies in India using cloud computing in some capacity.

Who is it ideal for?

1. Smaller companies, hungry for growth.  And which is serious about spiking their traffic.

2. Large Ecommerce companies who have built up comprehensive platforms need to start pushing some of their applications on the cloud. Predominantly to get comfortable with it.

Why aren’t more people using it?

A couple of reasons mainly

1. Inexperience amongst the developer community with implementing cloud solutions. They’re still comfortable hosting applications on shared / dedicated servers and are afraid to experiment.

2. Online businesses are confused about the total cost of ownership of a complete cloud based solution. (CPU cycles / data download and upload pricing / pricing with and without CDNs, etc)

Way Forward

Okay, despite last week’s outage of services at Amazon’s Cloud, I believe that Cloud computing is where all of Ecommerce is headed. I believe that there is a huge Mobile commerce play that will consume the Indian market. And all those mobiles would need to interact with a lot of data sitting in servers. And that traffic’s unpredictability will be huge.

Cloud computing for Ecommerce makes too much sense and saves too much money to be ignored. And with Ecommerce at infliction point in India, its more important now than ever that our developer community / Online business heads wake up to this reality.

Ecommerce Logistics – The essentials

Picking a courier company / logistics partner is probably one of the most critical decisions for an Ecommerce company. They are the last mile of your interaction with the customer, and as a result you need to be really careful about that experience. So please consider the following points as you select one or more logistics partners for your ecommerce business.

1. Pin Codes covered - The more the merrier.  You would be surprised the remote corners your customers can come from.

2. Delivery times for Tier 1, Tier 2, Tier 3 and Tier 4 cities / regions - Most of your customers are going to be from Tier 1 and Tier 2 cities. So ensure that your logistics provider commits to delivering your products in these cities in super quick time. Ideally next day. Worst case within 48 hours.

3. Own Network vs 3rd Party Network - Ask your logistics provider about details of the network they cover. How much of the pincodes that they cover is by their own fleet, and how much is outsourced to a local 3rd party provider. The difference in quality would be stark between the two, as will be the accountability.

4. Dedicated Relationship Manager – Demand for one. You need someone senior to service your account. Depends on the size of your business, but still demand it and get it.

5. Rates - The all important one. Shop around and consider all the factors on this list, and not just this one. Yes it needs to make sense for your business. But you don’t want to pinch pennies here at the cost of your customer’s experience.

6. Technology support – Check out how much information they can provide you and your customers with their technologies. Courier tracking and on demand status are the minimal service they should provide. They should also provide your customer support team to find the status of a bunch of Airway Bill Numbers.

7. Reconcilliation – This one is crucial to your accountant. Make sure they offer you on-demand reports of how many packages were picked up, how many delivered, send you the proof of delivery receipts, as well as all cash collections for Cash-on-Delivery orders. Also settle with your logistics company once every fortnight. In my experience, the longer the period of settlements the more the number of issues that crop up.

8. Damage and Return policy - Read this part of any contract you sign very carefully. Who is liable in case of damages to the products? What is the maximum amount of liability taken by the logistics partner? What is the insurance coverage provided? Please factor in these points when you publish your return and refunds policy.

9. Weight vs Rate – When you are considering a logistic partner, please check how their rates goes up with respect to the weights of the shipment. Does the increase seem justified? Or do they plan to make a killing when the shipment weight goes up? When you formulate your own shipping policies please factor in these costs.

10. Cash on Delivery – Extremely important in India. COD is still the preferred method of payment for many online customers. So please pick a logistics partner that provides you this service. Also do the homework in checking out the reputation of your partner when it comes to settlement of the COD amounts. This is really crucial as they become your collection agents and any delays on the logistic partners’ part in settling payments would then impact your cash flows. But still this is extremely important. And cannot be ignored.

KISS Principles in Ecommerce

In an Ecommerce business you have a lot of variables that can steal the focus away from your core activities. For example Business Heads at various E-tailing / Ecommerce companies have to constantly dabble with issues like evolving technologies, optimizing search results for a new category, site design and re-design, a new A/B testing campaign, competition’s discounts, Social media campaigns, bugs on the site that refuse to go away, etc.

Its easy to get distracted and lose sight of the bigger picture sometimes. And thats why its so important that we stick to the basics and adopt the KISS (Keep it simple, stupid) principle. An Etail Business Head should obsessively focus on the following:

1. Drive Traffic to the site

2. Ensure the site is fast and easy to use

3. Provide fantastic value to your customers

4. Ensure GREAT customer service

5. Deliver your products on or before time

6. Ensure post sale engagement with your customers / Get customers to come back

If you do the above right, everything else will fall into place. So ensure that you’re spending your team’s energy equally, in the above areas. And remember, the bigger the dream, the more important the team.

So depending on the size of your operations / revenues, start creating teams that revolve around each of these areas. There are a lot of other areas that can be listed above such as managing vendors, accounts, legal, etc but thats where the KISS principle works so well. Take care of the basics and everything else will fall into place. Focus on building solid foundations.