Fulfillment represents the single strategic challenge of the e-tailing business.\u00a0 India has one of the highest cost of logistics \u2013 measured at 13% of GDP. This compares against 6% in countries like Singapore and much of Europe, 3% in the US and UK and 2% in Canada (Source: World Bank 2012).<\/p>\n

In the initial phase of e-tailing (2007-2010) \u2013 there were operational challenges around fulfillment. However customer adoption (at one end of the value chain) together with the availability of capital to invest in supply chain (see feature on Funding Etail: “Show me the profit”) meant that marketplaces and e-tailers invested in supply chain.\u00a0 The Logistics industry responded to the market opportunity \u2013 between 2008 and 2013 \u2013 4500 local courier companies have come up. Companies such as Chhotu, Mudita, unicommerce and Delhivery\u00a0 are area-specific in coverage and provide\u00a0 local services – last mile delivery, third party and transit warehousing, reverse logistics, and offline payment collection.<\/p>\n

Market places are evolving hybrid models of inventory. The category being sold impacts the choice of inventory model \u2013 fashion and lifestyle products usually entail greater inventory control because of the \u2018perishable\u2019 nature of the category.\u00a0 So, in spite of pursuing a \u201cmarket place\u201d business model, Myntra has invested in inventory.\u00a0 Similarly, a higher focus on private label automatically creates the need to hold inventory.\u00a0\u00a0 Pure-play market places such as eBay and Naaptol take minimal inventory risk.<\/p>\n

Sizing Up<\/h2>\n

For market places such as Jabong and Myntra managing sizing is critical to their strategic position in the consumer\u2019s mind. Jabong positions itself as a being \u201cFashion Forward\u201d, Myntra works at aggregating brands which are not available elsewhere in the online space.<\/p>\n

Marketing @ the MarketPlace<\/h2>\n

Most e-tailers use strong digital and social media marketing campaigns.\u00a0 Some companies (e.g. Push Plaza) have also begun to use blogs.\u00a0 Companies like Flipkart, Naaptol, Myntra and Jabong also use mass media including TV ads \u2013 this is a function of viewing habits of the target customer base (e.g. for Naaptol \u2013 the base is older) as well as the availability of marketing budgets.\u00a0 All companies\u2019 measure traffic spends, cost of acquisition \u2013 in addition eBay measures velocity and depth of spend and profiles the same through its annual census publications.<\/p>\n

 <\/p>\n

The Great (Indian) Online Shopping Festival<\/h2>\n

In 2013 both Flipkart and Google introduced the conceptual equivalent of \u201cBlack Monday\u201d \u2013 a short window of time where the availability of deals online is very high and therefore customer interest and spend peaks. While Flipkart undertook this during Diwali (the Great Flipkart Diwali sale), Google\u2019s Great Online Shopping Festival took place on 12\/12\/12.<\/p>\n

Shopper Insights from marketplaces<\/h2>\n

There is little question that marketplaces are responsible for broad-basing the online shopping phenomenon.\u00a0 EBay provides the most widespread example of this \u2013 the company has customers from more than 4000 towns and cities in India and of these 3200 locations are in tier 2 \/ tier 3 cities.\u00a0 A large number of these are rural customers \u2013 this points to the depth of the consumption wave in the country.<\/p>\n

In terms of geographical velocity of purchases \u2013 Maharashtra, Karnataka, Tamil Nadu and Rajasthan show the highest number of transactions (See Heat Map).<\/p>\n

Another trend is the increasing number of mobile phone queries. Naaptol reported a sizeable increase in the number of purchases from mobiles \u2013 and Google search data from Jan to June 2013 substantiated this \u2013 about 25% of queries are now from smart phones.\u00a0 Google expects this to translate into higher mobile \/ Tablet sales in 2013 \/ 2014 (source: Google).<\/p>\n

Funding: \u201cShow me the Profit\u201d<\/h2>\n

52 E-Commerce companies raised USD 700 Mn in Venture Capital between May 2010 and May 2013.\u00a0 However, most of the large companies and marketplaces are not profitable.\u00a0 Some niche e-tailers (e.g. Utsav Fashion, Craftsvala) are \u2013 but these are exceptions to the rule.<\/p>\n

Source: Re-birth of E-commerce in India \u2013 E&Y report<\/i><\/p>\n

Of the 53 companies that raised capital, only 11 companies were able to raise further rounds of funding \u2013 a pointer to the high rate of mortality.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n

Fund House<\/b><\/td>\n	Total Deals<\/b><\/td>\n	Portfolio<\/b><\/td>\n<\/tr>\n
Ace Partners<\/b><\/td>\n	19<\/td>\n	Flipkart, Myntra, Exclusively.in, Babyoye, Freshdesk<\/td>\n<\/tr>\n
Tiger Global<\/b><\/td>\n	17<\/td>\n	Makemytrip, Flipkart, Caratlane, Olacabs, JustDial<\/td>\n<\/tr>\n
SAIF Partners<\/b><\/td>\n	15<\/td>\n	Makemytrip, JustDial, Firstcry, Homeshop18, iStream<\/td>\n<\/tr>\n
Nexus Venture Partners <\/b><\/td>\n	14<\/td>\n	Snapdeal, yebhi.com, GENWI, Salorix, Unmetric<\/td>\n<\/tr>\n
SeedFund<\/b><\/td>\n	14<\/td>\n	Redbus, Printo, Fetise, Sportskeeda, Healthizen<\/td>\n<\/tr>\n
Helion Venture Partners <\/b><\/td>\n	14<\/td>\n	Makemytrip, Hoopos, Redbus, yepme, SMS Gupshup<\/td>\n<\/tr>\n
IndoUS Venture Partners<\/b><\/td>\n	13<\/td>\n	Snapdeal, Indiaplaza, Zivame, Via, Hushbabbies<\/td>\n<\/tr>\n
Sequoia Capital<\/b><\/td>\n	13<\/td>\n	Fashionandyou, Knowlarity, JustDial, Freecharge, Healthkart<\/td>\n<\/tr>\n
Source: VCCEdge <\/i><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n The design of e-tailing in India \u2013 with the need to invest in supply chain, inventory management and returns management – is operationally intensive.\u00a0 Profitability has been elusive because of:<\/p>\n High customer acquisition cost<\/b>:\u00a0Given low Internet penetration and some customer distrust around online buying, customer acquisition is expensive. Most sites spend between Rs 800-1,200 to acquire a customer. Considering that the average order size is around Rs 1,600, and that gross margins range between three to eight per cent, the customer needs to transact over 12 times for the retailer to recover the acquisition cost.<\/p>\n High inventory carrying costs<\/b>:\u00a0Most Indian e-commerce sites carry their own inventory. This causes a heavy drain on working capital due to unsold inventory and carrying costs.<\/p>\n Cash on delivery (COD) is expensive<\/b>:\u00a0COD encourages customer to buy, but it is a sub-optimal mechanism for e-commerce. COD transactions have a higher rate of product returns, and lock-up working capital.<\/p>\n High cost of fulfillment<\/b>:\u00a0Most e-tailers have had to invest heavily in their own fulfillment network. This allows them to ensure predictability of delivery and a better experience. But it requires deep pockets to invest upfront, and incurs greater operational costs that which bring down margins by another 3 to 5 percent.<\/p>\n While capital is still available \u2013 the funding industry has become more selective.\u00a0 That trend is likely to continue either until FDI is permitted into ecommerce OR until large e-tailers \/ marketplaces are able to create enough supply chain efficiency to create profits.<\/p>\n Future Focus<\/h1>\n Watch the \u201cbrick and click\u201d counterparts<\/h2>\n E-tailers and market places invest heavily in technology \u2013 to track and manage inventory, delivery, and returns.\u00a0 In addition, customer acquisition related analytics (\u2018click analyses\u2019) and converting abandoned carts are focus areas.<\/p>\n As their brick and click counterparts scale up their online presence;\u00a0 pure play e-tailers will also have to find an answer to Omni-channel offerings. For example, brick and click stores can offer customers the option of in-store pick up and return and will move to integrating mobile shopping into in-store and online experiences.\u00a0 These are two areas of focus for e-tailers in the future.<\/p>\n Converging to emerge?<\/h2>\n While brick and mortar stores are creating online presence, the market is also witnessing instances where e-tailers are setting up physical presence.<\/p>\n\n\n\n Caratlane.com is a case in point. They e-tail contemporary gold, diamond and semi-precious jewellery.\u00a0 They have set up Solitaire Experience Lounges in New Delhi and Hyderabad.\u00a0 At these, customers are given information about buying solitaires and experts handhold them through the transaction. The lounges serve as an offline extension of the online store.<\/p>\n\n\n\n \n \u201cBecause jewellery is a high involvement purchase category, and part of the experience is \u2018trying on\u2019 \u2013 we have merged the online and offline shopping experiences.\u00a0 Customers can use our \u201cSolitaire Lounges\u201d where they can Touch and Feel the\u00a0product.\u201d – Calvin John, VP-Offline Marketing, Caratlane.com<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n As an extension of the customers need to \u201ctouch and feel\u201d \u2013 Caratlane offers \u201cTry at Home\u201d.\u00a0 This is aimed at mimicking the traditional purchase process, where customers will try on multiple pieces, \u2018shortlist\u2019 and then buy. Customers can choose up to five designs online and\u00a0CaratLane.com\u00a0will arrange to send these, correctly sized, to the customers\u2019 preferred address. Once the customer makes her choice, she can pay cash or go online and place an order.<\/p>\n Impact:<\/b> The Try at Home service has resulted in cash memo sizes which are 3x the pure online transaction.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Multiple partnerships<\/h2>\n E-tailers must be willing to work with many different partners. In India, no single player today can handle all aspects of the business \u00a0– from site design to fulfillment solutions to employee training.\u00a0 Most e-tailers in India tend to build their capabilities rather than buy, that scenario is likely to change as more global players with existing vendor partners enter the market.<\/p>\n Nurture people<\/h2>\n There are few ecommerce professionals in India \u2013 the domain has attracted entrepreneurs and technocrats but senior professionals who have grown with the industry are rare.\u00a0 E-tailers will have to invest in this space as well \u2013 pure financial hooks such as ESOPs will not hold key talent, when the marketplace down the road offers more of the same.<\/p>\n Make mobile a part of the eCommerce mix from the start. While the mobile opportunity in India is nascent, it is undeniably going to be a critical part of how consumers interact online. India has seen the fastest global adoption of the smart-phone.\u00a0 With the proposed national rollout of 4G in the next two years, customers will increasingly replace their laptops with smart phones and tablets.<\/p>\n <\/a><\/p>\n Move beyond English in the longer term<\/h2>\n The experience of Yahoo, MSN and Google is an early indicator \u2013 as ecommerce moves into the hinterland, English language capability will not be enough. While it\u2019s relatively easy to convert the technology front end into other languages \u2013 service capability (e.g. call centers, e-mailers) will need investments and top management mind-share.<\/p>\n","protected":false},"excerpt":{"rendered":" E-tailing in India has reached a tipping point.\u00a0 STORAI investigates. With more than 85% of the world shopping online, it\u2019s no longer a fad, even in developing markets like India. \u00a0\u00a0Worldwide retail web sales will reach nearly USD 1 trillion… <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[13],"tags":[9],"_links":{"self":[{"href":"http:\/\/blog.rai.net.in\/wp-json\/wp\/v2\/posts\/1159"}],"collection":[{"href":"http:\/\/blog.rai.net.in\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/blog.rai.net.in\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/blog.rai.net.in\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/blog.rai.net.in\/wp-json\/wp\/v2\/comments?post=1159"}],"version-history":[{"count":8,"href":"http:\/\/blog.rai.net.in\/wp-json\/wp\/v2\/posts\/1159\/revisions"}],"predecessor-version":[{"id":1310,"href":"http:\/\/blog.rai.net.in\/wp-json\/wp\/v2\/posts\/1159\/revisions\/1310"}],"wp:attachment":[{"href":"http:\/\/blog.rai.net.in\/wp-json\/wp\/v2\/media?parent=1159"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/blog.rai.net.in\/wp-json\/wp\/v2\/categories?post=1159"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/blog.rai.net.in\/wp-json\/wp\/v2\/tags?post=1159"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}