Shopping online in India is an impersonal experience. It’s been
mechanical. This was something I wanted to address. You buy something
beautiful and it comes wrapped in ugly plastic,” says Arun Sirdeshmukh,
CEO,
Fashionara.com. “Instead, we gift-wrap each item you buy from our
site, so it’s easy to gift, but even if you’re buying something for
yourself, it feels special. That’s just one of the things we did to make
the experience personal.”
E-commerce has been around for over a
decade now, but it’s still finding its feet. Barring a few success
stories such as Flipkart, the market has been crowded with me-too
websites which faded away, died or were acquired and then cut to pieces.
People
are definitely keen to purchase things online. Anita Phukan, a
25-year-old freelance writer living in Dibrugarh, Assam, and a regular
Internet shopper, says: “In Assam, our small, slightly unreachable town
now has access to many brands for the first time. Recently, the local
Blue Dart office called me to apologize for the delay in one of my
packages. It was because there were 500 deliveries piled up with them
and they said they were all from e-commerce sites.”
Some of the
most successful examples are service providers—sites such as
IRCTC.com,
JustDial.com and
MakeMyTrip.com. In five years, Flipkart has become a household
name, becoming more well-known than established firms such as
Indiaplaza. Why haven’t others been able to do the same?
Despite a lot of investment ($298 million—or
Rs.
1,668 crore now—in the year till October 2011, up from $47 million in
the corresponding period in 2010, as previously reported in
Mint),
the online retail sector remains unsettled, and many of the new players
seem more interested in attracting users through discounts than in
building for the long term.
Chris George, founder and group CEO of
digital marketing services provider EBS Worldwide, says these sites
have focused on acquiring customers rather than making profits. “This is
starting to make a lot of them feel the pinch. But the conditions in
India are right for e-commerce now. People are comfortable with the
Internet and online payments are secure,” he says. George was one of the
early investors in e-commerce in India, launching
EasyBuyMusic.com in
2000.
E-commerce transactions were
Rs. 19,688 crore in 2009, and crossed
Rs. 45,000 crore in 2011, according to estimates by the Internet and Mobile Association of India (Iamai).
That e-commerce is growing in India is clear, but can this last?
Anupam
Saxena, associate editor of the industry news and analysis website
MediaNama, says: “There are a lot of issues in front of Indian
e-commerce sites today. The sites are interchangeable, there’s no reason
to pick one over the other right now, so people chase deals. The sites
need to get more creative.”
Alok Kejriwal, owner and founder of
the 2Win group, says: “People say things like cash on delivery are
essential, but seven years ago, IRCTC asked for a credit card.
MakeMyTrip asks for a credit card. People are taking the wrong lessons
and trying to build their businesses too quickly, and this is making the
air toxic.”
Based on our own analysis and the recommendations of
these and other industry watchers, we’ve put together a list of some of
the most promising start-ups in online retail today. In the order of
their founding, these are:
Myntra
Founded in February
2007 as a gift personalization service, Myntra sold custom-printed
goods such as T-shirts and mugs; it grew quickly but then plateaued. In
2011, it ventured into fashion and lifestyle products. Much like
Flipkart, Myntra focused on making its system easy to use (through cash
on delivery, simple returns) and on speedy deliveries, counting on
customer service to drive growth.
Getting here
Partner act: Ashutosh Lawania (right) and Mukesh Bansal, Myntra co-founders.
In
2007, e-commerce was starting to take shape in India, and a lot of the
early problems were getting resolved. Ashutosh Lawania, 34, the
Bangalore-based co-founder and head of sales,
Myntra.com, says: “We were the
only player in the personalization space. This afforded good early
growth, but we realized that we needed to expand our offerings to
continue to grow.” The founders decided fashion was the best choice for
them.Lawania speaks softly and deliberately, but as you get
him talking about the early days of their business, you can hear the
enthusiasm underlying his words. He says, “The overall apparel and
textile industry was around $50 billion in 2010, and there were no
established players, only start-ups.”
Myntra’s site is simple to
use, and very visual. They set a template which most sites now
use—thumbnails from which users can pick individual items to zoom into,
with filters to make it easy to find specific products.
Instead of
focusing on deals and discounts, as other start-ups were doing, Myntra
aimed mostly at current trends in fashion. Lawania says: “We decided
early on to focus on getting the buyers who want the latest and best
products. Around 80% of the fashion business is current season,
discounted products are only a small portion of the business.”
Missteps
“We
have done better than we could’ve hoped for. If there was anything to
change, it would be that we should have entered the fashion sector even
sooner. We spent too long studying the market, but we wanted to make
sure that we were fully prepared,” says Lawania.
The road ahead
“Our
vision is to democratize fashion. For people outside of the big cities,
the major brands still don’t have any physical presence. Instead of
offering last year’s products at a big discount, we want to make it
possible for anyone, anywhere to look good,” says Lawania.
Our view
Despite
having done well so far, Myntra might find the most challenging time
lies ahead, as competition in the fashion segment builds up. It will
need to innovate to keep customers interested, but it’s starting from a
strong position.
FutureBazaar
Founded in December
2007 with a focus on electronics,
FutureBazaar.com is one of the top 10
e-commerce companies in India. It has shown a willingness to change
focus to react to the needs of the market, going from electronics to a
much larger basket of goods.
On site: Kashyap Deorah of FutureBazaar.
The
big turning point for the firm was in 2010-11, when it built closer
ties with its parent company, the Future Group (which includes Big
Bazaar, Pantaloon and HomeTown), which helped it to operate in more
segments, and to operate more efficiently with the offline operations.
Getting here
FutureBazaar
has been headed by Kashyap Deorah since March 2011. The 33-year-old CEO
started his own e-commerce business as a final-year student at the
Indian Institute of Technology, Bombay in 1999, before moving to the US
to work for the company that acquired his business. He returned to India
in November 2007 and launched Chaupaati Bazaar, a phone-in retail
business, which was acquired by FutureBazaar in 2010. “In October 2010,
we relaunched FutureBazaar as a destination for deals in electronics.”
This cost-driven model would continue for one year, but by 2011, the
focus was shifting. Mumbai-based Deorah says: “Now, our focus was on
home technology,
ghar ka samaan. With the Big Bazaar integration, distribution and warehousing was solved for us.”
This
is just the start, though. According to Deorah, the real volumes will
come from products that are linked to their physical stores, and “the
biggest volume driver is going to be groceries, which we’ve rolled out
in Mumbai now, and are going to scale across major Indian cities in the
next year or two”. You can order Big Bazaar items from the website, and
there is no minimum order, though the site charges
Rs. 50 for delivery.
Missteps
This,
however, has led to a cluttered website. The home page is confusing,
with deals from different categories presented with no obvious
organization. Video cables,
mithai (sweets), pillows and backpacks are all lined up together, and it takes a second to find what you want within the categories.
“Of course we made mistakes along the way,” Deorah says, “but the real
one was not fully leveraging the (Future) group’s strengths during our
relaunch in 2010.” Instead, the company focused entirely on electronic
products, and Deorah adds ruefully, “If we could change things, we would
have held off a lot of big spending in 2010 to bolster our current
growth plans.”
The road ahead
The physical stores
simplify logistics for FutureBazaar. More interesting is the extent of
its cash-on-delivery (CoD) business—the figure is over 50% for the
industry, but Deorah enthusiastically points out, “CoD is only 20% of
our sales”. Instead, they promote loyalty with cashback incentives and
buyer rewards.
The company is also investing heavily in
technology, since its software requirements are specific. Deorah says,
“You’re going to see the more successful e-commerce companies also
developing a lot of technology themselves.”
Our view
The
hub-and-spoke model of physical stores supplementing the reach of the
website is what makes FutureBazaar such a promising e-commerce model in
India. Going forward, its limited reliance on cash on delivery, and
focus on low-cost, high-volume transactions, could lead to success for
the brand.
Jabong
Manu Kumar Jain (in a check shirt) and Praveen Sinha, Jabong’s co-founders. Photo: Priyanka Parashar/Mint
Launched
in October and live from January,
Jabong.com has quickly become one of the
top e-commerce sites in India. Internet rankings website Alexa, which
measures website visits around the world, places Jabong as the 63rd most
popular website in India—beating every retail site except Flipkart (at
No. 15). The site focuses on fashion and retail, and has grown quickly
by focusing on customer service.
Getting here
While
there were already some sites in the fashion and apparel sector, there
was little innovation in customer service, says Manu Kumar Jain,
co-founder and managing director, Jabong.com, Gurgaon. The 31-year-old
entrepreneur (a product of IIT Delhi and the Indian Institute of
Management, Calcutta), says: “Fashion and apparel is still a largely
untapped sector in Indian e-commerce. It’s got the right kind of profile
for e-commerce as well, because it’s an aspirational product category,
but people lack access to fashion.”
For Jain, the mandate was
clear—roll out new features and build an audience before the established
players could react. He says: “We did a lot of things that should’ve
been there already. We were one of the first sites with a 30-day return
policy, and today we are trying to offer same-day delivery in the top 10
metros. We pioneered card-on-delivery payments, so customers who aren’t
comfortable with using a card online don’t have to keep cash handy.”
The
company has concentrated on building depth while staying focused on
fashion. “With over 400 brands and 50,000 products, we have possibly the
largest selection right now and we’re building that up still.”
Jabong’s
site looks a lot like Myntra. Each section is dominated by large
pictures and a photo catalogue. This is easy to use, but puts the
spotlight on deals, something both sites say isn’t a primary focus.
Jabong’s layout is easier to navigate, but by and large it seems to be
willing to adopt ideas from the competition to grow quickly.
Missteps
At
this early stage, it’s too soon to say if Jabong has made any real
mistakes. Certainly the company is doing far better than planned. Jain
says, “We have gone in the right directions, and grown better than
expected.”
The road ahead
Jabong has been growing
through word of mouth and targeted online advertising on social media.
Jain says: “We listen to customer feedback and we’ve had a great
response. We see repeat visitors at well above the industry average
because of the commitment to customer service, and this is going to help
us grow profitably.”
Our view
Despite the quick
start, Jabong has a lot to do. The brand must keep introducing new
reasons for customers to keep visiting. For long-term success, it needs
to be able to balance growth and profitability.
Fashionara
Arun Sirdeshmukh of Fashionara. Photo: Aniruddha Chowdhury/Mint
Launched
in May, Bangalore-based
Fashionara.com is the newest firm on our list, but
it is doing things differently for the segment. Founded by Sirdeshmukh,
former CEO of Reliance Trends, and Darpan Munjal, president of
e-commerce consulting firm LeapMatrix, Fashionara is focusing on making
the experience of using the website as easy as possible, and is trying
to appeal to a more mature set of buyers, than other fashion sites.
Getting here
Even
on the phone, Sirdeshmukh, 46, has a commanding presence. He speaks
like a practised orator: “I have a history in start-ups and in this
particular vertical. When I felt that Reliance Trends was well set up, I
felt the urge to do something new. E-commerce seemed like a good next
step because I think that it’s changing the world.”
Sirdeshmukh,
who worked with Van Heusen, Louis Philippe, Indigo Nation and Scullers
before joining Reliance Trends, felt he could bring something new to the
existing e-commerce scene.
“What most people do is sell like a
catalogue. That’s not really useful for buyers,” he says. “What we offer
is a curated site, with a focus on fashion.” To that end, Fashionara is
one of the most visually distinctive sites around—it resembles the
social network Pinterest more than a retail site, with users able to
quickly customize views to their liking.
Products have detailed
descriptions—of the material and design, but also of the items they can
be paired with, and the settings they’re most appropriate for. This
level of detail makes it one of the easiest sites to navigate. At the
same time, there are lots of detailed photos, and even videos of
products, so users can see what a particular outfit looks like in
motion. Sirdeshmukh says: “Clothing is meant to be seen. The site
reflects that.”
Missteps
So far, the company seems to
have made the right moves, particularly in differentiating itself from
the competition by having one of the best-looking and simple-to-use
websites.
The road ahead
Fashionara plans to grow by
adding depth within its product range, while still being picky about the
brands it partners with. Sirdeshmukh is emphatic: “The focus has been
on improving the existing experience. We’re not going after deals
because we think people will pay a little extra for a better
experience.” For example, aside from the regular free delivery,
Fashionara offers overnight delivery (or same day in Bangalore) in major
metros, for which it charges
Rs. 199 (or
Rs.
99 in Bangalore). Charging for express delivery is unheard of in India,
yet it actually gives the customer a choice to expedite shopping before
a special occasion.
Sirdeshmukh adds: “There are some shoppers
who are loyal to the deals. They are usually younger, and will not stay
loyal to a site. We want the shoppers who are willing to pay a little
more for the best experience.”
Our view
With its
highly visual approach, Fashionara immediately catches the eye.
Lookbooks, where all the elements in outfits for different settings link
to product pages, are a new idea for Indian e-commerce, and Fashionara
is focusing on this, as well as an online fashion magazine. These ideas,
it hopes, will help users find products they may have missed otherwise.
Details
about the value of the transaction weren’t immediately available.
Officials of both Yatra and Travelguru didn’t respond to phone calls and
messages. Travelocity’s representatives couldn’t immediately be reached
for comment. Speculation about the acquisition was doing the rounds of
various websites on Friday.The Travelguru acquisition will
make Yatra a dominant player in domestic hotel bookings, a Yatra
executive and analysts said. This extension is becoming critical as
margins dwindle in the ticketing segment, given stiff competition from
rivals such as Makemytrip.com and Cleartrip.com.
“The decision has to be purely about the hotel business,” said Chetan
Kapoor, an analyst at travel industry research company PhoCusWright.
“Online travel agencies (OTAs) have been centered around airlines since a
long time. But now, air ticketing is not that profitable with current
commissions. The online travel companies make a profit of around 1-2%
from air ticketing, whereas the hotel business gives them 15-30%
margin.”
