Let’s go Karting on dot.coms

About six months ago, I wrote a blog post on how online retails were making hay with 30% growth over Diwali, while the economic slowdown was hurting sales across malls with drop in footfalls of 10%. Things The dynamics of the online business have been shifting gears rapidly in the interim with the likelihood of a scenario in the near future where lack on online presence may be harmful as say not having a store at the proper location.

Unlike the developed markets, online retail in India is actually an online market place where the buyer and seller trade goods with the online retail portal serving as the intermediary. So basically when you order a book or any other goods, the order is actually placed against a supplier or a local trading company which fulfill the order. The online portal earns a small margin on every transaction.

This is exactly the reason why e-shopping is so cheap; there is no inventory to be managed by the retail portals and no showroom spaces needed by the sellers and traders. The system functions on one well-coordinated web of online ordering and ERP systems that integrate the buyer- portal- seller at one shot. Yes, Flipkart had tried the warehousing model initially when they started off with books, but it was not the way ahead with an increase in number of categories.

Much like the real world, e- retails today also host various categories today ranging from specialty verticals to the mega stores which sell everything under the sun. Buy furniture and furnishings at Fabfurnish, Pepperfry or Urban Ladder, get groceries from Bigbasket, Localbaniya or Greenkart , the kinder get their needs from Firstcry or Babyoye. Every kind of personal accessory is residing on Lenskart, Watchkart, Jewelskart. Jabong, FashionAnd You, Yebhi are mostly for clothing and accessories. The sharks of this ocean are Flipkart, Snapdeal, Junglee (Indian arm of Amazon) and Amazon India.

So is this the great shift of the Indian shopper from floor space to web space?

There is enough reason to believe this, considering some indicators. The very fact that Motorola’s went ahead to launch its smartphone range in India exclusively via Flipkart was a bold statement in this direction.

Darwinism is also evident as historic presence has made no difference. Old timers like ebay, Rediff shopping, Indiatimes shopping have no space today. Adapting to change and migration has been the key. TV based shopping networks like Homeshop18 and StarCJ were initially launched for them to capitalize on the fact that Satellite TV penetration was higher than internet. I guess smart phones have changed that equation. Retailers like Crossword, Shoppers Stop have websites with exclusive online deals, so does Future bazaar. Seventy MM which offered online DVD rentals closed the business of DVDs and got into retailing in 2012.

And most significant, IRCTC; the online railway booking king which gets the maximum traffic in India by far, has got into shopping- mind you, stuff here isn't cheap by any lengths.

The biggest question in my mind tough is will this boom survive?

It might be a tough question to answer at this point, considering none of these sites have any significant USP to differentiate it from the rest. If we evaluate these sites on classical Marketing theory of the 4 P’s, this is the result as I see it:

Product: All of them are following the market place model where suppliers are the kings. If the suppliers overlap, there is uniformity in the products. Also, other than Amazon (Kindle, Fire phone and Pinzon range) and Flipkart (Digiflip), no one has any product lines or brand which they own. This eliminates exclusivity in products.

Price: Yes, the consumer is definitely price sensitive and much like a regular market, a buyer visits 3-5 sites comparing prices once the product is final. But, since the back end suppliers for many of these markets are the same, the selling price equations will always remain:

Selling price= Supplier price+ Margin,  if supplier’s are same and its price is constant; it’s a war on who can bleed on margins and survive for how long. A point to note, even on a global level, Amazon is still in debt.

Place: Let us take this as delivery and we may find that same day delivery, free delivery etc. are fairly easy to ape. The segmentation by geography is where the biggies have tried to map the market differently. Flipkart is an urban hot seller and Snapdeal is targeting tier 2. Amazon is tying up with the Indian Post to cater to the remotest buyers where a courier may not go. This in my view can be a sustained advantage for some period.

Promotion: Spams! That what every send me in my mails. I get ads on social networks, TV, on my mobile apps and games. It is as cluttered as can be.

Service: This is not a P, but usually the best way to make a difference amongst alikes. But a look at the websites and they all appear the same. The customer service is not much to choose as well.

The bottom line is there is little or no scope for any site to build their brand persona or consumer experience that can lead to loyalty amongst consumers. In that case, this will finally be an online kart race where survival will depend on who can work on the slimmest margins to stay afloat. It is only a matter of time for us to know how it flows.