Sunday 10 January 2016

Ecommerce trends: Marketplace models are perfect for India

Ecommerce is manna from heaven for India's beleaguered consumers — not because they are cool dudes but because most of them have modest incomes making it hard for businesses to serve them profitably. So a handful of big companies with a limited set of products address the mass consumer base; the others, including organised retailers, stay content with serving rich consumers, leaving the rest to millions of intrepid small suppliers, small traders and small shops.

Indians are lapping up online buying and it ought to come as no surprise. It takes away the considerable pain that shopping in India entails. You can look as much as you want and buy as little as you like with no shopkeeper glaring; it gives you more choice in less time and more comfort, allows you to say goodbye to crowded pavement markets, crammed shops, traffic, time-outs to get home before the maid or the water comes, and lugging home all the stuff you buy. You now get the staying power to not settle for less than the best deal or exactly what you are looking for. If Gita next door won't tell you where she got something from, you can still find it and the anonymity of eshopping ensures that the retailer is offering the same service and discounts to all, irrespective of how one dresses and talks. 

Ecommerce suits the structure of demand in India — a lot of people buying a little bit each that adds up to a lot; and scattered over a geographically long tail. An online lingerie retailer talks about how in some distant pin code where no lingerie shop could or should have gone, she sold two expensive push up bras.

A very modest income young hawker says that he is saving up to buy shoes online, like the ones he sees the walkers wear everyday. My daughter does e retail therapy to celebrate a good workday or recover from a bad one, buys from small estores with improbably names selling funky stuff to big brand ones. We could use an ecommerce helper at home, to answer the many doorbells to receive the stuff, to manage returns, matching the right courier to the right package and handle COD transactions for dodgy websites. 

Consumers see value as 'gain minus pain' and pick the option with the best value, which is nowadays the ecommerce option which both boosts gain and diminishes pain. What's more everyone is working to boost ecommerce — the Telecom Regulatory Authority of India ensuring cheaper telecom, telcos heavily advertising joys of data and smartphone companies crashing prices, and last but not least the ecommerce companies collectively burning money and bending over backwards to induce and seduce consumers to buy. In short this is Indian ecommerce's Y2K moment to seize and build scale to get to phase II.

Is supply ready for all this? Marketplace models are perfect for India, which is the land of Lilliput, with myriads of small buyers and small sellers. As Snapdeal points out in its interviews, the share of the organised sector or of known brands within it is very small. India Inc has not invested in mega factories to get huge economies of scale to play the high-volume low-margin game that Consumer India demands. There is also far more innovation and customer intimacy in the offerings of themillions of small suppliers than in large companies (just take a walk around pavement markets and small shopping centres in your city), and they don't have the money or the knowhow to expand their footprint and showcase their wares. And a marketplace connecting the two lands of Lilliput has got to be a winner. Of course it will not be the only winner, but that's the subject of another discussion. 

In the marketplace model the marketplace owner has to slog to provide value-added services to its suppliers and to scour the face of the earth for interesting supply that adds value to customers. However from a customer perspective, what we have is a mall owner who is not responsible for his tenants' behaviour. He does enable them to do better by offering many kinds of business assistance that a physical mall owner doesn't even dream of but in the end it is a "buyer beware" situation and yet untested at large scale. Will consumers understand the idea of an emarketplace to evaluate the difference between supplier X and supplier P as they do in Lajpat Nagar in south Delhi or Manish Market in south Mumbai? Or do they think it's all from the Snapdeal shop, without a care to where the stuff comes from? 

The Snapdeal founders have said they will keep working on the business model till they get it right, so we can expect the core customer-facing issue of "who is in charge out here, whose brand is giving me the guarantee of trust and quality and service" to be addressed alongside all the steps they are taking to serve suppliers better (king-size sheets packed into queen-labelled boxes was my experience). The middle majority of customers suffer in silence than complain, unless you provide them clea .. clear avenues and encouragement to do so. Any marketplace must serve both parties. Perhaps a stock exchange inspired listing agreement would be a good idea. 

Finally we needn't worry too much about whether a business is pure-play or not. India is about hybridism, consumers believe in "this AND that", not "this OR that". We want to be, and have been spoilt so far, by hightech as well as high-touch. I am a seasoned online buyer but I also want to physically see the five types of vacuum cleaners listed and talk to someone even virtually on whether the steam mop will work. The dharma of business is to add value and extract value from consumers, not drag them kicking and screaming to some supply-side notion of business model pristineness. 

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