With Online Shopping No More Feet Shuffling On Roads And Stores

Gone are the days when computer was a rare entity. Today, even the kindergarten going kids are enough computers literate to use and play with them. Along with advancement of computers and its technologies, internet has also paved its way to become an integral part of our lives. Reducing the efforts and time involved in almost every possible task, internet has blessed the life of human being. Internet has also endowed us with a concept of online buying that has massively helped us to utilize the time spend in running and waiting around the stores in some productive work.

Online purchase of products is about “so much convenience”. It eradicates the need of going through the congested streets as well as the minus of limited product availability at the bricks and mortars shop due to space constraints. Malls and modern shopping complexes do offer plentiful of brands and products to choose from, still, are no match to online buying in terms of product availability. Adding to the convenience, it keeps the consumer away from the buzzing traffic, parking problem and above all the tiring wait in the long queue of billing counters.

Online purchase is also about ‘fun and excitement’. Shopaholics from all walks of life can extend their shopping without digging a hole into their wallet by the exciting offers, deals and discounts provided by the online store. One must break the myth that the similar product offered with great discounts as compared to the physical store is not up to the mark. The margin that falls into the customer kitty is created from the cost cutting of establishing and maintenance of physical location, retail manpower and others. Hence, one can grab and enjoy the deals and discounts to buy online even the expensive products of high street brands.

Even if a revolutionizing concept, it has a slow adoption rate as many shoppers are still reluctant to buy online products due to its lack of touch and feel experience. Quality concerns have perhaps been the most significant obstacle to the growth of this type of online purchase. Another myth that hurdles the growth of online shopping is regarding the confidentiality related with the monetary transaction procedures used by the stores. Delivery slot is also a significant downside attached with the online purchase of products and services offered from the global merchandisers.

With time, online buying is improving its capability, capacity and other aspects that have helped it in increasing the consumers each passing day. Further, with the raising competition and inclination of consumer towards online market, these stores follow policies that are customer oriented. Keeping a strict tab on the quality of the products they are selling, these online stores also monitor about the delivery schedules to retain the trust and confidence of the customers. Furthermore, the implementation of improvised technology has made monetary transactions easy and secure.

Giving plethora of choices in any segment, online shopping gives relief to every people who are blessed with enough money but not with time.

Only one e-grocery start-up has attracted funding so far

More than half a dozen start-ups have launched online grocery stores in recent months. Working people, happy to have rice, sugar and even organic pepper delivered to their doorstep, may wonder why no one thought of it sooner. But egroceries are a tricky business. The success of online book and gadget retailers is little reason to assume that this sudden smorgasbord will fare well.

There is, of course, room for growth. According to consultancy firm Technopak Advisors, food and groceries account for $343 billion (Rs 15.44 trillion; one trillion equals 100,000 crore), or 68 per cent, of the $505-billion Indian retail market. Within this category, the organised food and grocery market, estimated at $12 billion, is expected to grow at a compound annual rate of 30 per cent in the next five years.

That might explain why 26-year-old Ambuj Jhunjhunwala, who started online supermarket MyGrahak in 2010, wears a confident smile. The entrepreneur, whose family promotes 6Ten, a 300-store retail chain, is unfazed that he has three rivals in the National Capital Region alone (see Grocers Galore, page 72). "The market has room for everyone," says Ajay Mittal, Director, Ascent Capital. His company recently invested $10 million in BigBasket, the only egrocery venture to attract funding.

"If people can buy highly touch-andfeel products like shoes or apparel online, why not grocery," asks Vaibhav Goel, founder of three-month-old FamilyKart, which delivers around 20 orders a day in and around Delhi. E-grocers enjoy some advantages over regular supermarkets. They save on costs such as rent, store staff, and managing store inventory in addition to warehouse inventory. Two years ago, 6Ten closed 25 stores that were not doing well. More recently, Future Group's Big Bazaar and the More chain, operated by Aditya Birla Retail, also shut several stores that had turned unviable. "Delivery costs account for 60 per cent of what we would incur on rentals, so we save 40 per cent," says Hari Menon, co-founder of Bangalore-based BigBasket.

One reason why no e-grocery startup other than BigBasket has managed to raise money is that margins are wafer-thin. "At a gross margin of 12 to 15 per cent, profitability cannot be more than two per cent," says Gaurav Saraf, Director of Epiphany Ventures, a venture capital firm. The gross margin on fast-moving consumer goods is as low as 14 per cent. On fruit and vegetables, it is around 16 per cent but shelf life is shorter. This is why many sites, including MyGrahak and FamilyKart, stay away from fresh produce. BigBasket, however, says it has no problem. "Fruit and vegetables are procured only on order, except for those with a longer shelf life, such as potatoes and onions," says Menon. "This reduces loss of stock by three to four per cent."

One of the biggest rivals of e-grocers is the local kirana store, which offers home delivery in many cities, often within an hour. But Ascent Capital's Mittal says kirana shops lack the cost advantages to offer customers the best price, and cannot stock a wide range of products. BigBasket tries to consolidate orders in a locality and reach the customer in eight to 24 hours. But is that enough? Manohar Mason, Managing Director of Pentagon Communications, a marketing and consulting firm, doesn't think so. He says: "People can wait for books, but not groceries."

E-grocers are more likely to get repeat purchases than online retailers of other products. BigBasket says 65 per cent of its 3,000 customers are repeat buyers. But this also means egrocers must be on their toes. "If you can satisfy a busy customer, you're in for a huge opportunity," says Mason. Many investors doubt whether e-grocers can scale up. "This category cannot rely on a hub-and-spoke model, unlike apparel or electronics," says Mukul Singhal, Vice President of SAIF Partners, a venture capital firm. A book or an iPod can be sent by air across the country more easily than a 10 kg package of groceries.

"To reach Rs 100 crore in revenue, you must be present across the country," says Epiphany Ventures's Saraf. "Supply chain challenges are different in Bangalore and Gurgaon. You cannot replicate your model." So, while Jhunjhunwala expects MyGrahak to turn profitable by end-2012, he has no expansion plans.

Goel of FamilyKart says scaling up in other cities makes sense only after it has fully penetrated the area it currently operates in. But it is debatable whether volumes alone can make a venture profitable. Started in 2007, Britain's biggest e-grocer, Ocado, executes more than 9,000 orders a day, but struggles to make a profit. California-based Webvan started in 1999 and went bankrupt in 2001. It delivered fresh produce in 26 cities, but ran aground partly because it could not keep its promise of delivery in 30 minutes.

To boost margins, Indian e-grocers concentrate on monthly rather than daily purchases. A second strategy is to sell products with higher margins. Margins on pet food, for instance, can go up to 30 per cent. "The contribution of such items to sales is over six per cent, and we plan to raise it to 15 per cent," says Jhunjhunwala, whose monthly sales turnover averaged more than Rs 1 crore a month in the past year.

A third strategy is to sell inhouse brands, which improves margins by 20 to 25 per cent on staples. "We sell 7,000 SKUs, of which 300 are our own branded staples," says Menon of BigBasket. SKU or stockkeeping unit is the retail term for product identification code.

E-grocers get fewer deliveries returned than other online sellers - two to three per cent. The overall retail average is over 10 per cent. Most returns are because the customer was not available to receive the package. Chennai-based e-grocer Veggibazaar, which sells fresh produce, asks customers to indicate where orders can be delivered if they are not available - with a neighbour, maybe, or the security staff.

Perhaps the biggest threat to egrocers is giants such as the Future Group, which is testing a hybrid model to sell groceries online and in brick-and-mortar stores. Kashyap Deora, President of FutureBazaar. com, the group's online arm, which started selling groceries online in January, says: "We are doing pilots in 30 stores in Mumbai to check the feasibility of shipping online orders from the stores."

Saraf of Epiphany Ventures cites the success of British retailer Tesco, which operates offline and online. "It suggests that a hybrid model works best for grocery," he says. "A startup can't compete on procurement with a Reliance Retail, which has the entire supply chain mapped out." Sourcing efficiencies allow big retailers to offer discounts. BigBasket's Menon is undaunted.

"Once we have volumes, we'll try to move up the supply chain," he says. But BigBasket is the only e-grocer with funding. Its rivals will not be able to expand unless they attract investment. Newcomers such as FamilyKart are aware the clock is ticking. "We have a small window of opportunity," says Goel. "In a year we will have to be at a level where we can survive even if the big guns enter."

TECHNOLOGY AS CHANGE AGENT

Tech Drives Growth in Grocery E-tailing
Supply-chain tech helps to reduce cost & inventory and predict user behaviour

Everyday, I learn something new,” says R Rammurthy as he picks up a netbook, an Android tablet and a paper-clip file before climbing onto the driver's seat of a white Maruti van loaded with four neatly packed baskets of grocery and vegetables. As he slips into first gear, he pointed to the netbook screen which displayed a map where the vehicle’s number flashed. The on-screen status of the vehicle changed from idle to moving and the address to which the baskets needs to be delivered popped up.
Rammurthy’s trip ended nearly twenty minutes later at the doorsteps of a customer-- mother of a three-year-old who hates to spend the little spare time she gets during weekends at the supermarket. During the drive, the 28-year-old management graduate, who now handles a small team for online retailer Bigbasket.com, started explaining how his company manages to keep near-zero inventory and fulfils hundreds of orders everyday.
Online food and grocery retailing, fairly mature in the West and showing lot of potential in growth markets like China, has not been able to capture the fancy of Indian shoppers yet. Things, however, may be changing as a new generation of wellfunded online firms -- Bigbasket.com is a key example -- are using simple end-to-end technology solutions to offer deep discounts on grocery items, predict customer behaviour and keep a tight leash on expenses. With technology playing a key role, they are trying to make a dent in the estimated $343-billon food and grocery market in India.
For example, these firms use a supplychain technology that allow customers to place orders through multiple channels and later predict what a customer is likely to order. Combined with applications that track everything from the time an order is placed to delivery and devices that help during procurement, technology is helping these firms to make a compelling and convenient offer to the tech-savvy shopper. For these online retailers, the most important tech application is the ability to predict customer behaviour which lets them reduce inventory and thereby, cut costs. For instance, while a traditional retailer might have to stock his monthly offtake of atta at least three weeks in advance, an online retailer ends up stocking it for less than two days. “That is mostly analytics,” says Ambuj Jhunjhunwala, the founder of Mygrahak.com which sells food and grocery online in Delhi. Predicting customer needs helps them to plan in advance and procure based on needs. Need-based procurement works ideally well with perishable goods like food not to talk about saving expenses on storage space, which is a large part of expenditure for a traditional retailer.
Analytics also involves knowing the customer better which helps retailers to make tailor-made offers for customers and increase sales. Online retailers can also eliminate a large part of their frontline staff because customers usually help themselves. Typically, large format brickand-mortar stores spend much of their attention to figure out customer behaviour on the shopping floor and arrange goods so that they catch customer attention. This can now be automated as the platform generates enough data about individual preferences. “You have complete control over knowing what your customer is buying and great level of predictability. The stickiness of forecasting can go up as you use technology to predict,” says Anand Ramanathan, Associate Director at KPMG.
Shoppers, whose experience of buying grocery online has been good, tend to very loyal. For example, Asha Liju, a clinical research professional from Bangalore buys her grocery online. “This is the second time I’m buying online because its simple and saves me nearly 10 kilometres of travel,” she says.
Here again, technology plays a key role. Grocery buying is mostly a repetitive task something technology is known to do well. For instance, when a shopper logs into the account, a history of previously bought items makes it easier to pick instead of going through the motion all over again. “At each step, simple technology is helping us save time and money,” says Abhinay Choudhary, co-founder of Bigbasket.com. Bigbasket.com, which now has 100 people on its rolls, will supply anything from milk products to fresh fruits among 7,000 other items at your doorstep at competitive prices within a few hours of placing an e-order. “Our delivery vans even have cold storage facilities. This is very new but if we do it right, it will be big," says Choudhary. His earlier venture was shopasyoulike, a similar food and grocery store catering to residents in Whitefield, Bangalore.
25-year-old Jhunjhunwala’s Mygrahak-.com now claims that they process nearly 15,000 orders a month. “The average order size is Rs 1,250- Rs 1,300 . We can at least grow 30 times in Delhi alone,” he said. He recently introduced “card on delivery,” where a customer can swipe their cards at the time of delivery to pay for the order. Jhunjhunwala comes from a family of entrepreneurs and returned to India after graduation learning how to do business from his family, the promoters of BSE listed REI Agro. Chennaionlinegrocery.com, Town Essentials and Atmydoorsteps.com also operate in this space. Scale might not be an issue as demand from a large working population, which finds frequenting supermarkets an irritant, grows.
Investors also seem to be buying into the grocery e-tailing story. Last month, private equity firm Ascent Capital invested $10 million when Bigbasket.com co-founded by a team of eight which includes Fab-Mall co-founders Hari Menon, VS Sudhakar, Vipul Parekh, VS Ramesh and Abhinay Choudhary, raised its first round of institutional funding.
The food and grocery market accounts for over two thirds of the $505 billion Indian retail market. According to retail consultancy Technopak, the retail market is projected to touch $725 billion by 2017. The organised food and grocery retail market in India is estimated at $ 12 billion in 2012 and grow at a compounded rate of 30% over next the five years. "Though e-tailing is still a very small part of retail in India it is projected to grow at a fast pace and over the next decade its presence will be significant," said Pragya Singh, Principal Consultant, Retail & Consumer Products, Technopak. Headroom for growth comes from the fact that that e-tailing accounts for a measly. 2% or $1 billion of the overall retail market and it is expected to reach $13 billion by 2017.
But retailing food and grocery online is not an easy task. Though there are success stories, the monumental failure of Webvan in the United States back in 2000 is enough to act as a damperner.
The challenges include being able to give consumers a large number of products to choose from, achieving consistency in quality especially when it comes to perishable goods and the cost of logistics. For instance, Mygrahak’s Jhunjhunwala has already invested $1 milllon in the firm and anticipates an expense of $4 million to $5 million every time it moves to a new city. While critics often cite the example of Webvan, the story may not repeat in India. Webvan may not be the best benchmark, argues Singh. “It is an example of a company that grew too fast in middle of the dotcom boom, rapid expansion to multiple cities, gigantic infrastructure including warehouses but not enough sales to back the same,” she said.
Even as its spends Rs 150- Rs 400 to acquire each customer, Mygrahak.com will break even this Diwali, claims Jhunjunwala. Despite the rosy numbers, e-tailers looking to sell food and grocery might have to expand cautiously, suggests Technopak’s Singh.
The Challenges
Achieving standardisation
in quality and quantity when a large part of grocery items are still sold loose in India
Having a comprehensive product range that covers all possible variations
Delivery across large parts of urban and semi-urban areas
Sensory needs of consumers are not satisfied through online channels
Fulfilment and logistics costs More:http://epaper.timesofindia.com

Top 10 Trends In Indian E-commerce In 2010

2010 has been defining for the Indian e-commerce sector, which has (and some may sigh “finally”) come of age with much of the evolution being clearly visible this year. Though a fairly old industry in India, this sector has caught the fancy of investors and has generated multiple entrepreneurial avenues, riding on macro trends such as increase in broadband penetration, change in buying patterns and the success of group buying sites globally. So, what did we see this year?

Most significantly, travel site MakeMyTrip’s listing at the Nasdaq spurred the interest of many an investor as they saw a clear potential of a liquidation event. 2010 also nearly double of number of M&As (25) compared to 2009 (11), according to data compiled by our financial research platform VCCEdge. In this backdrop, VCCircle spots some key trends, including M&As and private equity fund-raising, in the e-commerce space in 2010 that will have a bearing on the way the industry evolves in 2011 and beyond.

Categories that are flying: Domestic entrepreneurs are raring to set up online stores mimicking global ecommerce sites. The top categories within e-commerce, investors say, are travel, classifieds, group buying, auto sales and luxury brands.

Travel, the big e-commerce story: The catalyst for e-commerce, one category which is largely responsible for making users more comfortable with online transactions is travel. Top players such as IRCTC, Makemytrip.com, Yatra.com and Cleartrip.com are witnessing a boom in online ticketing sales and are expanding their portfolio of services to add hotel booking and packages. Makemytrip India Pvt. Ltd. acquired online bus ticketing company Ticketvala.com from Mumbai-based Travis Internet Pvt. Ltd. in March 2010 and in August had a high profile listing on NASDAQ. In October, Yatra Online Pvt Ltd, the owners of Yatra.com, picked up a stake in Travel Services International Pvt Ltd, a wholesale ticket consolidator. B2B travel network Via and bus ticketing service Redbus.in are also making inroads and experimenting with new services.

Travel sites are also spending more online and spent a total of Rs 59 crore on display ads in fiscal 2010, according to the IAMAI.

Exclusive book retail not sustainable: Flipkart, which set out as book retailing portals, has spread out to cover other products as plain vanilla book selling is not sustainable business. “Books were a good hook to draw in users but on its own, book retailing online is not a scalable business. It will work online but can never become very big as the average book value in India is very low. That is why sites like Flipkart and Infibeam are expanding into other categories,” said Suvir Sujan, Partner, Nexus Venture Partners. The site also sells movie and music DVDs, games and consoles and mobile handsets. Infibeam has expanded similarly with used cars and bike classifieds.

Indians love discounts: Having received high valuations, deal sites and voucher-based ecommerce is the flavour of the year with domestic startups mimicking global sites, primarily Groupon.com. “Indians like deals, so daily deal sites will continue to attract users,” says Rajan Anandan, an angel investor. Sites such as Snapdeal.com, Mydala.com and Dealsandyou.com have established themselves and a slew of more daily, localised deal sites are cropping up such as DealMagic and Koovs. According to Harjiv Singh, who is exploring global markets with his Comparenbuy.co.uk rather than India, the Indian e-commerce space is not ready as yet for serious e-commerce players. He explains, “There are too many players right now in the industry and the customers are not sophisticated enough. India will be ready in 3-5 years and by then we will see only a few ones still standing - only those who build it up will get brand recall. In India, it will be a numbers game, with the ones who win getting the most number of merchants, deals and users.”

But we also like fashion: Today eBay acquired Germany’s fashion and lifestyle shopping site brands4friends.com for $200 million, to foray into the hottest sector in ecommerce – high end luxury portals. In India, sites such as 99labels.com, exclusively.in and Fashionandyou.com are competing in this segment. In November, Accel India Venture Fund and Helion Advisors Pvt. Ltd. invested $2.8 million in Exclusively.In, Inc. followed by Sequoia Capital infusing $8 million in Fashionandyou.com. Anandan warned that retailers tend to be laggards when it comes to technology – and this will prove to be an issue for e-commerce players.

Strategic shifts: General e-commerce has shifted from being a horizontal space to vertical and shopping sites such as Indiatimes Shopping and Rediff Shopping need a total makeover. On the other hand, many portals are expanding horizontally - take Yebhi for example. Bigshoebazaar was recently rebranded as Yebhi - it no longer is a shoe-only store and also sells accessories, bags and clothing.

Classifieds going strong: Jobs, real estate, matrimonial continue to see traction. Linkedin, Naukri and Monster.com have top-recall followed by TimesJobs.com and Shine.com by HT Media. Matrimonial sites such as Consim Info Pvt Ltd’s Bharatmatrimony.com, Shaadi.com and Jeevansathi.com continue to reign. Naspers Ltd infused $40 million into the Nexus-backed OLX and in July, Mid-Day
Infomedia Ltd. acquired SnatchKing Online Pvt. Ltd. In August, Naaptol Online received $7 million in venture capital funding from Canaan Advisors Pvt Ltd while Nexus India Capital Advisors Pvt Ltd invested $1.5 million in Magic Rooms Solutions, which offers an online hotel inventory distribution software. Carwale.com’s auto classifieds business was acquired by Axel Springer and India Today, and other websites such as eBay Motors, Gaadi.com, Carazoo, Zigwheels and Automartindia are players in this space.

What is in store: Large e-commerce companies in India will need to spend heavily on infrastructure over the next three years to maintain momentum. Despite shipping delays, billing errors, poor user interfaces, checkout issues, the perception of online transactions not being secure and the continued lack of bandwidth, the mood of e-commerce players is one of optimism as they wait for 3G networks to roll out.

Competition and hype: Competition will continue to be heated and only few will survive. Shailendra Singh, MD of Sequoia Capital India says, “There is too much hype around e-commerce right now and many investors will lose their money investing in e-commerce because too many companies are trying to raise capital and we already see signs of very intense competition. In such an environment, market leaders have an unfair advantage because the whole industry will educate the market and drive adoption and the market leaders will get disproportionate benefit from it. We believe the market leader in each category will generate the lion's share of value for shareholders.”

Consolidation, will it happen: Industry experts are unanimous in the view that consolidation is still a far cry in the nascent industry. Salwan said, there are no cash flows for the next 2-5 years and hence there will be no consolidation. We might not see the likes of Amazon taking over Quidsi, the operator of Diapers.com and Soap.com for $500 million in the near future, but $100-$200 million deals can be expected to take place in the next two years, according to Anandan.

Top 10: Online shopping sites in India

Shop online: Online shopping has become a popular trend in India now. People have been enjoying the convenience of having their order shipped right to their doorstep. But people often get confused in selection of reliable sites as there are a plethora of sites, and everyone claims to be reliable. But in actual only few are up to the mark. Thus to facilitate you, here is our pick of top 10 online shopping sites.

ebay.in:eBay is one of India's leading online marketplace. It is an online marketplace where anyone can trade practically anything. It is a platform for the sale of goods and services by a diverse community of individuals and businesses. eBay users trade in more than 50,000 categories including collectibles, antiques, sports memorabilia, computers, IT and office, art, antiques, toys, dolls, stamps, comics, magazines, music, pottery, glass, photography, electronics, jewellery and gemstones, claims the company.

fashionandyou.com: Fashion and You is an invitation-only online destination. It features the best International & Indian designer brands in luxury, hi-fashion and lifestyle experiences for men, women, children and your home.

flipkart.com: It is an online chopping site that lets users shop various items including books, mobile accessories, cameras, game consoles, MP3 players, home and kitchen appliances and much more, online at discounted prices. It offer multiple methods to make payments for order: credit card, debit card, net Banking, e-gift voucher and cash on delivery. The order is generally delivered within 3-4 working days.

mygrahak.com: MyGrahak.com is said to be India's largest online SuperMarket. It sells a wide range of products like FMCG, Food, Non Food, Grocery, Rice, Gourmets and others. Attractive offers are also available for shopping online at MyGrahak.com.

futurebazaar.com: It is one of India's largest online retailers and is part of Future Group %u2013 owner of brands like Big Bazaar, Pantaloons & Central. It offers a wide range in cameras, consumer durables, home decor, home entertainment, appliances and electronics, mobile.

homeshop18.com: Homeshop18 is a virtual retailer operating in a multimedia environment that includes television, web, catalogue and print to sell high quality products and services directly to consumers across the country. It deals in books, movies and music, gifts and flowers, mobiles and accessories, camera and camcoders, electronics, computers and peripherals, toys and games and much more.

myntra.com: It is an online shopping destination for fashion and lifestyle products. It lets you shop online from the latest catalog of original branded products in apparel, footwear and accessories for men, women and kids.

snapdeal.com: The website claims to offer 50-90 per cent off daily discount deals in major cities of India. It is touted to be the one-stop-shop for availing discount coupons/vouchers for restaurants, spa, gyms, travel/holiday packages and other cool things in your city.

letsbuy.com: Letsbuy.com is an Internet retailer of branded Consumer electronics and IT products, which claims to offer more than 9000 products from top international and domestic brands. The company deals in technology products like notebooks, printers, networking, digital cameras, storage and Consumer electronics such as LCD TVs, mobile phones, MP3 players, gaming and home electronics.

mydala.com: It is a platform which gets you great deals you want in your city. It claims to offer deals each day - 40-95 per cent off on the best of restaurants, shopping, salons in your city.