Indian E-commerce & Retail Story

October 25th, 2008 by Annkur

This is a guest post by Sachin Singhal – Business Manager CafeGadgets.in

Whenever someone reads the word “Retail” the only thing that comes to mind is huge investment required for starting a new chapter in this space. When you have big fishes like Tata’s & Ambani’s in the ocean how a small fish can earn its bread? Probably this is a valid question to ask. Does E-commerce and retail have any connection?

People who have vision are called visionaries. Let me share a story with you. 14 months ago a start up funded by some angel investor opened up an e-commerce superstore. Idea behind the store was to be a leader in Digital & lifestyle products space somewhat like www.newegg.com in US market. As Vertical online superstore was a new concept in Indian e-commerce space, they have own limitations due to various challenges hovering around this arena. Usually in India people starts with one category but due to pressure on margins they tend to diversify and include newer categories which can increase their bottom-line. Opening and running a vertical online superstore is just like walking on an edge of a cliff especially when the area of business is digital and lifestyle products. Gross margins in this category are only 5-6% and net of around 2-3%. But due to competition it can be further reduced to 1-2%. Somehow this start-up decided to walk on this difficult path.

Unlike other websites, the Unique selling proposition was that they sell only genuine manufacturer’s warranty product and doesn’t have seller’s warranty. A word of creditworthiness with customers was the real bottom-line for them. Due to limited marketing money they relied heavily on strategic & vendor tie-ups which insured footfalls on the website and bringing down the cost of acquisition drastically. Tie-ups mainly included putting up “Buy Now” links on vendor’s website, monetizing the lead generating activities of vendors, setting up shops on 100 odd websites, back end fulfillment of major existing & upcoming websites, to be present on most of the shopping comparison engines. Other marketing activities included affiliate marketing, customer retention & loyalty programs, Brand Management, Search Engine Marketing, Social Media optimization, Print Media tie-ups. They also started to lead in niche M-commerce Indian market by introducing first time in India SMS based product/price search, multiple payment options which included SMS & mobile based payments. This implementation of WAP push and SMS push technology ensured their reach to 177 million potential mobile users who don’t have a desktop. In a matter of 6 months the customer database increased to 50k with 50 unique brands on the website. They had 7000 odd products ranging from Rs 150, Creative EP-50 earphones to Rs 2, 00,000 Bang & Olufsen’s speakers.

Today they have around 80 odd brands on their website, 200k registered customers, 1 million page views a month and most importantly they are profitable in first year of their business.

After the success story in E-commerce they got investments from a Retail chain. With funding, apart from expanding online business, they planned to launch their own retail outlets to overcome some of the limitations in online space. Major idea around this was to be present locally. They chose the locations like suburbs of universities where the footfalls of target audience were more. Target was gadget savvy people, 18-25 years of age group. They planned to open mid size retail outlets ranging from 1000 sq feet to 500 sq feet with a vision that growth in retail will complement the growth in online sales. Someone asked them how they would manage the exorbitant investment required for this retail?? Online presence is not that much capital intensive but retail is. If there is no marketing budget then how retail would be possible?? Answer to this was pretty convincing as well. Due to online presence of more than 14 months they had direct tie-ups with major brands in category of mobile phones, Electronics, Computers & peripherals. They approached each vendor and sold them this concept. They proposed to open shop in shop concept, putting up kiosks in the shops to market them, doing road shows and other co branded activities. Vendor support helped them to recover shop rent and other operational cost and it was just like showcasing their products locally. Extended credit line gave them flexibility as well. Now they are in process of opening around 40 retail stores PAN India. This has also given boost to their online business. After 16 months, they feel the journey has just begun on this long and unwinding road.

Now my question to you is – Retail, is it really difficult if you have online presence?

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Categories: Concept / Educative | Tags: cafegadgets, ecommerce, ecommerce india, guest post, sachin singhal