Just saw this tweet and I was reminded of one ecommerce company that takes care of packaging material post delivery.

It’d be nice if @flipkart reclaims packing material like this post delivery. What a massive waste otherwise. #CSR twitter.com/thesatbir/stat…

— Satbir Singh (@thesatbir) May 4, 2013

BigBasket, one of the leading grocery ecommerce companies of India, has a minimal wastage in the form of delivery packaging. Three things in particular:

1. The goods come in a crate that is emptied as you cross check the items. No plastic/fabric bags.
2. The tray for fragile veggies like tomato, capsicum etc. is collected back in the next delivery.
3. The paper invoice is dead simple black print on white paper. No fancy colors or costly papers.

Simple steps that bring in cost efficiency along with being a little eco-friendly.

[Originally posted on NextBigWhat]

Last couple of years we saw ecommerce industry making it to news for all the funds everyone was raising. In the past few months, the funding news has been slow but nonetheless ecommerce has had its fair share of media limelight with pundits talking about lack of profitability in companies that value growth and mocking small profit making ecommerce players for their lack of investment in infrastructure and growth.

Amidst all these there is a slow but noticeable change in the way ecommerce players are operating. The business model of the India ecommerce is taking a full circle flip to go back to where it started, though this time the infrastructure has changed and along with that the size and understanding of the market as well.

Last year, at an IAMAI panel we saw a host of 5, then prominent, ecommerce players each with a distinguishable business model.

1. Ebay – Marketplace
2. Flipkart – Inventory owned Retail
3. HomeShop18 – TV Shopping extended to ecommerce.
4. VIA – Store in Store model through there offline network of franchisees.
5. Smile Group – Vertical play through fashion&You, Deals&You, Bestylish, Freecultr, Juvalia&You.

The debate was mostly around which model works best for ecommerce and is sustainable in the long run. Today ofcourse everyone is going towards the marketplace model. Part of which is to do with the FDI regulation and the rest around capital efficiency. One credible point is that this time the players are moving towards a model that they did not originally start with, hence the belief is that they have definite answers to the intricacies of the model and not just a me-too jump.

Let’s take a look at how the full circle of change has evolved and how things are moving towards the better.

The Pre boom era – Rediff / Indiatimes/ Indiaplaza – Ecommerce, as was introduced in India, was more skewed towards sellers than consumers. The focus was on getting the user to transact without worrying about order fulfilment and post purchase support. Add to that the payment collection woes; the ecommerce ecosystem was only a blue link on the web for most consumers.  Most of these sites catered to NRI audience who wanted to send something back home. The time/quality/pricing mattered very little. A good instance of this could still be seen through the prices at some sweets and flowers delivery sites.

The players were more of a tech/media company with little to no exposure to retail (Indiaplaza is an exception and infact was powering the shopping section at a lot of news/media sites). The actual inventory owners were responsible for shipping but did not have a direct interface with the user. A lot of this still exists.

If you draw an analogy of this model to the offline world, it’s more like a megastore that has a single interface for billing and checkout but each department, floor and label has its own service levels. This was skewed indeed and the incumbent players realised the gap only in the past couple of years.

Marketplace – Through the acquisition of Baazee, Ebay entered India and gave a marketplace model to the user. The initial positioning was around enabling every consumer to be a seller and give them a platform to dispose-off their un-used products. This is very similar to the OLX/Quikr positioning of today. That positioning is still hurting Ebay India as there still exists a perception about ebay being second hand products store.

Ebay has acted well to bring in more trust and security for buyer and seller. Though it has been restricted a lot due to the FDI regulation and having to follow its international model in India as well. The buyers on Ebay are still limited to the savvy audience of the web. Others, who got introduced to ecommerce in the past couple of years through TV ads are yet to figure out why “IndiaTech99” or “Gadget4Sale” is mentioned as seller for a product.

Own the inventory retail – Until Flipkart entered the market, most ecommerce players acted more like an interface between the sellers, who were the actual inventory owner, and the buyers. Back then “Own the inventory” model was rarely seen, as this model is cash in-efficient. Large warehouses, limited credit time from vendors and added liability of dead stock have not worked in favour of this model and brought in new set of problems to solve. Though, the control over the complete value chain that this model offers has a lot of benefits as it means greater bargaining power with suppliers, higher gross margins and most importantly you become the single interface to the user. User does not have to worry about who the real inventory owner is.

This model, though, has been very costly but has helped Flipkart develop trust and service credibility amongst its users. That kind of intangible value creation for its brand would not have come through any amount of marketing spend.

TV Shopping – Homeshop18 /StarCJ – TeleShopping or TV shopping has been in India for over a decade now. It started with products that one would never get at a regular store and would never think of buying otherwise. Loaded with surprises and offers that sounded too good to be true, white skin humans with dubbed voice promo videos with lots of testimonials – that was the key to those transactions. I remember ordering some “mathemagic” course back in school days from one such network; the books came in English and the videos in dubbed Hindi. It was that bad.

With time, we saw Indian/Chinese products being sold by Indian celebrities targeting the gullible afternoon or late night audience. HomeShop18 fought that perception and has made a mark in TV shopping. StarCJ followed but hasn’t been as much popular although backed by GEC (General Entertainment Channel) network. HS18 is good. The transaction process is smooth, delivery is on time and ordering on phone isn’t painful.

The pain with HS18 as a TV only model is that the catalogue size will be limited by airtime. Also, the cost of producing promo video is justified only for high margin products like apparels or imitation jewellery. The limitations are similar to that of a-deal-a-day model of WooT. For the user, though, this is as good as inventory owned retail. The brand extension on web has been executed well and it has the advantage of being an As-Seen-On-TV brand which does bring a lot of trust with Indian users.

I would expect Indiatimes Shopping to pull off something similar with TV being replaced by newspaper or may be both together. The problem with Indiatimes’ current usage of print media space in their bouquet of publications is that the same spot earlier showed Chinese products from Naaptol or some e-phone or blackcherry phone under the Reader’s Offers. Indiatimes isn’t using its print space enough for brand building but only for announcing coupon codes. When you turn pages, you jump from one offer to another between Naaptol, Reader’s Offers and Indiatimes Shopping. It is facing the same perception problem that HS18 had to fight due to incumbent players in the TV shopping space. Timesdeal did try a little brand building through print but that just isn’t enough, specially when competitors like FlipKart, Infibeam etc. have earlier enticed readers with full page ads in the same publication.

Pro cheapskate tip – use FLASH<today’s date> as coupon code on Indiatimes Shopping anyday, eg. FLASH3101 for Jan 31. [That is all that the ToI ad of Indiatimes Shopping says.]

Virtual Store in Physical Store model – Via.com, through its network of offline franchisee stores, has been selling travel services, telecom services, movie bookings etc. Though I haven’t tried but I have heard of Via trying their hands at selling physical goods such as books through the ViaWorld network. That is a powerful proposition in India. It is enabling “assisted” online shopping. Anyone who has ever sold anything offline in India knows how important “assisted” shopping is. We are a country where coin operated coke vending machines and ticket vending machines are also manned. In the long run, this network of retail points can become a delivery hub for neighbourhood orders and in turn increase footfalls in the store.

Vertically Integrated Retail – India is yet to see an aggressive vertically integrated retail play on web.  The advantage of VIR shouldn’t be viewed as an ecommerce company starting to manufacture but a manufacturer getting direct access to consumers. Some large brands have deployed their own stores using Martjack, Zepo, BuildaBazaar etc. though the marketing for their ecommerce store hasn’t been that aggressive. As the market matures, single brand VIR would need to depend on marketplace and their ecommerce setup would be reduced to an order fulfilment department. Private labels are a different game than VIR. There is no manufacturing in private label. The analogy of Private label vs. VIR is same as Marketplace vs. inventory owned retail. Zovi, for example, is a private label. The Zovi shirts are manufactured by a Delhi based manufacturer called TN’G, amongst others, which also serves private labels for large stores like Lifestyle. Same is the story with most private label brands, online and offline.

So where are we going from here?

The 2 important points to consider from over a decade of action are:

1. Ecommerce needs greater control over each process in the service chain for maintaining brand credibility.
2. Owning the inventory is cash in-efficient. While a marketplace model allows for greater catalogue coverage without the risk of maintaining stock but owning the inventory also allows for higher margins.

A hybrid model of the 2 is best suited. Which takes us to what Amazon is doing in US. It is a retailer itself and it provides each process of the service chain as a service to its marketplace sellers. This way the service quality will be checked at all levels and there will be known/well communicated reasons for failure.

Again, the important point here is that the players are making a conscious move towards this model and it is (hopefully) not a blind jump.

Please note I am suggesting a hybrid model with power of direct retail and efficiency of marketplace. This is not a standalone marketplace model like Ebay with only web infrastructure.

Here’s a list of Marketplace related action so far in India.

1. Flipkart – Expected to launch marketplace in March. Good infrastructure in place.
2. Infibeam – Hybrid model but lack of physical infrastructure. The retail of Infibeam is still different from that of Flipkart in the fact that the order fulfilment is not handled by them. Say if you order a Videocon fridge from Infibeam, it would be delivered by Videocon in Bangalore with no mention of Infibeam anywhere. Almost marketplace but no exposure of seller until delivery.
3. Jabong – Launched customer support as a service. Also launched Logistics service.
4. BuyThePrice – Converted to marketplace.
5. Shopclues – Making a prominent mark in electronics segment with marketplace model.
6. Tradus – Doing decently well with pure play marketplace.
7. Rediff/Ebay – Was always a marketplace but lack of infrastructure.

* All the players mentioned above are either our customers or potential customers. The article is only a perspective on the past and does not intend to demean anyone.

Exotel, the cloud telephone company, has launched “Exotel For Food“. The product is a packaging of the standard Exotel product for restaurants. From what I understand, the core product is same, what changes in the product is the default settings. Configuration options that would otherwise have been set to null or for the audience at large, is optimized for restaurants. Though it might sound trivial but this one feature of handling the default options better would increase customer satisfaction from day one and reduce the churn rate dramatically.

This is a sign of understanding a particular segment of target audience better. You cannot expect a new user to understand every configuration of your product. It is going to be too late until he understands the variables that are under his control. This is, in a way, adding a services angle to the product but is very important for product companies in initial days. Though the good part is that the service is not at individual level but at a set of users, hence scalable. [Read my earlier take on Default Settings and How It helped Facebook gain marketshare in India here].

Imagine “Facebook for privacy concerned people” or “Practo for Diet Consultants”. You can either let the competitor address that niche or customize for that niche yourself. This also gives you the flexibility of pricing your product differently for different audience without falling into the conflict of double standard pricing. Imagine Surf Excel (for hand wash ) and Surf Excel Automatic (for machine wash) – same product*, different audience, different pricing. Most importantly, it makes the customer believe that the product is designed for her and that the company cares for her need. It’s a marketers dream to achieve that kind of trust, even with a subset of the target audience.

Next step for Exotel might be to use dedicated sales channel for this variant only, say a tie up with Zomato – they are already doing phantom numbers and analytics tracking for leads generated for their advertisers, Exotel will make it lot easier. A typical example of parasparam bhavayantah (mutual pleasing of one-another to create win-win for all) between the 3 parties.

*A distinguished chemical engineering professor, who had worked at a research lab for a FMCG major, told me that the chemical composition of active particles is same in both variants. Only a color change of few inactive particles to make it sell better. There is too much pressure on research labs to come out with something new every few months, hence the “automatic” version came into existence. 

Pharma delivery and Meals-on-train are 2 startup ideas that most of us must have thought about at sometime but never tried just because of the obvious hurdles.

YoPharma is an online pharma store that is tackling the first problem. The hurdle here is that the regulations do not allow selling of medicines without the original prescription being produced before purchase. Not that the local druggist adheres to it but when you do it at scale you would attract trouble. The solution that YoPharma has applied is to get a pharmacist to deliver the drug and check the prescription on delivery. This is going to be a little costly as compared to regular delivery but the margins in this business justify the cost.

TravelKhana is addressing the second problem of delivering meals on train. The hurdle is the sheer scale that you need to operate at. Unlike normal food delivery you cannot be growing 1 city at a time building your own delivery system. TravelKhana looks at the problem at a different angle. Instead of getting 100+ restaurant in a single city with your own delivery system, they got 2-3 restaurants each in 70 cities. They are covering 2000 popular trains through these 70 stations. Almost all of these restaurants already have their own delivery system for trains. In north India, regular travelers already know numbers to call at, at major stations, to get food delivered on their seat. TravelKhana is acting as an aggregator.

There are few things common in these 2 startups:

1. Both these problem have been solved locally. There are local pharma stores that home deliver and there are food joint that deliver in train. The 2 startups are organizing the fragmented sector and taking it to a new scale. None of the popular food chains or pharma chains are addressing this market.

2. Both are high margin business. Pharma has way higher higher margin than FMCG sold at general stores and Meal on train has about 50-100% higher margin than same quality meal available in the city.

3. Both are primarily offline business. Phone is going to be their major communication mode and web is going to do very little help. Phone app? Yes. But again for TravelKhana it is going to take some time as there is a psychological cost barrier for affording data on roaming for train travelling junta. Communicating medicine name or your train PNR number over phone is going to be as painful as explaining an address to a Meru driver.

4. Both are fighting against the retail’s fundamental principal of “Location”. Most drugs are bought at the store just outside a medical clinic, repeat purchase of some essential drugs is also at most times preceded by to visit to the doc. Most food purchase during travel is impulsive. You know you want to eat when you see it.

What I like about both of them is that these are some “real India” problems. I hope they don’t position or build themselves as an eCommerce company, they would not only end up giving the wrong solutions but also undersell themselves.