By Aniruddha Lokre (36404) Manish Hirve (36416) Nilesh Gokhale (36420) Sarvesh Kolhatkar (36429)Advisor Prashant Washimkar

MBA Exe. 2013-16

Project Report on

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How Can a Small scale Furniture Enterprise join the Online Revolution?

TABLE OF CONTENTS

1. Executive Summary 2. Introduction 3. Overview of Current E Retailing scenario4. Objectives 5. Research Methodology 6. Glimpse on Furniture E-retailing industry7. Key observations8. Application of Business Strategy development tools9. Future Alternatives Available10.Concluding comments11.Pathways to E-retail12.References

Appendix History - Evolution of E RetailingTransition from Conventional retail to E RetailE Retailing Eco System Technological Building blocks - InfrastructureConsumer PerspectivesMarket overviewStakeholdersSuccessful corporations (Amazon, eBay etc.)Unsuccessful corporationsPotential threats for sustainability Growth OpportunitiesRevenues and Shareholder returnsExtrapolating the future of the IndustryQuestion and Answers

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Executive SummaryThe internet has changed the dynamics for many small businesses, increasing their competitiveness against larger players. Someone running a small business today is empowered by a new operating environment that has completely transformed from just ten years ago. Traditional impediments that smaller players faced when entering markets, expanding their business or competing with big business have been reduced by the internet and mobile computing in three key areas— connecting with customers, brand awareness and quality, and costs.

Connecting With CustomersThe internet has allowed small businesses to more effectively interact with potential customers, through websites and social media. The internet has also lowered the cost for small businesses of creating product offerings based on consumer interests, and of analysing data, making it easier for small businesses to grow.Furthermore, the internet and mobile computing have extended the geographic reach of small businesses, increasing their potential customer bases.Accordingly the internet has alleviated impediments that small businesses traditionally faced in connecting with customers, such as a lack of economies of scale in advertising or a large physical footprint.

Brand Awareness and Quality SignalingThe internet has helped small businesses to raise brand awareness and communicate the quality of their products or services. They can use online channels to create brand value at low cost with information on quality and reputation, which are influential on consumer purchasing decisions.Both activities were traditionally expensive, often requiring upfront costs before significant sales occur, creating both cash flow and resourcing issues for new entrants or smaller companies.

CostsThe internet can lighten the overall cost burden on small businesses, making it easier for them to get started and to expand. They can use the internet to establish an online presence before investing in a physical space, reduce internal operating costs with cloud technologies, access cheaper finance, and use online as a significantly cheaper direct sales channel. This helps to alleviate the traditional cost disadvantage that small business and new entrants face compared to bigger and established players.

Internet-Facilitated Platforms and Tools for Small BusinessesThe internet has also catalysed the birth of new platforms, such as auction and trading websites that connect buyers and sellers and so enable small businesses to better compete in their respective markets. These platforms:•Expand the reach of small businesses, and diversify sales channels;

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•Reduce the costs (cash, transaction and opportunity) of bringing sellers and buyers together, creating more welfare enhancing transactions; and•Lower the costs of entry and expansion for small businesses.

ConclusionIn our view, competition policy should be mindful of the significant impacts the internet and mobile computing are having, and are likely to continue to have, on the ability of small businesses to compete, and the further structural change this will create in markets over years to come.

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IntroductionDespite success of some E retail furniture players, real furniture (as opposed to home accents or smaller home furnishings) is a category that will never be replaced by pure-play ecommerce. Traditional furniture retailers have significant advantages over pure-play ecommerce retailers; including physical showrooms, brand awareness and local delivery –all of which enable them to deliver a better “real” furniture shopping experience.

At the same time, there has been significant disruption in the industry forcing traditional furniture retailers to revaluate their online strategy and place a greater focus on ecommerce. The furniture shopper is changing. Millennials are much more accustomed to shopping online than their predecessors. Furthermore,

As technology trends have moved beyond pure-play models and towards a more integrated experience bridging the digital and store divide, furniture retailers are now in a prime position to capture their ecommerce opportunity, and provide their customers a modern and seamless, Omni channel experience.

On the Business needs and types of furniture requirements the furniture market in India can be categorized as

Residential Dining and Living Bedroom Kitchen Storage Desk Operatives Storage Lounge Hotels Beds, dressers, wardrobes, bars, tables, paneling blinds, bed treatments, lighting Hospital/Nursing homes Beds, chairs, tables, lighting, bed treatment Educational Institutes Schools and College Retail Shelves, counters, tables, chairs, desks, lighting Restaurant and Public Houses Bar stools, tables, chairs, lighting

Small businesses have traditionally faced a variety of impediments to entering markets and expanding their businesses which includes:

• Financing upfront, fixed (and potentially sunk) costs (for example, on advertising, accounting systems and physical space) before earning revenue from sales;• Competing against larger firms who enjoy economies of scale;

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• Establishing a brand and raising customer awareness;• Providing customers with the information (for example, about quality, product characteristics and price) to encourage them to switch; and Obtaining access to distribution channels.

The internet and mobile based e commerce e retail have reduced these impediments by:• Reducing the need for physical space;• Reducing the costs of providing information to customers, and enabling target

interactions• Lowering search costs and the costs of switching to alternative suppliers;• Creating new distribution channels; and allowing for disintermediation and direct

sales.

As a consequence, the continued growth and development of the internet and mobile based e retail has helped:

• Small businesses to be more efficient, and to find it easier to enter markets and expand their businesses (Reducing entry barriers)

• The markets in which small businesses operate to be more competitive; and• Consumers in these markets to benefit from increased variety, quality, and lower

prices.

Competition policy should be mindful of the significant impacts the internet and mobile computing are having, and are likely to have, on the ability of small businesses to compete, and on the further structural change this will create in markets over years to come.

Types of Business modelsBefore we explain the rational for online promotions, and the different methods, manner and mechanisms in which e-retailers offer online promotions; the paper will describe the different types of e-retailers prevailing in Indian online market space. They can be classified according to the range of merchandise sold by them or according to the inventory management system followed by them. We will first describe the e-retailers based on the inventory management system.

Marketplace modelIn the marketplace model, (sometimes also referred as consignment based model), online retailers tie up with network vendors to procure the product who also prepares a web catalogue which is put up on the website of the e-retailer. Once the product is ordered by the customer on the e-retailer’s website, a notification is sent to the network vendor for fulfilment of the order. The vendor then ships the product to the customer and financial statement is made for the transaction done between vendor and online retailer.This model is advantageous to the online retailers as it allows them to offer large number of choices to customers while the product gets directly shipped from vendor and there is no need for investment in warehouse and logistics by e-retailer. Moreover, from an online retailers’

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perspective, these models present an opportunity to the merchants/vendors wherein they can procure and supply locally and sell nationally, enhancing their reach and spread. Thus, marketplace model requires less investment upfront and is easy to expand the business quickly. However, marketplace model has its set of drawbacks like longer delivery time, non-updating of web catalogue, and issues with sub-standard quality. These are some of important aspects as they ultimately affect the brand reputation of a particular e-retailer. However, this business model works out well for online retailers due to difficulty in assessing and forecasting the choice of customers in online shopping especially during initial days. Also, this model has special relevance for Indian markets as there are a number of unorganized players. ebay was a pioneer in development of marketplace model. Recently, get it, through its website getitbazaar, and Infibeam, through its initiative ‘Build a Bazaar’, has implemented marketplace model in Indian markets.

Inventory based modelThe second type of model, known as inventory based model, is designed in a way so that online retailers buy and stock the products in their warehouse and sell them through their websites. This model allows the e-retailer to provide assurance of the quality of product and allows them to have better control over the services through timely and faster delivery of products thereby providing better customer experience. Inventory based model has worked better for e-retailers who offer products in niche segment as they are able to procure products in bulk, thus obtaining higher discount from manufacturers. However, inventory based model is not always financially viable as it has its drawbacks like higher working capital and higher operating cost leading to higher expenses. Also, there are chances of stock getting out-dated, pile up of rejections or non-moving goods. In some cases, excess inventory stock-up may lead to big losses. It becomes all the more challenging when the competition, in order to capture bigger market share, offers the same value proposition but heavier discount.

Managed marketplace model:Recently, a number of online retailers are exploring the opportunity to expand and enter into managed marketplace model. In this model, the online retailer does not hold on to the inventory of the vendor but they have to undertake same quality checks and the supply mechanism so that there is no comprise on customer shopping experience. Customers are informed about the same so that they don’t build up on the expectations, as the delivery may take more than usual time. Shopclues.com is the first and the largest fully managed marketplace e-commerce site in India that had more than 1.2 million SKUs across 900+ categories and had built the largest community of merchants in India with eleven thousand merchants. E-retailers can also be classified as having horizontal (multi-category) business model and vertical (niche category) business model based on the range of merchandise sold by them.

Horizontal business model:Multi-category e-retailers who sell wide range of product assortments ranging from apparels, shoes, lifestyle products, books, music etc. are known to follow horizontal business model. Some of the popular commerce sites like flipkart.com, jabong.com, myntra.com, snapdeal.com are examples of multi-category players. The drawback with being a multi-category player is that in order to tap in more customers, online retailer has to stock up more inventories of each of the categories. With more product category options, the e-retailer needs to analyse and understand the purchasing patterns of a number of customers in order to effectively cater to them. Also, it presents a challenge for design of the e-commerce website as all product categories need to be visible on main page of the website.

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Vertical business modelSome e-retailers keep their range of merchandise limited by offering the customers products which are focused on single/niche category. Firstcry.com, gkboptical.com, bigbasket.com, urbanladder.com are few examples of niche category e-retailers. These e-retailers bring their deep understanding of customers’ need to serve the customers in what they consider themselves as best. Also, it doesn’t create confusion in mind of customers. Niche e-tailing also offers an opportunity for personalized service. For example, if a customer wants to purchase grocery for a month, then the traditional kirana store knows tentatively what the customer will buy based on her past purchase. In the same way, online e-commerce sites offer history of purchase to the customer which makes the whole process easier and less time consuming for the customer. Babeezworld.com, an online shopping site for babies uses the past purchase data of the customer in order to improve the whole experience. This e-retailer offers personalized suggestions to customers. Here, when a mother buys diapers for her kid, the site knows that she has an infant and is likely to buy more in future. So, the site tentatively suggests when the mother will need the next bigger size for her growing baby.Till 2012, electronics was the fastest growing segment in the online shopping space. However by 2013, apparel has been the fastest growing category in online retail and has reached 15 percent online users in India.15 In the vertical e-commerce categories, baby products, healthcare, and home and furnishing have also shown good growth.

Types of promotions used by e-commerce websites in IndiaIt is expected that most of the customers will like to save on their shopping expenses and therefore they will look for discounts and coupons. Research has indicated that coupons can directly impact happiness of people, promote positive health, and increase their ability to handle stressful situations.17 Coupons make customers 11 percent happier and 68 percent more motivated to try a new business. This kind of behaviour of customers where customers prefer coupons holds true for online as well as offline mode of shopping. By following methods the E retailor can use the discount mechanism effectively.

Deal Aggregators (Daily deals websites/Group buying websites) Flash Sales Cash Back Sites

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Overview of Current E Retailing scenario

E-commerce is considered as the next big thing that will drive internet usage growth in India and World driven by growing number of credit cards, good online shopping places, ticketing websites and the way banking is done today. From a business perspective E-commerce offers unlimited shelf space, it isn't bound by operational timings and geographical boundaries and an opportunity to cater to country wide city markets (for consumers and suppliers alike) at a comparative miniscule cost.

From a consumers perspective E-commerce allows greater access to markets and an opportunity to make informed decisions on purchases. Consumer behavior has changed rapidly and visiting a local store to buy a mobile phone is now more of a pain.

Flipkart, Snapdeal and Amazon have been touted as the major players in this industry; the report shows that they are contributing to healthy share of the total e-commerce market. E-Tailing grew by 1.4 times since 2013 taking up almost 29% of the e-commerce market share.

The latest numbers from Ministry of Statistics have shown India is to take a lead in terms of the fastest growing economy, beating out China next year. Economic status of the country is evolving and, as a result, ecommerce industry is heading north without any traces of slowing down.

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Investors are preferring ecommerce companies in India to invest their money. In the food retail industry, BigBasket, a leading grocery retail store received $32.7 million in September 2014 from Helion Ventures, Ascent Capital, Zodius Capital and Lionrock Capital. In order to maintain their grounds, big daddies of e-commerce are indulging into acquisitions. For instance, leading fashion retailer, Myntra that reportedly has 60% of its sales happening from mobiles, got acquired by Flipkart in 2014. Similarly, baby care retailer BabyOye, that had acquired its competitor Hoopos in late 2013, itself got acquired by Mahindra groups in February 2015. However, with Flipkart, Amazon taking up the maximum market, most of the player in baby care section has faded with time. Currently, only Hopscotch and FirstCry have managed to survive. One of the recent investments to happen in 2015 is that of Quikr. Quikr, an online classifieds platform has very recently entered the billion dollar club after it received a funding of $150 million from new investor Steadview Capital along with existing investors Tiger Global and eBay. The startup is now valued at $1 billion, according to the reports.

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E-Commerce is the Future of India

India being a growing economy has turned out to be a great establishing platform for the newly introduced element of online shopping. In a short time period Amazon has made an enormous growth in their sales and profits in a span of 2 years of entering into the E-Commerce zone in India. Some of the great features of online shopping like cash on delivery (COD), fastest delivery and 30 days return policy, give shoppers a superior shopping experience. Such E-Commerce resources offer a wide range of things from skin care to sports utilities and apparels to electronics, therefore a shopper can buy anything from these portals, I mean anything.

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Online shopping carts have toppled the entire world of shopping culture and have established a real trust and fame in the market. With the very same rate of growth in the E-Commerce section in India, it is considered that by 2016 the responders will probably be three times as of now. This sector has blossomed as a fresh and a successful capital investment option for business. With a great demand, these resources will continue grow and sprout all over the world.

Another trend that is fast growing to dominate in the E-Commerce industry is that of social shopping. It means shoppers’ friends can indulge in shopping experience. At present India have only two players in this area- Limeroad and Xarato, who have integrated social shopping with online product discovery.Last year Gartner Inc. had estimated E-commerce market in India worth $6 billion in 2015, projecting a 70% growth from 2014 revenue of $3.5 billion. However, according to the latest report by IAMAI and IMRB International, the Indian E-Commerce industry is expected to grow at a rate of 33% and cross INR one lakh crore (US$16.3 billion) by the end of 2015 – little over 2.5X predicted by Gartner.Flipkart co-founder Sachin Bansal hopes Indian E-Commerce market to reach approximately $50-70 billion by 2020. With the way people are getting dependent on their smartphones and the rapid penetration of internet, eCommerce is definitely the future of India.

Online Players

Pepperfry: Market leader in the Indian online furniture space, Sources 70-80% of the products from Jodhpur. USP: Delivers wide variety of designs with customer reach spreading to 200+ cities.

Fabfurnish: Second largest player in the Indian online furniture space. Has the widest variety of SKUs among the horizontals, largely operating in the market place model. USP: Focus is on providing affordable product categories, appealing to wider audiences.Urbanladder: Smallest of the three major vertical players. 100% private label with a strong focus on quality and customer experience. USP: High end designs delivered through the best customer experience.Snapdeal: The largest marketplace for furniture in India, with 15,000 – 20,000 SKUs and 400 suppliers. They are still working towards getting the customer experience and delivery right. USP: Largest and fastest growing selection delivered to a large range of locations.

Imports informationTop five countries from which India imported furniture in 2012 were China, Germany, Malaysia, Italy and USA .China largely dominates the furniture imports into India followed by Germany, Malaysia, United States of America, Italy and the USA.

Globally the online market leader for furniture doesn’t have a market share of more than 7-8%. India is also set to follow in the same path, thus attracting huge investments by 2020.

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Growth Pillars of the E-Retailing Industry

Marketing Mix

1. PRODUCT Highly developed digital culture has emerged. Data glasses,

smartphones, and digital wallets are ubiquitous. Avatars – virtual advisors – assist with purchases, monitor deliveries, and engage in independent transactions on behalf of consumers. Online retailing is dominant, using detailed knowledge of consumers to make targeted offerings, augmenting these with 3-D simulations of products in use.

Consumers can also get description and details from an online product catalog. For your customers, it is very much important to get information about the product no matter whether the time of day and day of the week. Through information, your customers and prospects are making decision to purchase your products or not.

Wide range of choices of product and one point allows consumer to see the options available, compare the products and get the right product satisfying the need.

2. Place Old boundaries between online and offline retailing have disappeared.

Retail sales are now hybrid, and mobile devices allow consumers to shop whenever they wish, with their orders being speedily delivered.

E -Commerce has become the preferred method of shopping for many people. They love the ease with which they can shop online from their home at any time of the day or night. Purchasing options are quick and convenient with the ability to transfer funds online. Consumers save time and money by searching for items and making their purchases online. It can take several days of physically going from location to location, costing time and fuel, to purchase a hard-to-find item.(PLACE)

E-commerce can offer maximum convenient to consumers because they can visit various online storefronts to compare prices and make purchases without having to leave their homes or offices.

3. People A global economic boom creates an affluent middle class worldwide.

This new prosperity fuels a culture of individual lifestyles. And there is a global shift from work-centric lifestyles to leisure-centric lifestyles.

The global economy has suffered another financial crisis. Consumers watch their budgets, energy costs are high, and globalization is in retreat. The importance of owning personal possessions has waned in

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favor of sharing, swapping, group-buying, and leasing. Sustainability, recycling, and “repair, don’t replace” are now the norm.

Many people feel making an online purchase does not compromise their personal information.

4. Process The best thing about it is buying options that are quick, convenient

and user-friendly with the ability to transfer funds online. Because of its convenience, consumers can save their lots of time as well as money by searching their products easily and making purchasing online.

Best in class packaging and fast delivery make the product available at your door step. Saving lots of time and efforts to get the product delivered to you.

The hassle free return policies offered allows you to trial out the product in all angles and then only makes the decision for purchase.

5. Promotion Most products are not well-merchandised. Key sales messages are

poorly communicated or may be missing entirely. Electronic retailing often overcomes these problems, because the medium itself - television or the Internet - allows the person to be sold the product. They understand how it works and why. The benefits are presented clearly and convincingly. And make no mistake about it: People enjoy being sold to.

Online marketing benefits not only from the use of words, but the use of words, sound and images combined, making it a wonderful way for businesses to quickly and very inexpensively share information about their products, services and business activities. Sites that include YouTube have gained enormous popularity and make it very simple for businesses or individuals to create their own channels and link those channels through their other online activities--web sites, blogs or social media activities, for instance.

6. Price One of the most positive things about E -Commerce is that there is

scope for the E-retailors to reduce their cost in multiple ways. In the price sensitive competition, they tend to transfer this benefit to the user.

Consumer can compare all the product options available on multiple sites and can purchase a product with least price. Saving lots of money per purchase

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Objective

To help Small and Medium Enterprises engaged in Furniture Manufacturers to maximise their business potential using e retail.

In furniture, brick-and-mortar stores still matter. Shoppers like to “touch and feel” merchandise and seek consultation from experienced sales professionals. But it’s no secret the Internet is playing a larger role in furniture shopping. Over 80% of furniture purchases today are influenced by the Internet, yet only 4% of all furniture purchases occur online. There is a “digital divide” in retail furniture, where shopping across channels can be frustrating and cumbersome for shoppers, and selling furniture is fragmented for retailers.

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E Retail technologies are bridging this “digital divide” between online and in-store shopping for big-ticket items. These are cloud-based shopping applications that create a seamless, personalized experience for shoppers, and enables retailers to harness big data to market and sell furniture more effectively.

Research Methodology

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Identifying Potential Impact of Online Retailers on SME Vendors

Understanding operation lifecycle through value chain analysis of existing SME vendors

Glimpse on Furniture E-retailing industry

Making Furniture Shopping EasierE Retail makes it easier to shop for furniture across digital and traditional channels.

No matter where customers begin either on their computer, tablet, smartphone or in a store.

Styles browsed online can be saved and sent to the nearest store location to facilitate fast and easy in-store viewing. Similarly, styles the shopper sees in the store can be saved for cross referencing to be viewed later online. As the shopper progresses towards their purchase, their shopping experience becomes increasingly personalized and they never have to have to start over. After they’ve shopped around or talked it over, they can buy anytime, from anywhere.

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Assessing manufacturing capacities and functional parameters of sample set of companies

Developing suitable strategy

Atgy.

Segmenting Customer profiles through sample set of customer interviews

Identifying USPs and pain points of SME vendors through shop

visits

Making Furniture Selling More EfficientFor Brick and Mortar retailers, Small and Medium Enterprises, E Retail enables

unprecedented ability to track marketing and sales touch points across channels. This tracking provides analytics and behavioral insights that enhance customer engagement and improve marketing effectiveness.

Omni Channel Supply Chain is the most effective way to sell furniture, marrying local stores, vendors, manufacturers and sales staff with the online convenience today’s busy shoppers expect.

Key points for greater customer engagementThe key is to engage potential customers early in the decision making funnel. Providing expert advice through social media, personal style consultations, customization and tailor made items.

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Key is to make your shopping experience such that

1. It empowers the buyers with value added /knowledge enabled tools. An example may be a e retail site which enables buyers to configure and design the interiors of their own home and then see the selection physically at a local store which has tie ups with the original equipment manufacturer (FOYR)

2. Enables to effectively communicate the product specifications such as type of wood, fittings, finish and furnishings used.

3. Removes specific pain points in the furniture buying process allowing for virtual trial and error and ease of ordering via a digital catalogue before buying big ticket items.

4. Increasing base of buying (offering products & services other than furniture as bundled solutions)

5. Using website based analytics data to gauge customer psychology and predict inventory requirements.

6. Strategic partnerships with OEM’s & tier-II vendors, warehouse operators, local dealers & logistics companies.

7. Innovative revenue & profit sharing models which maximize asset utilization & minimize capital investment

8. Risk distribution9. Reducing rate of return goods by increasing customer satisfaction & minimizing

return process loop holes

While The Opportunity Is Here, Furniture Retailers Are Still Far BehindAccording to Furniture Today*, 90% of furniture stores have a website, but only 26% of these are ecommerce enabled. Said another way, 77% of furniture retailers do not offer ecommerce –the basis of omnichannelshopping.Industry leaders in other retail verticals, lacking key features and a modern user experience their customers have come to expect.

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From a branding perspective, furniture retailers are behind in keeping up with the design and technology sophistications consumers have come to expect from retail websites vis-à-vis the furniture websites.

Responsive Design Ecommerce Enabled Consistency in Online and In-Store Offers Store Inventory Purchase Warranties and Protections Real-Time Delivery and Pick-Up Dates Apply and Buy Financing Localized Shopping

Key ObservationsThe way Indians buy furniture seems to be changing.

Until a few years ago, most would either call their local carpenter or head to the nearest furniture market. Now, increasing numbers are going online—and furniture is expected to become one of the largest categories in the rapidly growing Indian e-commerce market in India.

By 2018, India’s online marketplace is expected to grow to $14.5 billion (Rs88, 921 crore) and online furniture retail’s share is likely to go up.

For long, furniture retail in India has mostly been unorganized. As much as 80% of the industry, according to various estimates, is run by standalone stores and individual carpenters.

Besides a few organized, there are no brands in the organized brick and mortar furniture retail space that have managed to build a large chain of stores. (Sweden’s IKEA could be a game changer, when it opens its first store in India, possibly in Hyderabad.)

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Instead, a clutch of online furniture sellers have emerged in the last few years, offering a potential new business model for an industry that is bound to grow as India’s middle-class widens and spending rises.

The market is led by Pepperfry, Urban Ladder and Fab Furnish, three online furniture retailers founded in 2012. Part of their success is offering two things that traditional furniture typically doesn’t: A wide variety of modern designs, and the convenience of delivery and assembling.

There is a lack of retail destinations for furniture which has helped online Companies in the sector do well.

Another reason is the cost of retail space... Rentals are crazy and retailers need to generate Rs 4-5 crore a month to be able to sustain the kind of space that a brick and mortar retailer needs.

Urban Ladder raised $20 million (Rs 122.6 crore) in addition to a $6 million funding it had secured in an earlier round.

Pepperfry has raised about $29 million (Rs 177.8 crore) so far. His start-ups alone are looking to touch about $65 million (Rs 398.6 crore) in turnover this year.

Benefits to the SME Vendors• Offer Product Datasheets• Attract New Customers with Search Engine Visibility• Comprise Warranty Information• Decreasing cost of inventory Management• Keep Eye on Consumers’ Buying Habit• Competence• Allow Happy Customers to Sell Your Products Selling Products Across the World Stay open 24*7/365 Boost Brand Awareness Decrease Costs Offer Huge Information Expand Market for Niche Products Scalability Ability of Multi-site Effective usage of Social media

A Complex Problem with Few Resources to Solve ItThe slow ecommerce adoption in the industry is not for a lack of interest, but rather reflects the complexity of furniture systems and processes and limited ecommerce solutions to solve for them. Traditional ecommerce once involved retailers building ecommerce sites from scratch, an approach limited to top retailers who had the resources and expertise needed to focus on ecommerce. Today, this solution has fallen out of favour for all except a handful of retailers who have the significant resources needed to maintain these systems and continue to invest heavily in their home grown platforms. Many retailers next turned to on premise platform solutions, which are more efficient than building and maintaining a home grown system. But this solution requires significant upkeep and comes with the costs and

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operational challenges of hosting, scalability, security and most critically, keeping the website current. More often than not, the customizations required to make these systems work for furniture push these systems well off the provider’s upgrade path, leaving retailers with platforms that quickly become outdated in this rapidly changing world of retail technology. Today, most retailers are adopting cloud platforms for their lower costs, greater agility and the ability to remain current as the digital landscape evolves. Despite the increased agility of cloud platforms, most are designed for smaller-ticket items and lack the features, enhancements and tactics needed to generate sales and revenue for large purchases like furniture and appliances.Let’s review the top ten features that are critical to creating a modern online furniture shopping experience that will generate revenue online and in your stores:

Enabled for EcommerceGiving shoppers the option to buy directly from your website as a retailer in today’s world, having an ecommerce enabled website is taken for granted. Over 80% of furniture sales involve the Internet. For many shoppers, your website is the first store-front they encounter, and (if good enough) is one they will revisit many times during their path to purchase.Website is a crucial factor in retail success. Shoppers today require a convenient and seamless shopping experience that allows them to move between channels and make a purchase at any point along the way, whether it is in store or online via a desktop or mobile device. Failure to enable a purchase at all points of the shopping journey alienates a large segment of customers who increasingly value this convenience and puts your stores at risk when customers are deciding where to shop for furniture.Most of the furniture sales involve the internet.

Application of Business Strategy development tools

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Online Furniture Market: Assessment of key competitive areas

Assessment Areas And why

Sourcing Growing share of MDF, plastic, metal and non-hardwood products in online market by 2020 is likely to reduce importance of Jodhpur as a sourcing hub. Horizontals with the their wide reach of seller onboarding teams can catch up with verticals

Quality Control and Warehouse

E retailors are investing aggressively in warehousing and QC capabilities. Also, as online market become 20X by 2020, the sheer high volumes to be managed will allow SMEs to leverage their skills including technical capabilities with handling high volumes and compete effectively with verticals

Line Haul Going forward, horizontals can work equally well with 3P logistics players to establish robust furniture line haul operations. Verticals are unlikely to gain a significant competitive advantage from their current line-haul tie-ups1

Delivery Hub management

Expertise in managing high delivery hub volumes efficiently is likely to become the key differentiator going forward. Additionally, horizontals like Flipkart and Amazon already have a network of 220+ delivery hubs across India each, which offers them readymade infrastructure to build upon for shipping furniture

Last mile delivery Horizontals like Amazon and Flipkart would be able to leverage their large appliance delivery expertise for furniture delivery as well when the category is launched. Additionally, horizontal’s expertise in managing last mile shipment at scale is likely to help them stay competitive with verticals, when furniture volumes shipped grow to ~10,000 units per day from 350-400 currently1

Customer – Brand recall

Unaided brand recall of horizontals is 3-4x that of horizontals

SWOT Analysis

Strength

Economical production cost Increasing demand for simple, clean designs Excellent outsourcing facilities Increasing share of the organized segment Evolving efficient supply chain management Better process control and storage facilities Better information availability to both the consumers and the producers Improved business climate and infrastructure facilities

Weakness

Highly unorganized and fragmented sector Piece driven industry that operates on demand

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Since the industry is highly fragmented, and lacks direct market exposure, workers not equipped properly

Poor supply chain management system Poor stock control facilities Slow absorption of innovation change Lack of skilled manpower India is still a net importer of furniture Absence of Sector Skill Council for the sector No standards available for industry to benchmark production No nodal body for certification available No known skill initiatives focused on the sector

Opportunity

Expanding middle income group with larger pockets that drive demand Huge opportunity in Design space and also in emerging market segment in

services Huge unexplored retail space available for the industry to foray into Huge unpenetrated rural market Low labor costs Unexploited research and development capability Design space opening up due to change in consumer preferences and

awareness Hybrid business models offer scope for business expansion

Threats

Wooden furniture has the single largest market in India. With more policies aimed at protecting the environment being tabled, there may be limitations imposed sourcing wood from domestic forests.

Organized retailing in furniture is relatively new in India and local firms could suffer due to the new FDI rules which will bring in established foreign players into the fray.

Large variations in stock control owing to new production methods Highly bureaucratic and unreliable business environment Unfavorable Government tax policies promoting imports Local firms could suffer due to the new FDI rules which will bring in

established foreign players into the foray

Analyze the customer sentiments and enhancing the decision making.

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Competitive strength analysis

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Different angles to be considered (Hygiene factors and lessons learnt)

Management

The failures of major retailer’s predominately selling promotionally priced furniture have resulted in significant manufacturing overcapacity problems.

Manufacturers are forced to restructure their operations to accommodate lower volumes through downsizing or must attempt to steal market share in the remaining distribution channels from competitors.

Protecting margins in this type of environment will be extraordinarily difficult since retailers will attempt to squeeze manufacturers, playing one off of the other, in search of the best deal.

Lack of brand equity for most manufacturing companies’ means that getting floor placement in any given retailer's store is by no means a sure thing.

This trend will cause additional consolidation in the industry as some companies pursue a one stop shopping philosophy in order to distinguish themselves from the competition while weaker and smaller players are increasingly confined to smaller, niche markets.

Additional focus is being placed on improving customer service, reducing delivery times and liberal credit policies.

Manufacturing

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Furniture imports are rising quickly. The most immediate effect with respect to import competition will be felt by

case goods manufacturers as a result of the relative ease with which case good parts can be packed and shipped versus upholstered items.

In fact, the only true barrier protecting the industry today relates to the cost of freight in shipping from overseas and the associated damage to goods shipped in this manner. Domestically, technology has not advanced sufficiently fast enough to improve productivity to combat the lower costs associated with imported products.

Asset Quality

The bulk of a furniture manufacturer's value can be associated directly with its working capital assets.

It should be noted, however, that lenders cast a wary eye when evaluating these assets as inventory can quickly become obsolete.

Raw materials can also be subject to major obsolescence problems particularly when an upholstered furniture maker purchases fabric according to projected demand only to find that they have been far from accurate in their forecast and ultimately are saddled with potentially thousands of yards of useless material.

Few other parameters

The furniture industry as far as SMEs concerned, innovative marketing and/or sales programs is the need of an hour.

Most marketing programs are the responsibility of the retailer with some POP support from the manufacturer. As a result, little national branding occurs.

It appears that most manufacturers are content with allowing local advertising and marketing efforts to occur through the retail channel.

This has the effect of further commoditizing the product since most retailers addressing the mass market focus their message on price and selection in terms of sheer volume, rather than on specific product attributes which their inventory may have that other retailers are unable to match.

Customer service and support ultimately is the make or break factor in maintaining solid relationships with the manufacturer's retail outlets.

Today, customer relationships are as much based on credit terms and pricing as product offerings, largely because BEST SELLING DESIGNS can easily be replicated at lower prices.

This is a classic sign of the commoditization of an industry and has certainly been a factor in the recent history of the furniture industry.

Distribution and Delivery

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The most important trend in the industry related to distribution and delivery of product involves the compression of the delivery cycle particularly in the upholstered segment. In the past it was not uncommon for products to require 10- 12 weeks before delivery to the end-consumer. Even today higher-end manufacturers will take at least this long before fulfilling an order. Increasingly, manufacturers capable of short turn-around times are gaining a competitive advantage.

We see turnaround times continuing to decrease over the next five years and any manufacturer not implementing plans to deal with this trend will be at a major disadvantage vis-à-vis his competition.

Future Alternatives Available

Responsive DesignGoogle now processes over 100 billion searches per month. Within these searches, there has been a meteoric rise in mobile searches, increasing 115% YoY. Mobile searches now impact 28% of all retail sales –that’s $780 billion worth of retail sales. Today, Google believes mobile searches generate 10 in-store transactions for every online order. For comparison, desktop searches generate four in-store transactions for every online order.Mobile searches now impact 28% of all retail sales –that’s $780 billion worth of retail sales.As importantly, mobile searches that include “near me” or “nearby” have increased 34X. For brick-and-mortar furniture retailers, this statistic is particularly relevant. These are shoppers who are in the market for furniture, and are choosing whether or not to visit your stores based on mobile search visibility and how easy it is to shop your store on their mobile device.Having a common application span desktop, tablet and smartphones is the foundation for delivering a seamless furniture shopping experience.

Localized Shopping

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Once you enable shoppers to conveniently shop between online and stores, it is critically important to provide a consistent experience across all channels. It’s vital to show the same information to shoppers online that they would see at their local store. This can be tricky in furniture, where stores may be corporate or franchise stores, and store inventory, pricing, promotions; even policies may differ by store location. A website that doesn’t reflect these local differences is a real hindrance to omnichannel shopping, introducing inconsistency and uncertainty in a category where success comes from giving shoppers confidence. Using geo-location technology on your website, you can automatically locate shoppers and present them with localized marketing, merchandising, pricing and inventory presentation –100% consistent with what they’ll see at their local store, including:

finance offers coupon codes site graphics for special events product selection featured products based on local popularity regular pricing synchronized with their local store

Show In-Store Inventory on the Product Detail PageAn increasing number of furniture shoppers will research furniture products online before checking out their potential purchase in a store. Provide shoppers the ability to see where they can view an item in person. On the product detail page, be sure to showcase whether or not the product they are viewing is on display in nearby stores. This feature avoids disappointing shoppers who go to their closest store expecting to see a particular product that is not there, especially taking into consideration that stores have different layouts and products on display.

Consistency in Online and In-Store OffersConsistency from online to in store is not only about pricing and selection, but also extends to the promotions you offer. Ensure your website allows you to apply the same messaging and promotional content one would see in their local store. Conflicting sale messaging will not only disappoint shoppers, but also will create a headache for store associates faced with customers who have seen multiple offers from the brand. Equally important is enabling functionality that allows shoppers to easily apply these coupons and promotions at checkout.

Apply and Buy Financing, Online and In StoresFinancing options are a big part of furniture sales in stores. Too often, websites can’t keep up, limiting both ecommerce sales and the ability to market store financing online. Provide the ability to offer all of your finance options online, from your private label credit card, second source, to Rent to Own. Here again, this key aspect of furniture sales is a rarity in most ecommerce platforms and typically requires a custom solution. A furniture retail website should allow shoppers to easily apply for and use the same financing options that are available in store.

Enable Purchase of Warranties and Protections Online

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Warranties are a critical part of the furniture retail business. They not only ensure customer satisfaction by protecting their purchase, but they also provide the retailer with a source of incremental, high-margin revenue. Just as a salesperson would sell warranties in store, your site should include the options to upsell customers with warranties online. Additionally, providing this option online helps shoppers understand their warranty options before going to stores. This key aspect of furniture sales is a rarity in most ecommerce platforms, as systems built for more typical ecommerce categories have few customers for whom it’s relevant.

Real-Time Delivery and Pick-Up DatesDelivery information is just as important a factor to online shoppers as it is to store shoppers, and often a deciding factor. As a brick-and-mortar furniture retailer, your ability to deliver is a distinct advantage over pure-plays and big-box retailers. As such, it should be a feature that you make prominently visible on your website.Display real delivery and pick-ups dates on product detail pages and offer online shoppers several different options on how to receive their purchase during checkout, including at-home delivery or in-store pickup.Your furniture ecommerce site should automatically provide the same delivery and pick-up date options a customer would be given if they purchased in a store.This feature both highlights the speed and flexibility of your ability to deliver relative to pure-play retailers, but also ensures that online orders that are placed are easy for you to fulfil and meet shoppers’ expectations.

Reward Your SalespeopleIt’s no secret –furniture salespeople understandably fear that ecommerce will take away from their commissions. This often leads to a less-than-desirable experiences for the customer. It is important to engage your salespeople in the omnichannel shopping experience by giving them credit for their role in the path to purchase, regardless of where the sale begins or ultimately closes. In your website’s check-out process, ensure shoppers have the opportunity to acknowledge salespeople who helped them in a store. The result is a win-win for both parties –a better experience for your shoppers married with the ability to honour a long-standing incentive system for your store associates.

TechnologyIf there’s one way to tie together all of the aspects that are critical to providing a seamless, omnichannel experience to your shoppers (and a profitable one for you), it’s the technology that synchronizes online and in-store browsing. A shopper can start their research on a computer, mobile or in a store. A good website captures and synchronizes their preferences and the items they’re considering between all of their devices and the store’s point-of-sale system. Wherever the shopper is, they are always making progress towards their purchase decision, never having to start over. The products the shopper browses online will be saved and sent to the nearest store location to facilitate fast and easy in-store viewing and purchase. Similarly, products the shopper sees in the store can be saved to the website and the shopper receives an email from the store thanking them for their visit and linking to the items they viewed at the brick-and-mortar location. Shoppers can then finish their purchase

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through the channel they prefer, whether it is in store, on a desktop or mobile device, ensuring a seamless online to offline experience (and vice-versa). Throughout the process, the customer’s experience becomes increasingly personalized, and the marketing and sales activity that contributed to the sale across channels can be tracked. Best of all, shoppers love the experience.

Concluding Comments

 Retail Strategy Key Recommendations

1. Omnichannel retailing is about providing a seamless approach to the consumer experience, across all shopping channels.

cross-channel inventory visibility, going to local store to view online choices Not Relying on the showroom to make the sale consistent pricing across online and in-store The availability online agent to help the through my purchase barrier

hybrid model allows consumers to touch and feel its products first-hand.

2. Online vendors need to have an offline presence and vice versa, too.

• FabFurnish and Pepperfry have already set up brick-and-mortar stores while the others are toying with the idea

• The offline stores are not to push sales, but merely to reassure availability for installation and warranty services.

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• To build trust and credibility, having partner stores.

3. Vendors should also develop apps on major mobile platforms.

• Play in niche areas

o Home furniture

o Hotel furniture

o Hospital furniture

o Office furniture

o Traditional furniture

o Contemporary furniture

• Develop and maintain in-house expertise in terms of design and quality check even if manufacturing is outsourced

• Employ methods to woo shoppers such as

o quick delivery

o no questions asked returns for 30 days-

o Customization and carpenter services

o Installation and post sales services

4. Create functional products to cater to specific requirements of the customers. 5. Control product assortment (Range) and leverages international strategic alliances to purchase large volumes of raw materials, which push prices down.

6. Frugal design philosophy based on offering products so they can be transported in flat packs (SKUs) and assembled at customers' homes. This lowers prices by minimising manufacturing, transportation, and storage costs. 7. Keep prices low by empowering customers to make most purchase decisions themselves. It makes it easy for customers to choose the right products by displaying them in situ, with all specifications (Use of 3d interactive virtual reality). Packages them for immediate self-service pickup and offers a simple return policy. 8. Good product quality and minimises the company's impact on the environment. Reducing the amount of packaging for its products reduces carbon emissions, energy usage, and waste. Even its store design reflects this. . 9. Build brand and standards (Without compromising with the quality)

10. Ensure last mile connectivity (Increase coverage to remote areas.)

11. Building a frugal supply chain.

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12. Increase product configurations - DIY (do it yourself) products reduce logistics cost, damages and storage costs, ensuring phenomenal efficiencies at the backend.

13. Optimize modernize your manufacturing process

14. Use Country wide tie ups with vendors or strategic alliances for showrooms and warehouses to reduce delivery time and offer omnichannel experience

15. Innovative concept design. Innovate the concept of furniture designs rather than refining existing designs.

16. Optimum balance of standardization and customization. (Minimize the BOMs)

17. Price and design differentiation, access and trust. Logistics hubs act as sourcing and distribution centres.

18. Run your website on a best-in-class platform built for furniture retail and fully integrated with your stores.(Superior website designs)

19. Maximize the digital marketing across various channels (Such as social media, Google ads, Facebook pages, Television etc.)

20. Incorporate the fraud prevention technology for payment platforms.21. Push for widening the sales by bundling 22. Do not differentiate based on price, this commoditize the product.

3 Pathways for a SME to leverage E-Retail

Option 1/Solution 1

SME Corporation launches its own online portal

1. Liaise with a website developer and develop own website2. Investments will be needed in web content development , catalogues  , hosting

and maintenance3. Needs to invest in advertising…4. Sells through its website and showroom/factory in a Omni channel(Online, Offline

& Mobile) way5. Focus on In house manufacturing6. Focus on marketing existing product range and competencies7. Focus on preventing loss of market share due to other online competitors

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8. Channel tie ups will need to be done with local, state or national companies for logistics due to the demand arising out of website demands and traffic.

9. Long term increases in demand may necessitate tie ups with external partners for warehousing

10. Focus on niche such as Housing, Hotel, Hospitals, Kitchen , Traditional, Contemporary

11. Innovation and differentiation is key to building niche. For ex Aluminium furniture, Stainless steel furniture, Kitchen Furniture etc.

12. Use web site data to focus on high demand products and high margin product offerings

13. Enhance website experience with knowledge based tools.14. Bundling of services with products15. Balance between modularization (standardization) and tailor-made flexibility.16. Promote Electronic mechanisms of payment to maximize website utilization or

traffic

Option 2/ Solution 2

SME Corporation ties up with an established online furniture portal

1. Needs to enter into a strategic partnership with a single or multiple established online retailers.

2. Has to be flexible and adopt to the needs and demands of the online retailer3. Inherits the engineering expertise ,supply chain, logistics and advertising

infrastructure of the online retailer4. Can scale up quickly5. Contract manufacturing for a reputed label6. Can leverage global low cost sourcing channels due to scales7. Can invest in best manufacturing practices due to added volumes8. Organization learnings in process9. Gains competencies and insights to set up own brand, label, and venture in the

process.10. Risk Mitigation can be reached by cross investments by business partners

Option 3/ Solution 3

SME Corporation can maximize its asset utilization by a combination of various arrangements

1. Map the entire value chain of the organization

2. Maximize asset utilization by a combination of in-house manufacturing –selling and acting as a facility or organization on hire for parts of the value chain where assets are underutilized

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3. Offer services and assets for hire to leading online e retailers

4. Enter into innovating revenue sharing arrangements based on sales and services

provided.5. Examples include

Acting as a franchisee Acting as a service provider for installation , warranties and repairs Warehousing services Consigning and forwarding Customization services Utilize own showroom to display multiple brands at a commission Acting as an agent or a distributor for the local market

o All of the above should Internet enabled.6. Objective is maximizing revenue in a traditional set up by connecting with e retailers

elsewhere, using e retail connectivity and information sharing tools.

References

http://www.internetlivestats.com/ http://smallbusiness.chron.com/ http://www.estorefactory.com/ https://medium.com/ Report of the Working Group on Warehouse Receipts & Commodity

Futures, Published by Department of Banking Operations and Development, Reserve Bank of India, Mumbai. April 2005

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Report of the Working Group on Warehousing Development and Regulation for the Twelfth Plan Period (2012-17), Planning Commission, Government of India, October 2011.

E-commerce - Business. Technology. Society by Kenneth C. Laudon & Carol Guercio Traver.

WWW.wikepaedia.com E-commerce By Ravi Kalkota. WWW.service-architecture.com WWW.sci.cmu.org

APPENDIX

Origins and Evolution of E-commerce

World on WEB

Around 40% of the world population has an internet connection. In 1995, it was less than 1%. The number of internet users has increased tenfold from 1999 to 2013. The first

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billion was reached in 2005. The second billion in 2010. The third billion in 2014 and the rate are rapidly growing. Many conglomerates from “Silicon Valley” are in process to develop mechanisms to provide the disturbance free internet connectivity to the people in rural side of the world.

Statistics about the Internet Users Word Wide.

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In India one active internet connection is shared by all the members in the family. Many people use the public networks to access the Internet. The growing popularity of cybercafés is playing a big role in fuelling Internet development in India. Subscriber growth continues to be driven by heavy usage of the comparatively cheap internet cafes. As per the latest Survey 60% of the Indian population use the internet on the mobile phones. With latest Connected India initiative around 15% rise in the internet user numbers is expected by 2018.

Benefits to the SME Vendors

1. Offer Product Datasheets: For your customers, it is very much important to get information about the product

no matter whether the time of day and day of the week. Through information, your customers and prospects are making decision to purchase your products or not. Consumers can also get description and details from an online product catalog

2. Attract New Customers with Search Engine Visibility:As we all know that physical retail is run by branding and relationships. But, online

retail is also driving by traffic that comes from search engines. For customers, it is not very so common to follow a link in the search engine results and land up on an ecommerce website that they never heard of.

3. Comprise Warranty Information:No matter whether you are looking to choose including warranty information with

product descriptions and datasheets or providing it from within an ecommerce shopping cart, you need to make sure that customers must be aware of important terms and conditions that are associated with their purchase.

4. Decreasing cost of inventory Management:With e-commerce business, the suppliers can decrease the cost of managing their

inventory of goods that they can automate the inventory management using web-based management system. Indirectly, they can save their operational costs.

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5. Keep Eye on Consumers’ Buying Habit:The best thing is e-commerce retailers can easily keep a constant eye on consumers’

buying habits and interests to tailors their offer suit to consumers’ requirements. By satisfying their needs constantly, you can improve your ongoing relationship with them and build long-lasting relationships.

6. Competence:For effective business transactions, e-commerce is an efficient and competence

method. Setting-up cost is extremely low as compare to expanding your business with more brick and mortar locations. Very few licenses and permits are required to start-up an online business than physical store. You can save your lots of money by using fewer employees to perform operations like billing customers, managing inventory and more.

7. Allow Happy Customers to Sell Your Products:With lots of customers’ reviews and product ratings, you can easily increase your

sells as new customers find that your products are good and effective. Make sure that you mention your clients’ testimonials, reviews and product ratings as such things can help your new customers to purchase your products.

8. Selling Products across the World:If you are running a physical store, it will be limited by the geographical area that you

can service, but with an e-Commerce website, you can sell your products and services across the world. The entire world is your playground, where you can sell your complete range of products without any geographical limits. Moreover, the remaining limitation of geography has dissolved by commerce that is also known as mobile commerce.

9. Stay open 24*7/365:One of the most important benefits that ecommerce merchants can enjoy is store

timings are now 24/7/365 as they can run e-commerce websites all the time. By this way, they can increase their sales by boosting their number of orders. However, it is also beneficial for customers as they can purchase products whenever they want no matter whether it is early morning or mid-night.

10. Economy:Now, you don’t have to invest your money in the physical store, insurance or infrastructure as all you need is a wonderful idea, unique products and well-designed website to reach your precious customers to sell your products and services. We can say that this makes an e-commerce a lot more economical and reasonable.

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11. Boost Brand Awareness:As like e-commerce business can help B2B organizations to get new customers, so it

will be helpful for e-commerce businesses to boost their brand awareness in the market. Developing pages that can be indexed by search engines crawlers is one of the best ways to enhance your website’ search engine optimization and enhance the target audience on your site.

12. Decrease Costs:One of the most positive things about ecommerce is that you can decrease the costs

of your business. Below are some of the costs that you can reduce by opting for ecommerce:

Advertising & Marketing Cost: If you opt for ecommerce, you don’t have to spend your money on advertising and marketing. However, organic search engine traffic, social media traffic and pay-per-click are some of the advertising channels that are cost-effective.

Personnel: A complete automation of check-out, billing, inventory management, payments and other type of operational costs lower the total number of employees that you require to run your ecommerce business.

Eliminate Travel Cost: Now, customers do not have to travel long distances to reach their desired stores as ecommerce allows them to visit the e-store anytime without traveling. With few mouse clicks, customers can make their purchase and have wonderful shopping experience.

13.Offer Huge Information:One of the best benefits of ecommerce for customers is they can get huge

information that is not possible in a physical store. We all know that it is quite difficult to equip employees to respond to customers who are looking for information on different product lines.

But ecommerce websites offer additional information to their customers without any hassle. All the given information is provided by vendors so that their customers find it easy to purchase products with information.

14.Analytics:We can say that business 2 business offers an excellent platform to organizations to launch their complete range of analytics campaign. Through ecommerce, organizations can easily calculate and evaluate sales effectiveness, customer effectiveness, marketing campaigns, product mix, customer engagement and more.

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15.Expand Market for Niche Products:It is difficult for buyers and sellers to find each other in the physical world, but it

becomes very easy for them with the inception of e-store. Customers can search their required products on the web and can purchase it from any corner of the world. No matter what kind of product customers are looking, they can find all types of products without any hassle.

16.Scalability:With effective ecommerce solution, you and your organization grow and scale easily

to meet market demand as well as customer requirements by introducing different sales channels and reaching market segments.

17.Ability of Multi-site:With ecommerce platform, it becomes easy for businesses to launch channel specific

and particular brand ecommerce website. This ability enables you to provide co-branded websites for your specific customers and allows for websites catering to specific international spectators.

18.Effective usage of Social media

Social media is a relatively new tool that is rapidly exploding, offering opportunities for ecommerce companies to reach out to a variety of individuals and to establish connections with groups that have shared interested. But social media is about more than just buying--it can also provide a way for businesses to strengthen their service initiatives. Christopher Bucholtz points to a survey conducted in May 2010 by Forum One in which 22 percent said the most important goal for them in their online activities was customer service. Fifteen percent said the most important goal was fostering peer-to-peer customer service.

Some Facts• 60%+ sales happen by E-retailors without discounts.

• Repeat purchases are significant – shows genuine interest

40% sales outside top 10 cities.

Maximum basket size – 2.5 Lacs; 70-80% revenues from orders above Rs. 3,000

<5% returns when managed properly, and doubles the conversions online

Over 90% market is unorganized today and E-commerce market will grow 5 times than the ordinary retailors.(Reference Fig 1)

The habits of buying are changing rapidly. Near about 30% people read the online reviews before making the final purchase decisions. (Reference Fig 2)

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The time spent by an individual on the internet is increasing rapidly. (Reference Fig 3)

Modern websites also reduced the purchase session time. (Reference Fig 3)

Fig 1

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Fig 2

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Fig 3

• Furniture retail is on its course of being the next big category for E-commerce.

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25 -35 is the key age group for home buying. This age group is the major player to visit the internet sites and do online shopping.

Taking consideration of above facts, India could be the next big market for Furniture retail business.

Technological Building blocks of e-retailing

A major revolution has taken place during the last five years in the way business is done.

This revolution is primarily due to the convergence of computers and telecommunication technologies and the emergence of a number of Internet Service Providers (ISPs) who facilitate the connection of computers to the internet–the worldwide network of computers.

This provides us with a logical means of discussing the building blocks of e-commerce systems. Which can be listed as:-

Application layer Middleman services layer Messaging layer Network services layer Logical layer Physical layer

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Simple E commerce architecture can be shown as

Successful corporations (Amazon, ebay etc.)

Amazon.com Growth strategy

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Amazon.com started out as an online bookseller. Indeed, to some, Amazon.com will always be a bookseller. Selling books on the Internet made sense at many levels. To Jeff Bezos, the main advantage was selection. Books are incredibly unusual in one respect, and that is that there are more items in the book category than there are items in any other category by far. There are more than three million different titles available and active in print worldwide. When you have this huge number of titles, a couple of things start to happen. First, you can use computers to sort, search and organize. Second, you can create a super-valuable customer proposition that can only be done online, and that is selection. There are many categories where selection is proven to be important: books, in particular, with the book superstores, but also in home construction materials, with Home Depot, and toys with Toys ‘R Us. Online, you can have this vast catalog of millions of titles, whereas in the physical world, the largest physical superstores are only about 175,000 titles, and there are only three that big. In addition, as a product, books were easy to ship since they were not bulky, they represented a low value (and risk) item and they are informational products making them amenable to selling them via online storefronts using features such as sample chapters, table of contents, editorial reviews and customer reviews. However, Amazon.com rapidly expanded into a number of products.

Cross Selling: Amazon wanted to leverage its large customer base and encourage them to become buyers or sellers on its auction service. Amazon wanted to get a greater share of each customer’s overall shopping basket. They felt that they had already established a relationship with the customer with books.

Amazon is having 37 Copyright © 2004, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. All that remained was to leverage this trust in persuading consumers to buy everything else from them.

Economies of Scale From a technology standpoint, the company had already incurred the fixed costs of developing software for the online storefronts. Expanding into other product categories would allow the company to spread these fixed costs across a larger pool of transactions leading to greater profits.

Forever Small Selling books alone would not catapult Amazon as the leading e-tailer and a cutting edge firm. They would forever be constrained by the small market that they operated in. Moving into other product categories allowed them to be thought of as a dominant retailer as opposed to a ho-hum business. In addition to expanding into new product categories, Amazon.com proceeded in two new directions. The first initiative was to partner with e-tailers who sold products that Amazon did not carry and did not plan to carry. The second one was to host several small businesses as part of the Zshops initiative.

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Blessing of Wall Street Perhaps, the most important reason for Amazon to diversify was that at the time it was a darling of Wall Street. Sceptics were overruled by high-flying optimists who viewed Amazon as the symbol of the new economy and a new way of doing business. As a result, Amazon made the best use of the opportunity.

Brand: Amazon established a relationship with its first customers on the basis of being a bookseller. Redefining this relationship in terms of other product categories is a trivial task.

EBAY.Com Growth StrategyUnlike Amazon, eBay has been very focused as a service provider. The major variation from this strategy has been the purchase of Half.com, which is a fixed-price retailing operation. This is a place where consumers can go to buy new items. In addition, the company recently acquired Paypal, a leading provider of person-to-person payment services. eBay has many other service operations:

eBay International. eBay has consciously tried to create a global marketplace. Even though users from other countries may bid on U.S. auctions, the legal and financial barriers prevent easy trading. Country-specific sites are seen as the way to overcome this. As of now, eBay has country-specific sites in Austria, Australia, Canada, France, Germany, Ireland, Italy, Japan, Korea, New Zealand, Switzerland and the UK.

eBay Motors. In addition to selling used cars online, this site features motorcycles, as well as auto parts. The company has created a unique trading environment with services such as financing, inspections, escrow, auto insurance, vehicle shipping, title & registration, and a lemon check.

eBay Stores. EBay Stores expands the marketplace for sellers by allowing them to create customized shopping destinations to merchandise their items on eBay. For buyers, eBay Stores represents a convenient way to access sellers’ goods and services. Buyers who shop at eBay Stores are able to make immediate and multiple item purchases for fixed-price and auction-style items.

eBay Professional Services. Professional Services on eBay serves the fast growing and fragmented small business marketplace by providing a destination on eBay to find professionals and freelancers for all kinds of business needs such as Web design, accounting, writing, technical support, among others.

eBay Local Trading. eBay has local sites in 60 markets in the U.S. These sites feature items that are located near them. As a result, buyers pay low shipping rates—especially for difficult-to-ship items such as automobiles, furniture or appliances.

Ecommerce value chain

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Consumer Perspectives Market overview and Geographical success Rate.

Acquiring consumers and weaning them away from the normal retailing practices have been expensive business for eTailers because they are compensating the seller for discounts. One estimate put the losses suffered by the big three as follows: Flipkart lost Rs 2.23 for every rupee earned; similarly the loss for Amazon was Rs 1.90, and for Snapdeal, it was Rs 1.72.Flipkart suffered a loss of Rs 1,028.9 crore on a turnover of Rs 2,937.7 crore in FY14. Losses had doubled from the year before. In FY13, Flipkart’s loss (before taxes) was Rs 544 crore on a turnover of Rs 1,163.1 crore.Snapdeal had suffered losses worth Rs 530 crore in FY14. Meanwhile Flipkart, Amazon and Snapdeal together have spent Rs 9,774 crore on reverse logistics and discounting in the last financial year to acquire customers, as explained later.

Some believe that the online business models work because there are no rental costs. Remember what killed the organized retail boom in the previous decade? It was discounting and rental costs. Unfortunately, e-commerce has followed the same route today. Though most eTailers do not own physical stores, but Snapdeal, Amazon and Flipkart spend upwards of Rs 350 crore each every year on marketing and advertising to acquire the new real estate called the ‘consumer’. That apart, they are also paying rentals in maintaining warehouses. Last checked, each of the big three maintained at least 10 large warehouses at a huge rental

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cost.

The vast monies spent to acquire customers through deep discounting remind us of the halcyon days of the brick-and-mortar retail boom between 2003 and 2009. During that period, it is estimated that upwards of $5 billion (Rs 30,000 crore) was pumped in by retailers. Many of them, such as Provogue and Subhiksha, ultimately shut shop because of high-operations cost that included rentals and inventory cost. Others, such as Future Group and RPSG’s Spencer’s Retail, kept afloat by restructuring and incurring heavy debt.

For the fledgling e-commerce industry, it is probably a case of having bitten off too much, too soon. India promises a market of more than a billion customers; the industry hopes it is just a matter of time before the customer warms up to the idea of using smartphones to shop. Except, India isn’t really the homogenous stereotype as the marketing gurus like to think, where a huge customer base automatically translates into profits.

However, Sachin Bansal, co-founder of Flipkart, believes that the online platform creates so much data that cultural diversity is at the heart of the game. He says that technology, including data analytics, can change the way a region is being served with the help of real data collected from the browsing habits on phones. He is optimistic that the next step is going to be hyper local, and places more emphasis on the growth of mobile shopping.

Investment Interests envisioning Geographical success:

E retailing Eco system:

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ECommerce stakeholder list

Here are some of the roles, job titles, departments or groups who might be stakeholders for an eCommerce project. You can use this to generate a list of potential stakeholders or as a checklist in case you have missed any roles. This list is focussed on eCommerce, some generic roles are listed but for a fuller generic checklist see stakeholder list. For other stakeholder lists focused on particular industries or project types try Big Data Stakeholders, IT project stakeholders, IT stakeholders mindmap and Construction stakeholders.StakeholdersCustomer services Knowledge ManagerCustomers Sales DirectorsMarketing Sales EngineersWeb Master Directors of Commerce

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Content Manager eCommerce SMEsLegal eCommerce Project ManagerProcurement Digital Marketing and eCommerceFinance DevelopersAccounting VP/Head eCommerceAccounts receivables eCommerce ConsultantsLogistics Customer CareWarehouses Cloud OperationsSecurity Product ManagementIT security Global eCommerce DirectorIT procurement eCommerce Program ManagerSystems Architect Distributer salesTechnical Architect Regional salesSolutions Consultant EmployeesBuyersSocial Media teamRetail suppliersTransport suppliersCall CentersData WarehouseOperationsBack office

Unsuccessful Corporations in E-Retail

Indian e-commerce space has seen a lot of action in the last decade to become the fastest growing e-commerce market in Asia-Pacific and the 4th fastest growing market in the world. Multi-million dollar funding’s and changing fortunes of founders and employees have kept e-commerce companies in the headlines. Amidst the trumpets of ventures that succeeded, the wails of the failures have remained largely unheard.Examples of some of big ticket failures in the Indian e-commerce space are-

1. Yebhi.com – After three rounds of funding where it raised over $30 MN, the Gurgaon based company finally shut 2014 and changed its business model, after failing to raise additional capital from the existing investors, Cataraman Fund and Nexus Venture Partners or new investors. Yebhi.com had an eventful 2014 with its co-founder Nitin Agarwal and Rahul Jain quitting earlier this year.

2. Hushbabies.com – A portfolio company of Kalaari Capital, Hushbabies shut down in Sep 2013 after 4 years of operations and a funding of $5 million. Run by Delhi based Lapis Marketing Pvt. Ltd., the company downed the curtains due to

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its inability to raise fresh rounds of funding. The founders, Praveena Dhinakar and Vidyasagar Kris, have shifted focus on their other venture BabyBox.in.

3. SeventyMM – The Bangalore based online movie rental store shut down in March 2013 after seven years of operations. The start-up launched when Video on Demand was still in its infancy. The company, which diversified into e-commerce in 2010, raised a total of $21.4 million across separate rounds of funding. 4 months prior to its shutdown, the company’s CEO Mudit Khosla resigned from the company.

4. Tradus.com – This isn’t exactly a shutdown but a massive reshuffle of the product offering. Naspers owned Ibibo launchedTradus, a B2B/C2C e-commerce portal, in 2009. This year in August, the company re-did its business model and launched a location based mobile marketplace to become a grocery only store. Incidentally, Mudit Khosla, who was serving as the CEO of the company and was earlier with SeventyMM, resigned in Sep 2014.

5. Indiaplaza.com – One of the first e-commerce companies in India, starting out in 1999 as Fabmart.com. It was renamed Fabmall.com and later Indiaplaza.com, after Fabmall acquired US based Indiaplaza in 2007. An investee company of Kalaari Capital and founded by K Vaitheeswaran, Indiaplaza raised $8 mn in funding from 2004 to 2011. The company stopped its operations in mid-2013.

6. Taggle.com – Taggle started out as a group buying site in June 2010, and went on to become an e-commerce venture. After raising $9.5 mn in 2 rounds of funding, it decided to not be a part of the “Last-Man-Standing” game and shut shop in December 2011.

7. AllSchoolStuff.com – The website for school supplies and educational products shut shop in April 2014 after 3 years of operation and rising over $1 mn funding. Inability to raise the next round of funding was cited as the reason.

8. 21Diamonds.in – This Rocket Internet online custom jewellery store shut down India operations after operating for 1 year. It still continues to operate in 13 other countries.

Potential Threats /Pitfalls for survival and sustainability

Internal challenges

Internal forces impact how ecommerce companies can organize to drive and sustain growth.

• Organization scalingEcommerce companies will have to make sure organization design keeps pace with the rapidly evolving business strategy, along with fluid governance, strong leadership and management development. From a growth perspective, identifying acquisition opportunities, fund raising and IPO readiness becomes necessary. From a technology perspective, it is important to transform IT as an innovation hub and address the lack of synergy between business, technology and operations functions of the enterprise.

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Tax and regulatory structuring:

Companies will need to address issues around sub-optimal warehouse tax planning; imbalance between FDI norms vis-à-vis adequate entity controls; inefficient holding, IPR or entity structures; and international tax inefficiencies. Future challenges include the new Companies Act, policy on related-party transaction pricing, and the uncertainty around GST roadmap.

Risk, fraud and cyber security:

From a risk perspective, ecommerce companies could face issues around brand risk, insider threats and website uptime. Issues around employee-vendor nexus, bribery and corruption make companies vulnerable to fines. Cyber security also raises some concerns around website exploitation by external entities.

• Compliance framework

Ecommerce companies have to comply with several laws, many of which are still evolving. Potential issues around cyber law compliance, inefficient anti-corruption framework, legal exposure in agreements or arrangements, indirect and direct tax compliance framework and FEMA contraventions and regularization could pose problems. Also, uncertainty around VAT implications in different states due to peculiar business models could cause issues.

External challenges

External forces impact how eCommerce companies plan their growth strategy and provide seamless customer experience onsite and post transaction. Product and market strategy:

Ecommerce companies have to address issues pertaining to rapidly evolving customer segments and product portfolios; access information on market intelligence on growth, size and share; manage multiple customer engagement platforms; focus on expansion into new geographies, brands and products; and simultaneously tackle a hypercompetitive pricing environment. Customer and digital experience:

Companies have to provide a rich, fresh and simple customer experience, not geared towards discovery; manage inconsistent brand experience across platforms; manage proliferation of technologies; and handle time-to-market pressure for new applications. In the recent past, social media has become more influential than paid marketing. Payments and transactions:

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Ecommerce companies may face issues around security and privacy breach and controlling fictitious transactions. Further, RBI restrictions for prepaid instruments or eWallets act as impediments. From a transactions perspective, cross-border tax and regulatory issues, and backend service tax and withholding tax can have serious implications. • Fulfilment:

Companies will need to check if the physical infrastructure gets affected by the internet speed. Also, the lack of an integrated end-to-end logistics platform and innovation-focused fulfilment option could cause delivery issues. Challenges around reverse logistics management and third party logistics interactions could also act as barriers to growth.

No Real Investment

It is possible to open an online store for just a few hundred dollars. But that in no way means that a few hundred dollars is all that you will need to invest.Like any new business, a fledgling online store may require several infusions of capital and a significant amount of labor.

Brick-and-mortar retailers are often the worst about adequately investing in an online store. If you already have a physical store and are adding an online shop, think about that new ecommerce business like a new location. It is going to need a similar investment in time and at least a portion of what you would invest in money.

No Cash Flow

At the most basic level, cash flow is the movement of money into and out of a business. New ecommerce companies can get into trouble when they don’t have enough cash to keep operating. An example of this is when an entrepreneur invests all his cash in inventory and there is no money for marketing — so sales don’t rise and the business is stagnant.

To avoid cash-flow problems, try to spread out expenses, so that everything is not due at once. Look for the opportunity to pay for inventory on terms of 30, 60, or 90 days. Don’t over invest in advertising or would-be search-engine-optimization gurus. Also spend or reinvest based on actual revenue, not projected sales.

Poor Inventory Management

Depending on the business model, inventory management can be one of the most significant problems new ecommerce operations will face. Buy too much inventory, and, as mentioned above, you could cripple cash flow. Buy too little inventory and you might be missing out on sales or even disappointing customers.

What’s more, ordering products is often not as simple as you might think. Vendors may have distinctly different lead times, meaning that it might take one supplier a few days

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to get a reorder to you, while another supplier could take a few weeks, so that you would need to place reorders at very different times and at very different inventory levels.

Freight costs, associated with getting inventory to your business, can also be significant.

Too Much Competition

The Internet is a land of opportunity for even the smallest of businesses. But almost no online startup can survive in the face of significant, established competition.

This is most often a problem when new ecommerce stores seek to sell the very same products that are offered by much larger retailers.

Poor Product Photography

Online shoppers cannot physically inspect the products you sell, so they will need a strong visual representation of those products to help them understand it, want it, and buy it. Thus, poor product photography is one of the cardinal sins in online retailing.

No Website Traffic

Few things will kill retail, or even a wholesale, business as quickly as having no shoppers. In the ecommerce context, website traffic is the flow of shoppers into and out of your store. If you want to make sales, you need traffic.

A fast way to get traffic is with pay-per-click advertising. But it can be expensive, so make certain that you understand it before investing a lot.

A much slower, but ultimately more powerful, way to drive traffic is with content — i.e., content marketing, social media, or on-site product merchandising.

E-Commerce Is Growing, and So Are the Problems It Creates

You can start by solving some of the frictions e-commerce creates — that’s what inspired us to get started. We realized e-comm was growing rapidly, but couldn’t see how the end user actually benefited from the experience when he or she was not around to receive the packages.

That turned out to be a huge opportunity. In urban markets, up to 40% of deliveries are missed at least once.

Future Outlook of E Retail/E Commerce in India

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We believe that the online retail could have significant direct and indirect upsides to the consumption landscape in India. The B2C e-commerce market in India has exhibited rapid growth and has attracted large investments from the PE/VC community. With positive fillips from the demand and supply side, this market is likely to reach $60Bn by 2017

The market place model has seen significant amount of FDI, either through the PE/VC route or with the entry of global players like Amazon

The Indian B2C/C2C e-commerce sector has grown rapidly in the last 5 years to reach USD11Bn in 2013 (Fig 2). This segment is expected to grow to USD 60Bn by 2017, making India the fastest growing e-commerce market in the APAC region. The major factors driving this growth are decreasing cost of devices (PC & mobile), increasing internet penetration, more payment options backed and lastly changing consumer preferences.

India has the third largest internet user base in the world behind China and US and is expected to overtake the US in the next 2-3 years. While it took a decade for the number of internet users in India to move from 10 million to 100 million, the subsequent leap to 200 million happened in a mere three years (Fig 3). This accelerated pace of growth is expected to continue and to be bolstered by the number of users accessing the internet from their mobile devices, estimated at 110 million users as of October 2013 and growing rapidly. This rapid spread of mobile internet, especially of smart phones could unlock a significant market beyond the Tier 1 cities for the online retail segment.

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Payment Systems.

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The e-Commerce industry is expected to grow by 33 percent in the year 20132. As India moves towards becoming a consumption driven economy, this consumer centric model presents a very large and transformative opportunity.

Various demand and supply driven factors aided by dynamics in external (government/ regulatory) environment are supporting the growth of the industry. Favorable demographics, increasing number of urban households, growing internet penetration in smaller towns and rural areas, proliferation of mobile devices and emerging need for convenience, choice and access are acting as prime movers from the demand side. The e-Commerce and allied companies have also turbo-charged the e-Commerce growth engine by introducing innovative business models, by offering convenient payment options and by introducing technological innovations and customer friendly policies to capture online time and wallet share. Concepts such as flash sales, ‘by invite only’ sales, India ‘Cyber Monday’ or the ‘Great Online Shopping Festival’ have been smashing hits in the past and such innovations will continue to play an important role to promote online shopping. These tactics, in addition to the existing sales, coupons and deals are welcome by the Indian customer.

The government and regulatory bodies are also playing their part by investing in infrastructure and policy support. These bodies have also initiated awareness drives to get wider users (including SMEs/ MSMEs) on to the e-Commerce bandwagon

The e-Commerce industry offers great benefits to the Indian economy, the customers and the society at large, especially to small businesses, small merchants, and semi urban and rural population. In recent years, the growth of the global e-Commerce market has made cross-border transactions an intensifying force in India’s foreign trade, offering millions of enterprises, most of which are SMEs/ MSMEs, to expand beyond the domestic market. Over 30,000 sellers sell on eBay India annually to 4 million consumers in 3,311 Indian cities. Over

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15,000 sellers export a variety of Indian handcrafted products to 112 million customers in over 190 countries. It must be noted that this is just the tip of the iceberg. Many small businesses still do not have their own website, which greatly impacts their ability to reach out to a wider and bigger market. However, the third party B2B exchanges/ marketplace platforms afforded by e-Commerce is providing the required firepower for the growth of SMEs/MSMEs by opening a window to new markets, by shortening traditional supply chains, and by reducing costs, thereby, leading to higher revenues and profit margins.

It is estimated that the e-Commerce industry is expected to contribute around 4 percent to the GDP by 2023. In comparison, by 2020, the IT-BPO industry is expected to account for 10 percent of India’s GDP, according to a NASSCOM report, while the share of telecommunication services in India’s GDP is expected to increase to 15 percent by 2015. However, with enabling support, the e-Commerce industry too can contribute much more to the GDP.

The growing industry will also have a positive spillover effect on associated industries such as logistics, online advertising, media and IT/ ITeS. Currently e-Commerce accounts for 15-20 percent4 of the total revenues for some of the big logistics companies. The revenue for logistics industry from inventory based consumer e-Commerce alone may grow by 70 times to USD 2.6 Billion (INR 14,300 crores) by 20205. Currently, the inventory based consumer e-Commerce model alone provides direct employment to approximately 40,000 people and is estimated to create 1 million direct and another 0.5 Million indirect jobs by 20206. Low entry barriers have attracted many young and enterprising individuals to try their hand at entrepreneurship. A significant 63 percent of e-Commerce ventures have been started by first time entrepreneurs7.

Although many factors support the growth of e-Commerce in India, the fledgling industry is faced with significant hurdles with respect to infrastructure, governance and regulation. Low internet penetration of 11 percent8 as compared to world average of 34 percent9 impedes the growth of e-Commerce by limiting the internet access to a broader segment of the population. Poor ‘last mile connectivity’ due to missing links in supply chain infrastructure is limiting the access to far flung areas where a significant portion of the population resides at. High drop-out rates (25-30 percent)10 on payment gateways, consumer trust deficit and slow adoption of online payments are compelling e-Commerce companies to rely on costlier payment methods such as COD (Cash on Delivery). (Access, logistics, payments are part of infrastructure).

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OVERVALUATION Since the losses incurred are balanced by the equity infused by the private investors, there is a fear amongst analysts that the E-commerce space is a bubble waiting to burst. For instance, Flipkart here raised 1.91 billion USD in 2014 which took it to a valuation of roughly 16 billion USD. Flipkart today is amongst the highest valued privately held companies. However on comparing with Alibaba, which is profitable (reasons to be discussed in next section), the valuation to GMV multiple is somewhere 0.65-0.7 [7]. A similar story can be seen with other E-commerce majors. Given the current burn rate of the E-Commerce major companies, they might face difficulty in raising money and they will be forced to raise capital at lower valuations or at par with current valuations. Another concern is that some analysts feel that E-commerce industry is going on the same path that led to the dot com bubble burst of the early 2000’s. Whether this holds true is something that only time can tell [8]. TAX ISSUES

Indirect fallout of the discount based model also has problems pertaining to sales tax. For instance, if a product priced Rs.100 is sold for Rs.70 by a seller on an E-Commerce platform,The online retailer will collect Rs.70 from the customer, keep a cut for itself, and give the remaining proceeds to the seller. Then, the E-Commerce platform will also give the seller an additional amount to account for the discount offered by the seller. This amount could be Rs.30 or lower. [9] This method potentially poses a problem for state tax authorities. Tax is typically charged on the product when there’s a transfer of ownership. In the case of e-commerce, sales tax is collected on the cost of the product and then on the price at which it is sold to the final customer. If a product is sold on a site below the cost price—as it happens in some cases—then the tax collected from the customer is much lower than what was paid originally. In this case, the seller would potentially be eligible to get a tax refund from the concerned state tax department. The Karnataka commercial tax department in second half of 2014 has stopped Amazon India [10] from selling electronics and several other products from its warehouse in the

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state by cancelling the licenses of third-party merchants that work with the local unit of the world’s largest online retailer. These unfavorable government regulations can be detrimental for the entire sector.

THE WAY AHEAD While it can be argued that the root cause of some of the major industry problems is the

discount based strategy, given the consumer behavior of Indians and the hesitation of the Indian consumer towards internet based commerce, it is unrealistic to say that discounts will completely disappear. Quoting Mr. Vidmay Naini, Business Head of Ebay, “It is in the DNA of Indians to bargain, from that point of view discounts are going to stay and are not going away anytime soon.” [11]. Continuing on this thought, this paper proposes some of the strategies that can be used to mitigate the effects of discount to some degree.EXCLUSIVITY

Recently, a trend of exclusive launches on a single platform has emerged. In the last couple of years, major brands like Xiaomi, Motorola, One plus 2 etc. were launched exclusively on a single platform only. The advantage of this approach is that since there are no competing platforms, there is no requirement of using heavy discounts to entice customers. This is evident that most of the exclusive launches do not have more than 20% discounts. Moreover, exclusivity is the closest alternative to induce brand loyalty in the e-tail industry. As of now, most of the exclusive deals are mostly for mobile devices, books and high end apparels. A future strategy could be to broaden the scope of exclusive deals to daily household requirements like introducing FMCG brands. Recently, a lot of E-Commerce startups (like Groffers) have been targeting this particular segment. Having more exclusive brands which are used on a daily basis will not only help to reduce the financial burdens of the discount but also help to increase market share.

B2B E-COMMERCE A surprising paradox of the E-Commerce industry is that while B2C platforms are not/less

profitable, B2B platforms have been successful in creating profits. The best example of this is Alibaba that posted a profit of 467 million USD, or 18 cents a share and has one of the lowest valuations to GMV ratios [12]. One of the basic reasons for this profitability in the B2B sector is the lack of heavy discounts. Since B2B customers

Mobile to be the most influential aspect of eCommerce

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With mobile apps being developed by most eCommerce websites, smartphones are increasingly replacing PCs for online shopping. In 2013, only 10% of the mobile users used smartphones, and only 5% of the eCommerce transactions were made through a mobile device. This figure has more than doubled, and more than 13% of all eCommerce transactions today happen via mobile3. According to some industry players, over 50% of the orders are being placed through mobile apps, which is not only leading to substantial customer acquisition but also building customer loyalty for various brands. However, most mobileTransactions so far are for entertainment, such as booking movie tickets and music downloads. This trend will change soon with more and more merchandise being ordered online.Key market factors to be evaluated before entering a new eCommerce businessTo achieve their vision, eCommerce companies will need to understand the intricate landscape of new markets in addition to their own internal capabilities and limitations.The following factors must be considered:• Market size: • Ecommerce readiness• Scope of growth• Barriers to entry• Competition

Extrapolating the future -Omni channel Retailing -The Way AheadBrick and mortar retailers are realizing that physical store is only a part of the overall consumer experience. Access to internet and mobile devices has enabled consumers to research, shop anytime and anywhere. This new concept of retailing which integrates and aligns all channels of consumer engagement – stores, ecommerce, mobile apps and social media is called Omni channel retailing.In India, large brick and mortar retailers like Shoppers Stop, Croma and Future Group have invested in building their online capabilities, albeit that the business share currently is extremely small, at <5%. However there is unanimity on the importance of this channel. With their stores already existing as brand mascots, it will be critical for these players to align all their channels and not grow them separately. This could act as a significant differentiator in an increasingly cluttered market.

For example, given below is a figure that describes how aligning various points-of-engagement could provide a much superior experience to an apparel consumer.

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Consumer -The Biggest Benefactor of Online Retailing

The consumer is the biggest beneficiary of online retailing in all its variations. Research indicates that the wide choice of products at lower prices coupled with convenience emerge as top reasons for consumers to shop online (Fig 9).

Deloitte recently conducted a survey in the European market which revealed certain interesting facts on the importance of Omni channel:-

Up to 37% of transactions made online are likely to be additional to in-store purchases Up to 25% of recent online purchases were goods which could not have been purchased locally Up to 63% of shoppers used multiple channels when making orders above 100 Pounds In China also, surveys have revealed that slightly less than half of every Yuan spent online is new consumption generated from the online channel – this proportion is expected to be even higher in lower tier cities. The new channel is thus, driving the overall industry’s size higher and propelling consumption in the country – a trend that would hopefully be replicated in India.

Potential Discontinuity/Disruption in the Indian Online Retail Market

Online retail in India could potentially be a disruptive model for the Indian market. It helps players avoid two of the most oft repeated challenges in Indian retail – high rental costs and lack of skilled store level manpower.

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If provided with the right regulatory enablers and economic conditions playing out favorably, the online market opportunity could be substantially higher. To estimate this incremental value, the typical lag between India and China on various macro-economic, adoption, and consumption indicators was observed (Fig 11). This analysis revealed a broad range of 2 to 20 years, with 6-7 years being the most common. It was interesting to note that organized retail share showed the highest gap, and this is one area which has seen significant policy restrictions in India.

Thus, it is fair to assume that with the ‘right’ enabling framework, online retail in India can be a disruptive market opportunity. Taking a conservative 10-year gap from the above logic, we could potentially add more than $12Bn to the originally projected market size for the Indian online retail market in India (Fig 12).

While there are reservations expressed on the impact of e-commerce on local kirana stores and small players, we expect such negative impact to be minimal. Preliminary analysis suggests that the Indian retail market accords opportunities for multiple retail channels – traditional, organized, and online. All these three channels are expected to register growth in coming years. This indicates that the total retail market in India is large enough to accommodate multiple channels. Moreover, the organized retail segment will more likely feel the impact of the growth in online retail. The cause for worry for traditional retail is much lower.

Factors that will fuel growthA significantly low (19%) but fast-growing internet population of 243 million in 2014 is an

indicator of the sector’s huge growth potential in India.

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It is evident that in absolute terms India’s internet users are short by only 36 million as compared with 279 million in the US and higher than that in Japan, Brazil and Russia. However, in relation with its population, only 19% Indians use the internet. This indicates the potential of internet use in India and as internet penetration increases, the potential of growth for the eCommerce industry will also increase. Testifies that ecommerce will rise rapidly in India in coming years. Around 75% of Indian internet users are in the age group of 15 to 34 years. This category shops more than the remaining population. Peer pressure, rising aspirations with career growth, fashion and trends encourage this segment to shop more than any other category and India, therefore, clearly enjoys a demographic dividend that favours the growth of eCommerce.

An analysis of the demographic profile of internet user’s especially rural areas shows that rural India will yield more eCommerce business.

By 2020, entail in India is expected to account for 3% of total retail. Further, orders per million are expected to more than double from five million in 2013 to 12 million by 2016, which will mean more opportunities for both consumers and eTail companies. While the share of online shopping in total retail has increased at a fast pace in the last few years, it is still miniscule compared to the figure in China, where the share is 8-10%.

Retailers are going online: The big retailers are trying to complement the traditional retailing with digital commerce by tying up with big e-tailers. The partnership between Snapdeal & Croma or Amazon & Future Group owned Big Bazaar is no more a partnership between two retailers. It has extended to a vendor and technology partners offering technology and logistics services. Reliance retail is planning to launch its e-commerce website seeking to attract people from online retailers. Shoppers Stop is revamping its digital platform, which currently contributes 1% of the revenue. 18 The extended reach of the online channel is the primary reason for offline retailers to launch e-commerce offerings.

The Way Ahead – Extrapolating the future

The digital disruptions are very much visible in the retail industry where online businesses are embracing technology and innovating at a pace not seen in the past and the offline retailers are finding it difficult to compete with this change. With the increasing competition in the e-commerce market, players who are able to adapt and innovate in the face of these changes will be in better position for success.

As per Deloitte India TMT Prediction 2015, a new category of service (handyman, delivery, Healthcare, repairing) that touches the daily lives of the consumer would play a pivotal role in the growthOf e/m-commerce in the coming years. Although there are several trends that are shaping the market today, some of the key trends that the companies in digital commerce should focus on in the future are discussed below:

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Experience mattersCustomer is king for the brick-and-mortar stores and the digital age e-retailers. Shopping online is getting easier and the customer expectations are changing quickly. The e-tailers need to differentiate themselves to not only attract customers but also to build trust and loyalty.The big retailers provide product replacement warranty, after sales service, free delivery, etc., which have become norms in an online business. Customer still wants consistent and seamless experience across all touch points: online, in-store, website, mobile app, social media, customer service, or delivery man.They expect to order, pick up, receive, ship, return from anywhere, anytime and from any device. The e-tailers need to analyze the lifecycle of the customer relationship and enhance the offerings at each stage. Hence, e-tailers need to improve upon the customer experience metrics for attracting and retaining customers to maximize their lifetime value. The website and mobile application of the e-tailer are the frontend for a customer where customers can find product information and decide to make purchase decision. The metrics for analysis could be search optimization, personalization options, user-friendliness, access to information and content appeal. To cater to these expectations, e-tailers will need to modify their internal operations, assemble right tools and infrastructure and collaborate with third-party vendors and all other players in the e-commerce value chain.Leading telecom operators are working with mobile app vendors to improve the overall network performance on smartphones which would help better customer experience in terms of network speed, performance of mobileApp, battery life of smartphone. 41 All these parameters, although not fully in control of the e-tailer, influence the purchasing experience for customer.

Mobile firstThere are about 930 million wireless subscribers in India. The wireless tele density in urban areas is in excess of 140 while there is still huge potential in rural areas with tele density of 44. A significantly large percentage of this subscriber base in India will be using mobile devices to access internet, estimated at 235 million users as ofSeptember 2014 and growing rapidly. This rapid spread of mobile internet, especially of smart phones could unlock a significant market beyond the Tier 1 cities for the online retail segment. Undoubtedly, mobile retailing is expected to continue to grow aggressively. In the next three years, global e-commerce sales made via mobile devices are expected to top $638 billion. However, while shoppers want real-time, relevant, and personalized information and offers, retailers will need to surround this service with very strong privacy and security. Trust, transparency, and protecting customer information will be critical in retaining loyalty as mobile retailing becomes the norm. Online commerce companies should enable all features from search-to-purchase on mobile apps, such as facilitating product research, price comparison, view ratings and reviews, and payment. The launch of wearables, such as Google Glass and Apple Watch, opens new opportunities for reaching out to customers. E-tailers would keep an eye on developments in this arena, although it might only be an urban phenomenon at the moment.

Growing power of e-Marketplaces

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The e-Marketplaces are growing significantly with the increase in the Internet penetration and Smartphone usage. Internet enabled mobiles are making shopping a unique experience for buyers. E-Marketplaces provideA technology platform for sellers to participate and a trusted environment to scale up rapidly, increase profit and is highly valued by the customers. The non-inventory led B2C model also allows the e-commerce players toProvide attractive discounts and offers which are difficult for inventory led brick-and-mortar shops as well as for pure e-Tailers. According to Deloitte’s study “Global Powers of Retailing 2015,” online marketplaces rather than pure inventory-led companies tend to serve as the primary e-commerce model in Asia. The high costs of holding inventory, poor logistics and supply chain challenges in India are shifting the inventory-led companies and new entrants to adopt marketplace model. Also, e-Marketplaces work well in India due to high fragmentation on supply side. The rise of online sales in the developing markets is encouraging retailers to go online for global expansion.The e-retailers are becoming exclusive partners for different brands. E.g. The Chinese smartphone manufacturer, Xiaomi, entered Indian market through Flipkart e-Marketplace that helped to reach a large customerBase in a short time. 43 Similarly, OnePlus teamed up with Amazon India for exclusive partnership.

Robust supply chains and logisticsSupply chains are the lifeline of e-commerce players. The rapidly growing e-commerce sector needs a robust Logistic and supply chain to be successful in future. India being a vast country, the efficiency and reachability of the logistics and supply chain, can make big difference for the e-commerce players. Presently, the courier companies, handling the logistics business in India, have limited reach. To tackle the situation, some of the major players like Flipkart have started their in-house logistics operations. Recently Amazon started its own logistics arm, Amazon Transportation Services Private Limited, which will ship goods from sellers who transact on the Company’s online marketplace in India. The last mile delivery is still a concern for most of the Players especially given the high percentage of Cod deliveries in India. Indian Post comes to rescue especially for these Cod-based payments. Small distribution centers across all major cities and towns could guide the Products to their destination. These centers could be extended as collection locations for “Click-and-collect” delivery methods. Automated Guided Vehicles (AGV) could solve many logistic problems of the e-tailors and result in highly successful product deliveries. For example, Amazon Prime Air is working on drone-based Delivery of its products. 49 Local knowledge of the delivery person complemented by GPS-based device could lead to efficient delivery of products. Reverse logistics of damaged goods not only results in high cost and time, but also bad reputation for the company. Accurate labelling, tracking facilities, quality Material for packing and package cushioning would go a long way in successful order fulfillments have more emphasis on quality of product rather than price of the product, the need to entice customers with discounts evaporates. Also given the value driven nature of B2B business, there is a huge potential for E-Commerce industry. According to a report in Forbes, B2B E-commerce is expected to reach up to 6.7 trillion USD by 2020 [13]. As of now the Chinese are the dominant

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forces, but there is a big market share which can be taken up by the Indian E-commerce majors. Having said that, there are some inherent complexities to this strategy. Volumes are much higher, but also of a much wider range, necessitating a flexible shipping and logistics solution. Tax and regulatory concerns impact sales highly, and providers typically employ large staffs whose only responsibility is delivering products and services within these restrictions. Marketing is more complex, as clients need to understand how products work and interact with other systems they already have or are considering for purchase. These are some of the key challenges that an E-commerce platform needs to overcome to successfully foray into the B2B E-Commerce world.

OUTLOOK in future

In 2015, eCommerce players see mobile commerce as the most preferred route with mobile wallet as the preferred way of payment. With 4G services expected to be launched in 2015, internet penetration is likely to take a significant leap, which is likely to give another boost to mobile commerce. Changes in lifestyle and shopping choices will see buyers preferring online and mobile channel over physical channel to save time and seek wider range and possibly comparative pricing. For mobile wallets, improvements on the payments front with multiple payment instruments and increase in payment gateways aided by enhanced security with multiple authentication layers will help the consumers with a seamless mobile experience.

Niche categories are also expected to gather momentum including cars and real estate. Premium and international brands are likely to join eTail, purchases from Tier 2 and 3 cities will continue to rise and differentiated products such as exclusive brands by designers will grow. Riding high on the growth prospects eCommerce companies will look at more ways to raise funds such as IPOs. Some consolidation will also happen with the leaders focusing on high growth and smaller players finding their own niche.

Customer experience

As the customers progress from research to purchase to fulfilment stages, their expectations change fast. Ecommerce companies need to understand these change drivers and adapt their proposition accordingly. Easy transitions between ordering on tablets, mobile phones or PCs will have to be facilitated. Besides, convenient multichannel returns and delivery options need to be developed along with the provisions of touch and feel the product before buying. They should also ensure sufficient after sales service and support. Online product reviews and ratings, videos, more advanced sizing and fitting tools should be provided.

Technological advancements

Ecommerce companies constantly have to upgrade their offerings with changing technology. For instance, shopping through mobiles have truly arrived, they need to devise easy to use mobile apps for their websites. They need to ensure that their websites have the

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required speed to do fast business, especially during sale, deals and discounts. Solutions enabling seamless integration of back-end and front-end infrastructure, customer experience enhancement initiatives, integrated inventory management and analytics would be crucial for the eCommerce firms.

Convergence of online and off line channels

As the customers progress from research to purchase to fulfilment stages, their expectations change fast. Ecommerce companies need to understand these change drivers and adapt their proposition accordingly. Easy transitions between ordering on tablets, mobile phones or PCs will have to be facilitated. Besides, convenient multichannel returns and delivery options need to be developed along with the provisions of touch and feel the product before buying. They should also ensure sufficient after sales service and support. Online product reviews and ratings, videos, more advanced sizing and fitting tools should be provided.

Delivery experience

With lack of integrated end to end logistics platform, the eCommerce industry is facing issues related to procurement operations and transportation. Online purchases from Tier-2 and Tier-3 cities are expected to significantly increase, thanks to the emergence of low cost smartphones, however, poor last mile connectivity could act as a deterrent. Keeping control on logistics and on ground fleet management, especially courier companies, is essential for growth.

Payments and transactions

India continues to be a cash-based society due to limited banking and credit card penetration. This, combined with a lack of consumer trust in online merchants, has forced companies to offer Cod services, which imposes significant financial cost for firms in the form of labor, cash handling and higher returns of purchased items. Data protection and the integrity of the system that handles the data and transactions are serious concerns. Companies should take necessary action for management even if this imposes a cost on them.

CONCLUDING THOUGHTS The E-Commerce industry, in the last five years or so, has revolutionized the concept of

shopping in India. As the internet penetration and infrastructure improves, this industry stands to flourish. Having said that, there are some key issues that need to be resolved. While some have been discussed in this paper, there are other issues like penetration of market share, gaining and upholding customer trust etc. However the biggest challenge remains whether the industry can adapt itself to an ever changing business environment. Nevertheless, the one thing that remains constant is customer satisfaction and convenience. If a company can deliver this on a consistent basis - no need for discounts in the long run.

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