BUSINESS SPECIAL...E-COMMERCE AND OFF LINE BUSINESS

E-COMMERCE AND OFF LINE BUSINESS  Out Of The Box  With e-commerce gaining steam, how are off-line businesses coping?      Late last year, Shoppers Stop was giving customers spending over a certain amount in its stores a discount voucher which could be redeemed against purchases on the retailer's website. Croma, the electronics retail venture from the Tata Group, sells its products on eBay, in addition to having its own online shopping site. Fashion retailer Globus has a store on eBay through which it occasionally participates in flash sales. Jewellery retailer Gitanjali has jumped onto the bandwagon too, to reach out to consumers in Tier III and Tier IV towns. Something like this would've been unheard of until a few years ago. Modern retail meant selling through a brickand-mortar store, and the only things selling online were either discounted or through a deal site.     According to Muralikrishnan B, Country Manager, eBay India, after having been at the point of inflection for a while now, e-commerce in India has finally taken off. "Consumers understand that shopping online offers them far more variety as compared to offline. Besides, the larger stores haven't penetrated the smaller towns yet," he says. The number of online shoppers in India is expected to hit 38 million by 2015, with the e-commerce industry estimated to grow to $24 bn. Industry watchers predict that the launch of 4G services will be one big growth driver. eBay alone reaches out to over 4,300 towns in India.     That explains why the traditional brick-and-mortar retailers are in a rush to make their presence felt on the web. Reports of local music and book stores shutting down are as commonplace as of the bigger chains either cutting down the number of stores or even reducing the size of the existing ones. Physical retail of books and music has perhaps been the biggest calamity with various websites, including the retail chains, offering far more lucrative deals online. Today, the 'bookstores' sell a whole host of other products, from toys to handbags and even candy. E-books are still not as popular in India but the local publishing industry will be keeping a close eye on how the business is evolving in more developed markets. The first signs of the disruption were visible at the peak of the dotcom boom in 2001, especially in the headhunting and stockbroking industries. For Shiv Agrawal, Managing Director, ABC Consultants, the shift has been dramatic. "There are two aspects to recruitment, sourcing and matchmaking. With the internet, sourcing has opened up and recruiters who were focussed only on that, have been impacted," he says. Job sites like naukri.com and monster.com have amassed a huge database in India, which has hit certain aspects of the headhunting business. While it's no longer possible for agencies to demand a premium for plain vanilla jobs, not all talent has moved online. In fact, consultants often refer to the database that exists online before shortlisting people for specific jobs.     Realising that the dynamics of the marketplace were changing, Agrawal decided to innovate. Though there are tens of thousands of profiles online, these tend to be primarily for junior and entry level positions. A few years ago, ABC Consultants launched its own website, aimed specifically at middle and senior management. "People at this level typically don't use job sites and wait for companies or consultants to call them. This website enables them to actively look for jobs," says Agrawal. Based on a subscription model, the website has over 750,000 registered users.     Dinesh Thakkar, chairman & managing director, Angel Broking, remembers how people believed that the internet would not impact their industry. "Those who didn't embrace the technological changes that were happening then, were wiped out," he says. Thakkar was among the ones that realised that things were changing but the transition wasn't easy as there was no readymade software he could shift to. The back-office software, which did routine tasks like issuing contracts, had to be changed and resources dedicated to set up an integrated platform.     Today, over 20% of all trade volumes on the stock exchanges and about 35% on the commodity exchange are done online. One reason for this has been the customer becoming more tech-savvy and comfortable about doing transactions online. That coupled with low credit card penetration, are important reasons why online shopping is still at a nascent stage. Even today, a large number of people are comfortable shopping online only because it offers them a cash-on-delivery option, something unheard of in most other countries.     What's interesting in India is that the country is seeing the evolution of modern trade and online retail almost simultaneously. Aashish Bhinde, ED & Head-Digital Media & Technology, Avendus Capital, says markets like the US have seen a natural progression where today there are purely online retailers and old businesses that have found a way of leveraging their existing strengths to make the transition online. By offering incentives, like free in-store pick up, the retailers are trying every trick in the book to hold on to their customers. "In India, the existing retailers are looking at online as an additional channel, apart from having their own stores, presence in MBOs. This will get you traction, but it's not enough to make you a leader," he says. The organisational requirements to succeed in both formats are very different, as is the profile of the customer. Retailers are realising this as most of their offline customers prefer shopping at the bigger fashion websites, which offer a wider range of products coupled with features like cash-ondelivery and free returns.     Harminder Sahni, founder & managing director, Wazir Advisors says that while online has only just scratched the surface. "The only reason someone isn't shopping online is because he hasn't discovered it yet. There is no logic in shopping offline anymore," he says. The online marketplace offers a great opportunity to brands that don't have a dominant offline presence. "Brands which saw the potential of selling online early, are doing well in that space even though they may have a small presence on the ground," he says. For instance, Nike may dominate in terms of offline business, online, Puma, which was a latecomer to the Indian market, is way ahead of the pack.     eBay's Muralikrishnan points out that having access to an online marketplace has worked to the advantage of a number of medium and small businesses. He talks of a mobile phone seller in Vadodara who now sells through eBay. "From catering only to his locality in Vadodara, today, he has customers all over India," says Muralikrishnan. It's not been so simple for the travel industry, though. Ticketing, both air and rail, has almost completely moved away from the travel agents. Subhash Goyal, chairman, STIC Group, a Delhi-headquartered travel agency, says that 80% of all ticketing happens online. "Only those who adapt, survive. We were conscious of this and have changed with the times," he says. From having over 60 offices , STIC now has 14. According to him, when people are planning a big holiday, they will always go to a travel agent. "You can get all the information on various medicines online, but you still go to a doctor when you are unwell. Similarly, even if all the travel related information is available online, people still prefer to come to a travel agent when planning a vacation," he says. This is a characteristic unique to India where people still find some comfort in someone managing all the arrangements for them.     Amit Madhan, COO-IT, e-Services & Insurance, Thomas Cook says that agencies that continued to focus only on ticketing, have now shut down while others have evolved to offer services ranging from holiday packages to travel insurance and forex. "Pure ticketing has never been a big part of our business except for corporate clients. This too is evolving with many clients now opting for self-service modules where employees can go and manage their own bookings.," he says.     Another unique feature of the Indian market is the brag value associated with holidays, which drives the demand for exotic destinations. "Most people do their research online and then call or come to us to do the final booking," says Madhan. This enables the agent to up-sell at times, by updating the consumer on current popular destinations. "The online model is primarily about getting the technology right, and while that will help in ticketing, it's different for holidays. Holidays are about understanding experiences, and there, the personal touch matters," he says.     According to an Avendus Capital report, 'India Goes Digital', 47% of the Indian classifieds market has already moved online, with jobs and matrimonial sites comprising 65%. Real estate is still small, and given the maze that Indian real estate is, it's unlikely that the neighbourhood broker will be looking for an alternate career.     There may be temporary slumps but the size of the pie will keep growing. The Yellow Pages is an interesting example. For years, it has been the go to point for any kind of information on local traders and dealers. That started changing with the growth of voice and then internet-based information providers. "Print sales have definitely decreased in the metros," agrees Mukhtar Qureshi, COO-Network18 Publishing, "but the volumes in the smaller towns continue to grow." The Vadodara Yellow Pages, for instance, earned Rs 1.65 crore this year, as compared to Rs 1.1 crore last year, from print sales. The company recently sold the brand to Getit, which offers a similar service. Qureshi is now using his network of sales agents to help the SMBs set up their own websites. "Having a website is the first step to having a presence online, after which we use Google Adwords to attract traffic to their site. This brings in an ROI (returns on investment)-based approach," he says. In the case of some industries, the entire business model has been turned on its head. Bhushan Kumar, CMD, T-Series, has seen the industry change from a time when the company was selling eight lakh cassettes a day to music being sold (or illegally downloaded) online. While physical sales are dropping and are down to about 15% of total revenue, a number of new avenues have opened up. "We are present on various online platforms and the future of the music industry will be in selling online," he says. Royalties from TV and radio, apart from mobile downloads and caller ring back tunes today, comprise a large chunk of the revenues. At the same time, the canny businessman has realised that music cannot be the only revenue source and has diversified into films as well. While the future of publishing and music is shifting to a purely digital model, it seems unlikely to happen in other industries.     Thakkar explains that purely for regulatory reasons, stockbroking can completely move online. Angel Broking currently has 170 offices of its own and over 5,000 franchises across the country, which Thakkar hopes to expand as the economy picks up. Similarly, while some people may prefer the convenience of shopping online, it's still a miniscule fraction of the overall population. Stores will continue to attract the large volumes for whom shopping is about the experience and the actual touch and feel of the product matter.     What we will see is a hybrid model that will serve the interests of the consumer and the business. Given the size of the market, irrespective of the product or service offering, it's going to be some time before offline business needs to worry about its survival. —— Priyanka Sangani —— CDET130426