E-Sparks 2011 captures Indian spring in E-commerce

Shailendra Singh asks e-commerce startups to think differentI fell in love –/ Taken by the innocence of / Child-face daffodils:

Their perky April fanfares – /Clarion calls from yellow-ochre brass bands

Presaging, rejoicing, calling us: /‘Here we are! Here we are! ’

—Mark R. Slaughter

‘Here we are! Here we are!’ proclaimed the e-commerce startups from nook and cranny of the country that inspired YourStory to host the first showcase of e-commerce startups in the country. “e-commerce began to gain momentum from 2010 and we began receiving lot of stories from all parts of India in 2011,” remarked Shradha Sharma, YourStory founder. A few pointers to the booming trend of Indian spring in e-commerce can be attributed to success of e-commerce businesses like Flipkart and Snapdeal. In a departure from the earlier YourStory events, only one company from Bangalore found its way into the top 15 startups chosen by YourStory to showcase their wares at esparks from among the 227 nominations received from all over the country. It was finally a pan-India mix including one startup from Goa. The 500+ attendees for the event showed participant interest from all parts of India and many were coming to an YourStory event for the first time and by the evening, there was visible glow after a scintillating workshop by Mekin Maheshwari, President, Engineering, Flipkart.

According to a Forbes report quoting Venture Intelligence, Sequoia Capital had invested $23 million (Rs. 115 crores) in two deals in e-commerce in India up till July 2011. And certainly there will be uptick in their investment going forward. At least Shailendra Singh, MD, Sequoia Capital, seemed to suggest as much in his inaugural remarks, as they have Rs. 7000 crore to invest in India. So far Sequoia has funded 75 businesses from seed stage to growth stage. The investor interest in e-commerce is enabled by a few successes and scalability of businesses in India, which may die out as a “hype,” Shailendra Singh pointed out. But the enormous opportunities available can be realized if we look and learn from the Chinese e-commerce businesses as to how they have localized and succeeded in scaling very big. In a succinct presentation on “E-commerce in India,” Shilendra Singh did not dwell upon the Indian scene as much instead sought to refer to the Chinese activity in the sector to throw some interesting insights. There is a tendency among Indian entrepreneurs in e-commerce to replicate businesses either the Chinese or the U.S. way, which holds no good, explained Shailendra. “The major e-commerce activity in China is in the marketplace model,” said Shailendra elaborating that Taobao.com has more than 400 million users and does in excess of a staggering 50,000 transactions per minute whereas Indian activity is viewed as transactions per day. He added that B2C marketplace has not taken off in India yet, perhaps hinting at the enormous opportunities available in that space for Indian entrepreneurs. He summed up the successes of Chinese e-commerce businesses as due to (i) difference in nature of companies, (ii) adapting to what works in China, (iii) building logistics to cater to Chinese market (Taobao does same-day delivery), and (iv) scaling innovations. “You should adapt to India,” he advised Indian entrepreneurs.

On the supply side infrastructure, most e-commerce biggies in China have built their own delivery channels. Flipkart in India uses their own service to deliver in 30 cities. e-commerce startups in China have grown on a massive scale, much much better than in India, and larger opportunity lies untapped in India. But the challenges are bigger. Shailendra, banking on his experience of seeing Sequoia portfolio companies in China, had a few tips to give Indian entrepreneurs.

Calling upon Indian e-commerce startups to think different, he pointed out to the fact the e-commerce companies are shaping differently in different countries. “Scale is a driver of efficiencies and unit economics, as many e-commerce businesses are low margin,” said Shailendra. Thinking disruptive and innovating is the way forward, in Shailendra’s view, as unit economics does not add up to scale in India. Indian entrepreneurs are betting on negative or zero margins buoyed by the hype and not concentrating on unit economics. This is dangerous in the Indian scenario as the average selling price in India is low. Adding up to this sobering effect is that payment infrastructure is broken as one out of three online transactions fail. Inefficient logistics and high cost of customer acquisition add up to the woes.

Shailendra’s success mantras in the Indian context are (1) acquiring customers at a cheaper price, (2) innovating with payments, (3) delivering through affiliates for better logistics, (4) creating your own brand, (5) innovating in supply chain, (6) leveraging network effects, (7) offering better customer service, and (8) creating lower cost structure. “Innovate. Localize. Don’t copy U.S. and China,” concluded Shailendra.

Decade of the Cloud

Vikram Bhatia of Microsoft provided some case studies of Microsoft’s Cloud platform, Azure, has been able to jointly engage in marketing and promoting e-commerce sites in India. Their Facebook campaigns have resulted in 300% growth. Azure’s client base is split in such a way that their two-thirds of revenue come from startups, strongly calling upon entrepreneurs to use Azure platform for maximum effect. He called the next decade the Decade of the Cloud.

Scaling e-commerce businesses: Panel discussion

Aakash Goel, Sequoia, moderator; Vijay, Infibeam; Manish, textweb; Rajesh, cbazzar; Shailendra Singh, MD, Sequoia Capital; Sachin Singhal, Paytm; Jitendra, MartJack

This panel discussion enthused the audience who had many questions to ask the panelists. The panelists recounted their experience of building e-commerce businesses and all of them agreed that customer delight is the biggest driver of scale. As cost to acquire customer is high, and average selling price is low, there needs to be a balance between unit economics and customer service, pointed out Aakash. He encouraged entrepreneurs to tell the audience to detail how e-commerce sites should be built. Vijay of Infibeam said they betted on architecture first and built it gradually, while Rajesh of cbazzar.com said the balance between marketing promises and deliveries should match. Sachin’s problem with online recharging was positioning and he used social media to position the business to result in high customer delight. Rajesh felt customer queries should be answered immediately for maximum customer delight. Jitendra felt that crucial aspects of business like supply chain and customer service should be focused upon while technology should be left to experts. Manish innovated using mobile to answer customer queries on cheaper services.

Shailendra said customer acquired through viral campaigns and virtually are valuable as their stickiness is high as compared to customers acquired by paid traffic. He asked entrepreneurs to do an honest analysis on costs on a month-by-month basis. Analysis is needed to optimize inventory and unfortunately dissatisfied customers make a lot of noise in social media platforms. Delivery time is crucial in cash on delivery mode as the customer might switch to some other competition or buy elsewhere if shipment is delayed. The question time seemed to go on with questions asked on how to design a business model for e-commerce startups to much detailed questions like bringing down customer acquisition cost. The panelists vied with each other to answer the queries and finally it was a worthy session, as recounted by many participants and also by number of queries asked.

The day provided enough excitement and activity for the participants who showed no signs of thinning till the startup showcase ended.

—Venkatesh Krishnamoorthy, chief evangelist