Microsoft India last week launched one of the most brilliant ecommerce initiatives in software space in India. The move is very relevant from several perspectives. Namely the visibility it would give to Microsoft and its products on the internet, ecommerce coming of age in India and how a simple but well planned program can easily overcome geographical and bureaucratic difficulties in India.
Last week a minor snippet caught my attention. On further exploration what I discovered was an absolutely brilliant initiative in the ecommerce field and also a perfect case of how ecommerce is exploding in India. First about the initiative. This ecommerce initiative from Microsoft India, a company more famous for traditional software selling rather than innovation, is one in which consumers can buy Windows Vista, Office, Servers and XBox and games online. Nothing really great about that right? Well true. The interesting part starts now. Now what if the same Microsoft store is replicated in tens and thousands of websites. In other words any website or blog with reasonable traffic can signup and create a customized store for itself in zero investment. Now that sounds little interesting right? But there are tens of affiliate programs on the internet so what's to great about this initiative? Well that's where the beauty starts.
Most of the affiliate programs have mostly been cookie based. In other words suppose a blogger or website has partnered with Amazon.com and is selling their books on his website, the cookie aids in tracking the transaction and give the due credit to the referrer. If the cookie is cleared or if the visitor doesn't make that purchase within a set time the website or blog doesn't get the credit. In other words lost revenue what was rightly due to the website. While there are no clear nos. a substantial amount of revenue is lost this way. The Microsoft ecommerce initiative bypasses the entire cookie based system. The actual payment transaction happens on the partner's website or blog, which means chances of lost revenue are almost nil. Now that's perhaps one of the most brilliantly made affiliate programs ever made on the www. This program has been built by Smile Interactive (sitg.in) and the initiative is a partnership between them. Now what happens in case of renewals or re-purchase. This program takes care of that also in terms of benefiting the website/blogger, something though prevalent in very few programs but very rarely in physical delivery arena.
While Microsoft has interests in curbing piracy through this initiative, for Smile Interactive it about economics and business. For bloggers or websites participation in such an initiative would be purely for extra revenue. According to Brian Campbell from Microsoft "Our interest is to promote original software accessibility. This initiative makes original software more accessible to smaller towns." According to Harish from Smile Interactive "E-commerce is a fast growing trend and we are excited about our partnership with Microsoft to provide consumers with greater access to original software through an extensible and easy-to-use platform." While it's too early to know the kind of conversion rates or arrive at any CPC or CPA stats this initiative could surely mean lots of free visibility on a space that hasn't known Microsoft for a long time atleast contextually.
Considering where Microsoft revenues come from it has obviously been bullish on curbing piracy. According to BSA-IDC Fourth Global Software Piracy study, globally piracy rates were as high as 35 percent and this amounted to losses of USD 40 billion, India itself lost USD 1,250 million in 2006 to software piracy, a substantial increase from USD 367 million in 2003. Though that figure maybe overrated (for obvious reasons) but it is to be seen if an initiative like this would result in a sales upsurge.
Are Indians really buying software off the web? Now that's a tricky one with no clear answers. But according to a report consumer eCommerce market report by IMRB and Internet and Mobile Association of India, 10.02% people have used online sites for looking at information on computer software online. Out of this only 0.47% have purchased online in the last 6 months and this is expected to rise significantly to 2.84% in the next six months. Currently the ecommerce market in India is valued at roughly Rs 10, 000 crores.
While these maybe taken with a pinch of salt, a more pinpointed question is will this Microsoft initiative succeed in a country like India? Let's look at few things first. If you think Indian highways are only deterrent in its growth then you probably don't have your facts right. Consider the case of distribution in India. Almost every state has a different taxation structure. While in some where is VAT in some there is CST and more. The icing of the cake is in places like Pune where in the same city there are different taxation brackets within same city. In others words if you want to do ecommerce in India and sell things below the MRP to let your customers benefit it's a huge task in India. According to Brian Campbell from Microsoft "Microsoft has been looking at a deeper geographical reach. Given the Indian distribution logistics conditions it's been an overwhelming task." Harish from Smile Interactive had similar things to say "The last mile is really important especially in a country like India. Without proper logistics ecommerce is daunting task in India." In Reddington Microsoft has found the perfect distribution partner it seems. Apparently the venture has taken care not only of the various taxation structures but is also making delivery available in most major cities minus the NE states. The biggest ecommerce portal in India currently has a delivery mechanism in 90+ cities so that makes this one of the biggest in terms of logistical reach.
What seem the downsides of this Microsoft initiative? On the face of it this program looks great. In terms of technology it's aeons ahead of Amazon or any other tech major. In terms of logistics it's far ahead of anything that we have in India. The pricing flexibility is something that would attract a lot of buyers. One of the greatest achievements is this has come from the Indian soil and not the other way round.
The biggest downside besides the geographic limitations and the narrow product line are the commission rates. According to reports the commission rates vary from 5% to 15%. It's peanuts in software standards where the cost of the product reproduction is almost negligible. Why shouldn't the advantage be passed on the website or blogger who is giving free visibility to Microsoft? Also an initiative like this one gives the perfect ground for dumping non sellers which Microsoft definitely has in plenty, like any other entity, whether it admits or not, which definitely must have higher margins. Microsoft also needs to focus more on this initiative more from the ecommerce angle than just from the genuine software angle something in my view it lacks. In fact it is in finer details like these that the novice ness of Microsoft as a traditional packaged software company shows rather than a genx innovation one.
The Last Word
A must recommendation. Minus some of the downsides one of the best ecommerce initiatives ever from the Indian soil. Microsoft India definitely deserves kudos for this one.