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A shake-up call

india Updated: Jul 01, 2013 01:25 IST
Anita Sharan
Anita Sharan
Hindustan Times
Highlight Story

The entry of e-commerce giant, Amazon, into India seems to have set off a flurry of activity in the industry, though no one is ready to admit as much. Several big players are effecting strategic changes in their business models and products, while the consumer is gung-ho.

“It’s a welcome entry. I buy a lot online and have had problems from some sites, especially on delivery. Besides, international sites stock products from international brands — like the Dell Streak mobile phone charger that I couldn’t get on Flipkart, and finally bought on eBay,” said Pinaki Roy, who is currently doing his PhD at IIM Ahmedabad, after an MBA and a couple of years of working in industry.

Flipkart.com has just added apparel and accessories to its verticals. Said Ravi Vora, Flipkart’s VP marketing, “Lifestyle and apparel forms a big chunk of opportunity, allowing for scale and profitability.” Flipkart has discontinued selling large consumer electronics for now.

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Significantly, Flipkart has also shifted from an inventory-based model to a marketplace one. The inventory model requires stocking of products and managing the whole process. The market place model frees the e-commerce brand from inventory responsibility as sellers coming to the site manage their own inventories. “To scale up, a market place model works better,” said Vora.

While Amazon operates both models globally, in India, it can operate only the market place model since regulations do not allow for inventory by foreign e-commerce brands. Many existing e-commerce brands in India too have shifted from an inventory-based to a market place model.

Kunal Bahl, co-founder and CEO, Snapdeal.com, said a “managed market place model” is more suitable for India. “It is the only way to offer a great assortment at great prices. When we started it, most e-commerce brands were inventory-based.”
Mudit Khosla, CEO, Tradus.com, said, “Ours is a 100% pure play market place model. The sellers handle inventory. We monitor shipping, complaints, responses, quality, payment collections and refunds.”

Homeshop18.com has just added on packaged, ready-to-eat foods. Its CEO Sandeep Malhotra said, “International e-commerce brands coming in are catalysts for growth – they will help grow the acceptability of this domain, and bring in good practices across technology, merchandising, logistics and payment mechanisms, propelling the industry towards improvement and higher efficiency.”

“Globally, as too in India, e-commerce is about variety, convenience and deals. Price is an important lever though that varies by categories,” said Ratul Ghosh, head of strategy, eBay India, an open market place model with a registered 50 lakh user base and 30,000 sellers.

Amazon, which started out with books, movies and TV shows last month, added Kindle e-readers and tablets shortly after and has just added mobiles and accessories, cameras and photography, and portable media players. It offers consumers a unique A-to-Z guarantee on purchases and takes the logistics responsibility.

Amit Agarwal, VP and country manager, Amazon India, said, “Essentially, we take care of the sellers’ stock and inventory management, packing, shipping and customer service infrastructure, leaving them free to concentrate on product selection, pricing and business development. Consumers have the same expectations everywhere —they want large selections, low prices, and fast and reliable delivery.”

For now, going mass seems to be the common refrain in India, causing the market place model to be favoured. While Amazon believes there is enough scope in India for all models, the industry believes that eventually, just four-to-six market place brands and a handful of more specialised, inventory-based brands will survive. For most of the 900-odd e-commerce sites in India, that’s a ‘shake-up’ call.

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