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India's eCommerce Revolution

Analysis

Jan 27, 2013 2:23 AM   By Dilipp S Nag
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RAPAPORT... Internet penetration in India in the past few years has created new business opportunities, prompting several new start-ups as well as existing players to enter the online market. Several companies, including jewelers, are now offering goods and services online through ecommerce platforms and reaping the benefits.

How is ecommerce changing the dynamics of conducting business?

India, with more than 125 million Internet users, has been the fastest growing market for Internet usage among the BRIC nations – which include Brazil, Russia, India and China – and was one of the top three fastest-growing markets ‎worldwide in the past 12 months, according to a study conducted by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) and comScore in October 2012. In 2012 alone, the country added more than 18 million Internet users, while China added about 14 million.

A new study by global consulting firm McKinsey & Co. forecasts that India is on the verge of an Internet boom, with a projected user base of 330 million to 370 million by 2015, which would be the second largest audience behind No.1 China. The Internet’s potential contribution to India’s gross domestic product (GDP) by 2015 may reach some $100 billion, up from only $30 billion currently, the study noted.

But even with only about 10 percent to 12 percent of India’s 1.2 billion population base online, there is huge potential for jewelers to fuel their channel growth. Is this potential  only limited to metro cities? What are the prospects going forward?

Indian ecommerce has evolved over the course of a decade from a sector driven purely by the online travel business to one with many different verticals and niche segments. Factors driving the accelerated growth include rising disposable incomes; a young and educated population; rising use of social media and technology; increasing Internet penetration; reach into smaller cities and the evolution of the online marketplace model.

Ecommerce has not only empowered consumers to easily compare products, but also reduced buying costs, as well as offering a shorter transaction time and the ability to track goods from order through delivery.

YOUNG INDIA!

Yes, it is young India that’s driving the country’s ecommerce. “The majority of the online users are in the age group of 15 to 34 years, and most of the growing online categories are in relation to this age group,” said Kedar Gavane, the director for India at comScore Inc.

He noted that men account for about 60 percent of the Internet users in ‎India, but that women's share is growing fast. Gavane projected that the number of Internet users in India is expected to cross 200 million by the end of this year.

“If you look at the next five to 10 years, there is big opportunity in online because of the young India. How they engage to the world is very different,” said Vijay Jain, the chief executive of Orra, Rosy Blue Group's diamond jewelry retail chain.

Jain added that young shoppers are going online with their iPads, mobile phones and smartphones, and this method of interacting with others is becoming a habit for most of them. Realizing the huge opportunity, Orra is planning to launch its ecommerce platform in April, while the U.K. jewelry website Gerald Online has also announced its intention to enter the Indian market.

Mark Brohan, the director of research at U.S.-based Internet Retailer, says that Asia is the upcoming ecommerce powerhouse and that the brightest companies have already adapted or are building the technology to expand their operations to the Internet.

These projections look great, but actual growth will depend on factors such as Internet infrastructure, ecommerce platforms and companies’ ability to innovate their businesses to attract consumers online.

DEVELOPING AN ONLINE PLATFORM

What factors should you focus on when developing your ecommerce platform? Do you need a large database of designs? What about content? Experts opine that the online platform offers a huge opportunity to feature good merchandise. You can begin by placing a few designs and keep updating the platform regularly with good photographs of jewelry. Displaying basic content with right kind of description of the jewelry is very important.

“You also need to have technology that will allow you to have [a] presence on an omni-channel or multi-channel,” said Sanjiv Khandelwal, the CEO of Centerac Technologies Ltd., a technology service provider. “You may want to start with only going to browser today, but you need to be able to choose the technology that will allow you to integrate with your backend as you grow and stream in multi-channel and to other websites that will allow you to build applications.”

Discovery, comparison and purchase are the key three steps in the consumers' buying process, added Khandelwal, and jewelers need to keep these three things in mind when developing their online strategy.

BE WHERE CONSUMERS ARE

India's online jewelry market is currently at the nascent stage. But while the contribution of online business to overall sales remains miniscule, prospects certainly look bright as the number of people shopping online grows. Nevertheless, only a few jewelers have embraced the online platform. Several industry players seem to be of two minds.

Most retailers, whose core competency is not in technology, aren’t clear about what platform that they will require for their online business, industry experts noted. However, this is a minor issue that can easily be solved by outsourcing the technological aspect to a third party. This shouldn’t be an excuse for not being able to reach consumers.

“The consumer is looking for you online. He is comparing you with competitors and making a choice. Therefore, by not being present online you are missing out the big opportunity,” said Muralikrishnan B., the country manager of eBay India.

The message is clear – you need to be where the consumers are!

“If you don’t do [ecommerce] now, the cost of doing it three or five years down the line will become very high,” Jain said. “A second benefit is that it will allow you to reach a larger segment of consumers which you are currently not reaching out to.”

TRUST - THE BIGGEST CHALLENGE

Ecommerce presents challenges – creating excitement for consumers in terms of design, price, transparency and discounting – but winning the consumer's trust is the biggest hurdle for retailers. Most Indian consumers usually prefer to buy from their family jewelers and attracting them online could be a big challenge. However, if your brand is already established, this shouldn't be an issue, as the ecommerce platform will serve as an extension of your brand.

But what if you are an unbranded player? Offering an attractive collection of jewelry designs; different price points; certified jewelry and diamonds; exceptional customer service; and the option of cash on delivery (COD) can certainly help in building your brand.

“Customer service plays a big role. You need to have a good channel of communication with the customer while selling online,” said Deepak Tulsian, the business head of ecommerce for Gitanjali Gems Ltd., which own brands such as Nakshatra, Gili, D'damas, Asmi and Diya. He adds that there shouldn’t be any price differentiation for branded jewelry, whether jewelers are selling online or offline. 

But what about touch and feel factor that is very crucial for Indians when buying jewelry? The online platform lacks this entirely and overcoming this barrier is not easy. So what should you do? “Even though COD is an option, we offer lifetime exchange, we offer 30-day no-questions-asked return policy to overcome the touch and feel barrier,” said Richa Bansal, the managing director of the jewelry shopping website www.21Diamonds.in.

Meanwhile, issues of shipping and online payment can be addressed by partnering with logistics and payment gateway providers.

MULTI-CHANNEL APPROACH

Some customers do research online and go to a retail store to actually purchase the jewelry. But a combination of both online and offline presence can better serve consumers. If they want to save time, they can choose the product and pay online. They can choose to visit the store to inspect the goods or have them delivered to their doorstep.

“There is a distinct advantage [in] having online and offline presence. If you have offline presence, then you already have the inventory and that is a big advantage,” said Tulsian. “We as established players have built trust with consumers, so it helps in brand equity.”

But is selling only through a website the only option? Traffic and conversion are very important if you want to succeed online and so jewelers need to look outside options. Partnering with websites such as www.ebay.in, www.caratlane.com, www.jabong.com, www.myntra.com or www.flipkart.com can help you utilize these sites' existing traffic.

“The primary factor to be successful in this area is to create goodwill, and that comes by good product, good pricing, good customer service and brand equity,” said Rajiv Mehta, the managing director of Surat Diamond Jewelry Private Ltd, which sells jewelry online only, using a multi-channel approach.

Jewelers also need to build technology for mobile phones and smartphones, as increasing numbers of Indians are using their mobile devices to access the Internet. According to the Internet and Mobile Association of India (IAMAI) and IMRB, India will have 130.6 million mobile Internet users by March 2014, up from 87.1 million users in December 2012.

This means that Internet opportunities are not limited to traditional ecommerce. A new business environment – mobile commerce, or mcommerce – could have a far-reaching effect given the extent of mobile use in India, the leading player in the global gems and jewelry industry.
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