Types of e-commerce websites
E-commerce in India has come of age and has become a popular medium for consumers to buy a variety of products and services from brands and merchants. Today, e-commerce co-exists with modern retail and for the many that live outside the key metros; online shopping has given them access to brands that are not available in their city or town. Since e-commerce was born, the business models used have also evolved and grown rapidly. What started as a simple channel for retailers to expand their reach to consumers and for airlines to sell tickets has grown into a stand-alone business sector where several businesses co-exist through a range of unique revenue models.
TYPES OF E-COMMERCE WEBSITES
This chapter explores the different business models that are followed by e-commerce websites in India
E-commerce in India has come of age and has become a popular medium for consumers to buy a variety of products and services from brands and merchants. Today, e-commerce co-exists with modern retail and for the many that live outside the key metros; online shopping has given them access to brands that are not available in their city or town.
Since e-commerce was born, the business models used have also evolved and grown rapidly. What started as a simple channel for retailers to expand their reach to consumers and for airlines to sell tickets has grown into a stand-alone business sector where several businesses co-exist through a range of unique revenue models.
There are sites that offer auctions on branded items, sites that let you loan your second property to travellers, sites that have created an online marketplace and even sites that recommend what sites you should shop from. Online businesses need to be built for scale and while that is true, there are also sites that have created a niche for themselves online and become knowledge partners to the customer by offering specialist products and services.
An estimated 100 million Indians spend their time online consuming content and indulging themselves in commerce. Some of the models used by businesses to engage their consumers are:
Megamall – Your favourite departmental store but online
Marketplace – Where you know you will get a good deal, you only need to look
The Deal-Maker – When going to the same place for an expensive haircut is not your thing
Vertical Marketplace – The shopping mall for a specific segment Going once, going
twice, Auctioned! – For those that like the thrill of the chase
Community Buying – For when buying alone is just no fun (and expensive!)
The Aggregators – The ‘Know-All Aunty’ of the Internet
Facebook Commerce – To cater for the Facebook addicts of the world
The Single Brand Crossover – Your not-so-local brick store that now has a click store
We look now at how these models work and what makes them different from each other.
The online megamall concept is perhaps the oldest and till date most popular business model within the industry. Here, much like its traditional counterpart, businesses bet on the products their consumers would most like to buy and stock those in a virtual store. Customers then go online and purchase the products they like and pay for it using a variety of mediums such as credit cards, net banking or cash on delivery. These stores then have their own dispatch team that delivers the product to the customer in the promised time frame.
Examples of such stores are many but the one that we are all familiar with is Amazon globally and Flipkart, Infibeam, and Indiaplaza within India. Business models such as these are popular for the same reason that malls are popular – you only need to go to one place to find a multitude of products from various brands. But why online? Well, because these online megamalls pass on cost savings in the form of discounted products and customers can buy these anytime, yes even during office hours.
The key to the success of such business models is scale. “Through online megamalls, people have the privilege of being able to compare a wide variety of brands, styles and prices easily through the comfort of their home. Such sites have become very popular not only in metros but also in the smaller cities as people in India today have the aspiration and purchasing power to buy but often not the accessibility to a particular brand”, says Praveen Sinha, Founder of Jabong.com which is another entrant within the megamall category in India.
To ensure that their business model continues to remain relevant, the online mall has evolved greatly since its birth. Some of the latest features include:
Ability to read product reviews before buying a product. Much like taking your friend shopping with you, only better.
Super fast delivery times so the thrill and satisfaction of buying something is retained
Open box policies so that the customer can touch & feel the product before accepting delivery
Cash on delivery, so you don’t need to pay for it until your new gizmo is safely in your hands.
In terms of size, the marketplace concept is as popular as the megamalls and has enabled the creation of a virtual ‘main-street’ of the world. At the core of the marketplace concept is the community. Here, the site enables multiple smaller stores to co-exist and operate within a common ecosystem. The difference is that the product may not necessarily be from a particular ‘brand’.
The online marketplace has changed the way people shop and eBay has been the pioneer of this concept globally as well as in India. Such a concept enables entrepreneurs to access wider markets and makes it possible for local products to be sold across the country as well as be exported across the globe. The marketplace concept is free of middlemen and unconstrained by geographical boundaries, thereby, enables frictionless trade between buyers and sellers. Moreover, for the e-commerce business, being a marketplace means they don’t need to hold inventory and they can focus on shipping and handling, thereby, enabling them to pick up products from the seller and deliver them to the buyer faster.
Within India, while eBay continues to enjoy popularity there are also a few players that have modified this concept to create a marketplace for all things Indian. One such being Shopo.in.
“Shopo is one of the first Indian marketplaces that was specifically created for Indian designer and handcrafted things. There are about 35.4 million handicraft artisans across India and platforms such as Shopo enable them to give their business exposure and their products a unique identity”, says Krithika Nelson, co-founder of Shopo.in So, what’s needed to be successful? For the marketplace concept to be successful, the business must not only have excellent merchants selling unique products through their shops but it must also have a large community of subscribers to attract the relevant merchants. Moreover, with the world going social, marketplaces too need to go social as it enables customers to interact and engage with the website as well as the merchants that showcase their business on the site.
Now here’s a model that is at most times a win-win for both customers and businesses, and has swept across the world. It is the dealmaker. With deal sites, customers get exclusive access to great deals from a wide variety of local businesses, while businesses get the chance to serve new customers or even reactivate lapsed customers. What makes this model different from the megamall is that the discounts offered here ( anywhere from 40 – 90%), are for a limited period and opens up e-commerce for a new category of businesses, namely those within the service sector.
The dealmaker model has revolutionized e-commerce as for the first time customers can buy services that have a high perceived value such as discounted restaurant experiences, spa packages or tickets to a concert. For the businesses supplying these deals, they are able to get access to a new customer base and woo the customer into becoming a repeat by giving them a chance to experience the service first-hand. Perhaps the biggest such deal site in India is Crazeal, a fully owned subsidiary of the global Groupon group. Crazeal offers deals to its customers over a wide range of products and services such as home décor, gadgets, travel, food & beverage and wellness to name a few.
Do such sites encourage deal-chasing and customer disloyalty? “Initially, sites that only took a token fee from the customer and asked them to pay the balance to the merchant were problematic. However, most such sites have died or changed their model, as having such practices is not sustainable. When executed properly, deal sites create excitement and buzz for a brand and if payment is done upfront results in guaranteed business for the merchant”, says Ankur Warikoo, CEO of Crazeal.com (Groupon India), a business that has created a model where cash-on-delivery accounts for less than 15% of their sales, rejection rates are only 4% as compared to an industry average of 15 – 20% and customers are given a promise of 100% satisfaction with the deal or their money returned.
The vertical marketplace
E-commerce is an endless aisle, in which consumers can shop products from all over the world. However, the appeal of specialist shops is just as strong online as it is offline and there are specialty sites in just about every category. While the concept remains similar to the online mall, these websites operate within a specific niche and sell products only within a particular category thereby positioning themselves as a knowledge leader. As niche websites operate only within a single sector, they are able to stock more brands and a wider range of products in that segment as compared to what a horizontal website such as Yebhi or Flipkart would. This results in a chain reaction of the site gaining more eyeballs as wouldn’t you rather purchase a camera from a camera shop rather than from a generic departmental store?
The Indian market, which was till now flooded with multi-product e-commerce sites is now seeing new ventures that are betting big on niche categories. For example, there is Lenskart.com for eyewear, Bagskart. com for bags, Zimave.com for lingerie, BeStylish.com for shoes and Jewelsnext.com for jewelry. As the e-commerce industry in India starts to get crowded, newer players are looking for areas, which have= not been touched widely. Consequently, niche sites are emerging mostly in two categories – fashion and health care.
The vertical marketplace model “has a bright prospect for the future and is as viable as multi-brand outlets are in the offline world. The aim with such a model is to become the one-stop destination for connoisseur’s within a particular category”, says Shailen Amin, CEO and Co-founder, BeStylish.com.
In India, just like the traditional retail world, both the online mega mall and niche websites will continue to co-exist and grow simultaneously because people looking for multiple products will go with players that operate horizontally while those looking for more varieties in one segment will go for the niche players.
According to the Internet & Mobile Association of India, there are roughly 360 e-commerce sites operational in the country and in recent months almost 30 – 45 new ventures have come up that cater only to single verticals. Check out some of these other niche sites:
Allschoolstuff.com for all types of educational products
Heavenandhome.com for home furnishings
Veev.com which offers luxury leather products
Menzkart.com that looks at the largely untapped market of Men’s hygiene and personal care
Laptopwale.com that sates the hunger of the mobile computer within Indian society
Footsy.in that sells an unnoticeable commodity – socks!
Going once, going twice, auctioned!
A relatively new concept in auction sites and gaining popularity in India is that of minimum bids. The business model employs a mixture of an auction and a strategy game to sell high value items through a lowest unique bid. These auctions require bidders to make a bid that is not only the lowest but also one which has not been made by anyone. How do businesses make a profit by selling items worth thousands of dollars for peanuts? Well, typically the site charges a low participation fee and since the auction attracts a sufficiently large number of bidders, often the bids exceed the value of the item being sold, thereby allowing the auction organizer to make a profit.
Indian site, Jeetle.in is one such popular example, which has a traffic rank of 1426 amongst users in India. Other Indian auction sites include mybids.in, almostfree.in and bidjeeto.com to name a few. There is also bidstall.com, which uses a different bidding model where participants must enter the highest unique bid though the maximum bid for any product does not exceed Rs 10.
Globally, there are also other types of auction sites such as sella.co.nz in New Zealand where various brands set up their own stores and offer products up for auction. Other examples are trademe.co.nz and eBay, which are used by the community to sell not only new but also second-hand products through the auction model.
The auction business model works because it encourages repeat visits to sites but also results in strong customer engagement with the brand.
When buying alone is just no fun, there is the community-shopping model. This model is employed in different ways by different sites but they all use the power of people to engage eyeballs and generate value. The community-shopping model is a combination of the vertical marketplace and megamall models and is best explained through examples.
Let’s look at US site Little Black Bag. Mimicking Japanese department stores ‘fukurburo’ (lucky bag) sales, shoppers here receive a mystery bag with a selection of fashion and beauty products every month. They then get a week to trade with other users to make their perfect collection and the excitement is increased further by the fact that select bags contain prizes worth 4 to 5 times the value of the bags.
Another example is Neverlikeditanyway. com, which is like an eBay for the broken hearted. Users that have been heart broken from a previous relationship upload images of an item that for them has bad memories and then give it a ‘break-up price’ which is much lower than what it would be worth in the real world so that sneaky buyers looking for a bargain can snap up these reduced price items.
Online classifieds sites such as Quickr.com and Olx.com in India ] are also community based. They use the age-old model of connecting buyers with sellers and have established a great following. Any user that wants to sell his old television or is looking for a second-hand car now but doesn’t want to scour the local market can post their requirements or quote a price for their goods and instantly be connected to a community that would be interested in purchasing or selling those to them. Over time, these sites have also evolved rapidly and are used for connecting people to just about anything be it classes, real estate, jobs, cars, matrimonial, vehicles – the list just keeps on going.
These are just a few of the many examples of community-based e-commerce. What’s great about them is that have harnessed the best part of being online – mass collaboration and social networking and plugged it into a model where shoppers can use the power of the crowd in new and innovative ways.
While e-commerce often promises low prices and the latest products, sometimes finding the best price can be difficult and/or time consuming. Moreover, with the constant churn of prices and deals on the internet, even the most intrepid of shoppers can’t keep track of every deal as it appears, every new song as it is produced or every new hotel that introduces a new package. For all of this, there is the ‘aggregator’. The greatest advantage of aggregator sites is the ability to search dozens of sites within a particular category all at the same time and compiling that information into one easy to interact site so that customers don’t need to go hunting through various pages to source the best price or product. These sites are like the know-it-all aunty within your building who knows everything you need to know before making that important purchase.
What originally began as a model used by e-commerce sites offering airline tickets has now been adopted across industry sectors. In India itself, there is Saavn.com, which is an aggregator of music that one can download, this yathat. com for buying books online and junglee.com for finding product reviews from online & offline retailers. There is also the popular site Trip Advisor that is used globally to aggregate hotel reviews and special packages so that customers can review the information and then proceed to book directly through the site.
The growth and belief in aggregators is both fascinating and dangerous. Do these sites really work or are they a lazy person’s way to assimilate information before going and buying it from the place they were going to anyways? That question remains to be answers. In the meantime, here are some other aggregators for you to check out
Social: msnNow (aggregates trending topics from all your social sites)
Having an e-commerce site of social networking site, Facebook is still a largely uncharted business model but one that is quickly gaining in popularity. Facebook’s gravitational pull of 750 million users has been enough to hold digital marketers spellbound and there are many brands today that undertake interactive marketing campaigns to engage their users. But is selling on Facebook really practical? Doesn’t the average Facebook user have better things to do? It seems not, as more and more of these “F-commerce” stores keep opening up.
Facebook stores come in all shapes and sizes. While some are basically no more than glorified banner ads= linking to product pages on external sites there are other fully-fledged stores that handle transaction within the Facebook environment. Do ‘likes’ and ‘shares’ of such stores actually turn into sales? It seems that as with any marketing strategy, this too takes time. Like in real life, these stores need to be set up right, should be nurtured and promoted via word of mouth as well as Facebook Ads and should continuously post content to engage their users so that they keep coming back. Here, repeat customers is more important than ever as the average Facebook customer will come to a store 3 – 4 times prior to buying anything as this is still a relatively new business concept. Social commerce it seems is the future of e-commerce as it allows online retailers to rapidly expand their market potential. Moreover, your fans and customers are able to easily spread the word about our store and it is easily located as compared to some stores that get lost in the abyss of the web if they do not have the appropriate SEO etc.
To check out the Facebook store concept, start by looking at the following stores:
The Breast Cancer Site
First Crush Apparels
The single brand crossover
This is another popular model used mainly by established individual retail brands to not only create awareness about the brand and product but also drive sales. With this model, brands are able to expand their brick store into a click store, thereby, reaching out to a wider audience than what may have been possible with solely the physical store.
In this day and age there are a multitude of stores that have adopted this model ranging from airlines that sell tickets for their flights, artists that sell their own music, authors that sell their own books, physical grocery stores that can now take orders online, pizza outlets that urge you to order through their site – there is a store for just about anything you can think of. There are also luxury stores that are adopting this concept in reverse. Luxury e-commerce jewelry stores have in some cases created experience lounges so that their customers are able to touch and feel the jewelry before going back online and purchasing it. Here, having a brick store has enabled them to add credibility to their e-commerce site and reduced the perceived risk of shopping high-value luxury items online.
The bricks and clicks model is more easily adopted by a traditional retailer than for a startup company as the control of costs and logistics required for the model to succeed. Harvard Business Review states that the key factor for a bricks and clicks model to be successful, “will, to a large extent, be determined by a company’s ability to manage the trade-offs between separation and integration of their retail and online businesses. When e-commerce was first born, analysts argued that their success would render traditional retail stores obsolete. Instead, the bricks and clicks model has enabled such businesses to thrive even further and create a stronger brand identity.
Models of the future
The above is by far not an exhaustive list of the e-commerce business models that are in practice today. A new model is born practically every few weeks as businesses learn what works best for them within their particular sector. Some of the models that are at the cusp of making it big in India are:
Personalization: A variety of sites are coming up that enable you to personalize anything that you may decide to purchase online. You can custom-build your computer with DELL or Apple, get a t-shirt that has your design on it or get custom pieces of furniture and interior décor. There are also sites that enable users to convert their memories into something meaningful like a personalized calendar, a coffee table book with your travel memoirs, or even a book of your family’s best recipes.
Flash Sell or Invite Only: A concept where a product or service goes on sale online at a specific time for a limited period and sometimes even in limited series. The majority of flash concepts are still limited to fashion such as 99labels in India or Vente-Privee in France, but can be easily expanded across sectors.
Shopping through Games: While this model has not picked up steam in India yet, Fantasy Shopper was first launched in the UK in October 2011. A social shopping game, Fantasy Shoppers gives users fantasy money to browse, style and purchase from over 300 real stores. Players unlock major shopping destinations, complete challenges to create a ‘Fashionista’ reputation all the while earning real discount codes and vouchers for participating brands.
As can be seen, there are myriad models that can be adopted by e-commerce ventures. In India today, the vast majority of these continue to be within the megamall and marketplace space and there is some level of catching up to do within the other more unique models. Consumers today expect the online experience to not just match but exceed the offline experience. This means that to succeed, businesses need to continue offering great products and services that are of value to the customer, offer great customer service and keep innovating continuously so that they always remain relevant to the customer.