Digital Commerce Opportunities & Challenges – WATBlog Panel – An Analysis

The WATBlog Panel on Digital Commerce – Opportunities and Challenges was held at IIM Bangalore on 15th August. Here is the analysis of the panel discussion.. (pictures can be seen here)

The Panel included:

* Kashyap Vadapalli, Director – Marketing & Ops, eBay India
* Sarayu Srinivasan – Director – Intel Capital
* Gautam Balijepalli, Principal – Ojas Ventures

Opportunities in Digital Commerce?

Kashyap Vadepalli (Ebay): I’d like to put opportunities in the context of the broader internet environment. Total internet users is about 50-80 million in India. Daily users would be at about 40 million, The broadband penetration is increasing. All increasing numbers indicate a larger opportunity in e-commerce in the days ahead. Product searches form a large % of the searches made onlone. This opens up various opportunities for ecommerce.

Specific opportunities – time right for people with a unique idea or provide service digitally- right time. Offline retailers with user base should get online and building online sales using their own site or ebay. Opportunities in alternate kinds of payments is also open given the RBI regulations on credit cards. Number of people on the internet is one tenth that of mobile and mobile payments does looks far more feasible now. Transfer e-commerce to m-commerce scales business ten times. For digital commerce to be-commerce complete online and offline have to work in tandem hence logistics development is key. Logistics is another opportunity that is up for grabs

Sarayu Srinivasan (Intel Capital): There are a lot of inefficiencies and opportunities to exploit in India. People still stand in queue to pay bills  and still major records are on papers. Lot of things to solve for example rural supply chain farmer etc. This is good news for India but bad news is lack of infrastructure, regulations, computing and communication. One of the companies we have invested in is Indiamart which is solving huge inefficiencies, connecting SMEs who don’t have other voice in the world to global markets and are earning revenues via online subscriptions.

Gautam Balijepalli (Ojas Ventures)
–  Opportunities in Indian e-commerce is unlike western markets which are about convenience and cheaper products. In India convenience won’t apply as most services are closeby and can be reached by phone or on foot. I can walk and buy groceries. Companies need to pick a niche to provide products at cheaper rates. For example Flipkart an online bookstore provides beautiful user experience. If primary thing is convenience then Im not sure people will use it. Though cheaper than traditional retail may be an opportunity. Most successes in e-commerce have been for virtual goods because logistics is still very nacent. In US there are specific logistic providers for e-commerce maybe that is an opportunity in India too. Research online to buy offline is another trend that is seen in ecommerce. In India you don’t find too many services to compare and contrast products via retailers which I feel is the missing link for ecommerce. Payment infrastructure for ecommerce is also a big opportunity but it has its own challenges.

What is the reasons for the slow growth?

Gautam Balijepalli (Ojas Ventures): Lack of payment channels. Culturally – shopping is an entertainment experience. Going to mall on weekend is fun for most people as families go at it together. Also we don’t trust sellers even in retail and try and bargain hence trust in ecommerce is tougher to find. That behavior won’t change unless more and more single people shop for themselves and choose online over offline for convenience and time saving measures. Also there is a lot of inefficiency in service delivery post transaction.

How do you deal with inefficiency service delivery?

Kashyap Vadepalli (Ebay India)
: Ebay has no inventory but is a platform for buyers and sellers. We have rules and regulations and reputation score of sellers and buyers which acts as a quality metric mechanism. One needs to question whether does demand exist.? Are all people ready for internet today? The answer is NO! Only a  small fraction is the good part is its growing. Access to internet is increasing. Conversion and trust is increasing. Online comparison shopping is coming to the fore and Online shopping also increasing. Value proposition of ebay is lots of goods. Hard to find goods. Safe easy goods. Other ecommerce players need to find their value proposition.  Infrastructure, Payment methods will remain a challenge but fundamentals look good and it should be  a journey with challenges but everything in the right direction.

Sarayu Srinivasan (Intel Capital): Very low pc penetration. Particularly suitable for non materialistic products i.e. tickets. Mobile phones is an important piece as one can do everything on mobile. Also India is a highly segmented market and what may sell in the south may not sell in the west. Affordability and access, regulatory methods, expenses are all challenges. Tremendous respect for entrepreneurs entering this space as there are huge challenges.

Impact of RBI Regulations On Credit cards? Has Ebay projected a drop in transactions?

Kashyap Vadepalli (Ebay India): I will not be able to confirm the drop in transactions on the Ebay side. But lets consider IRCTC which uses multiple gateways and based on data publicly available I can say that there is a drop there. The question to be asked is Should government reduce laws to reduce friction or puts constraints on an industry that is nascent and budding? Should RBI have done this? Yes the reason is security. It does create an extremely high chances of drop off between transactions and actions to bank. But thats  a temporary trade off  for a longterm security based solution.

Who has onus of lobbying for better regulation and communicating the same to users?

Kashyap Vadepalli (Ebay India): Ebay chooses to interact with IAMAI but  the onus on merchants and banks. Cost of transactions cheaper online so they make money and have responsibility to communicate users at large. Not easy to use credit card nowadays as now we have introduced an additional layer. But people will get used to it.

How do you (Investors) look at e-commerce now after RBI Regulation? Circumspect?

Sarayu Srinivasan (Intel Capital): Ecommerce has nowhere to go but up. Smart people that figure it out will still scale businesses.

Gautam Balijepalli (Ojas Ventures): Same kind optimism. Short run there will be a drop but long run will be good.

Alternative payments – mobile, E-wallets , m-wallets, cash cards etc. role of these in digital transactions in India?

Kashyap Vadepalli (Ebay India):Ewallets has not been possible in the current regulatory environment. Credit card used online stand at6-9 million while Visa and mastercard state that 50 million people have credit cards. It is easy to use debit card online because lot many people use it. One things merchants needs to make sure is to accept as many payment methods as possible. Government should free up these regulations. If you want growth one needs to remove barriers. Virtual cash on mobile phone and be able to use it online or offline could be the big breakthrough if and when it happens.

What opportunity in m-commerce?

Sarayu Srinivasan (Intel Capital): ITZ cash is one of the companies we have invested in and alternate payments is a Huge opportunity. What the success depends on is the ecosystem of who is accepting and advantages of one over the other based on the target audience.

Ecommerce commission Vs Service Charge? Which Monetization works best?

Sarayu Srinivasan (Intel Capital): Indiamart makes money in subscription and trust seal – business pays. If the services is a new novelty oriented services then one can initially charge a services fee. But once the services is a commodity then here wont be a service charge.

What advice for getting into e-commerce?

Kashyap Vadepalli (Ebay India): E-commerce growing in India and multiple opportunities. Find your niche and go after it. The entire infrastructure, logistics piece is a huge opportunity.

Sarayu Srinivasan (Intel Capital): Don’t let history encumber you. Go out and do what you got to do.

Gautam Balijepalli (Ojas Ventures) : Pick your niche, go and execute.

One Response to “Digital Commerce Opportunities & Challenges – WATBlog Panel – An Analysis”

  1. SA
    August 25, 2009 at 12:11 pm #

    this is a very helpful blog ……….. highly appreciated, as the trends in this industry are not clear and no transparent data are available

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