ValueMax

India Fastest growing ecommerce market

Had an interesting conversation with an investor friend yesterday, who is really active in the start-up/seed stage. We were talking about the many niche plays that are coming up with the well funded steep growth we are witnessing in the ecommerce industry.

While there is no doubt, that Indians have started buying/shopping/ordering online and in a big way, what can also not be debated is the uniqueness of the Indian model, which throws up its own set of challenges. Lets look at a few of them:

• Almost 70% of our ecommerce transactions are Cash-on-Delivery (COD)
• Many big portals have seen return-rates upwards of 30%
• Current ecommerce growth is happening predominantly from tier 2 and tier 3 towns

What all of this translates into, is some serious logistics issues namely, collecting payments from COD customers, inbound logistics for returned goods and finally having an efficient distribution network, which is spread out really far and wide.

A few interesting plays are being introduced in the Indian economy

• Players like Chhotu.in who are focusing only on ecommerce logistics including cash collection. This company has a simple pitch that it will help reduce the return rates and also ensure higher efficiency on the COD segment.
• Niche players who are focusing only on the cash management for COD piece. One such player is riding on the positioning that it will enable ecommerce players to get sales proceeds into their accounts within x days. A payment guarantee that allows the ecommerce player to do what it does best- focus on demand generation and driving transactions.

If these challenges are very unique to our economy, it could mean the difference between the success of a local experienced player vs the success of a global ecommerce giant like Amazon.com.

Had an interesting conversation over the weekend with the office caretaker- a young late 20′s chap who has his wife and kids back home in Nepal. He told me very excitedly how he managed to send across money to them in Nepal through a new option wherein the credit was showing in his Nepalese account the very next day.

The Mobile Wallet is here

The few interesting things that really stood out were

• He transferred all of Rs7000/- in one go. He didnt feel like testing the process as he was told about this option by a close friend. Referrals generate high sense of security and comfort
• He was given a secure PIN and this gave him immense confidence about the process being secure. Though he had to ask his friend to SMS the same to his better half back in Nepal.
• He was happy to pay a transaction fee of Rs100/- for an almost immediate confirmation of credit in the recipient account. Customers will pay decent amount as fees for specific features/benefits
• He hasn’t heard about Western Union etc and went straight to this PNB branch in Connaught Place for his remittance.
• He also talked about an option where money can be credited almost immediately (mobile based process) and was sure that this would be a great option to use during times of emergency. This gave him a lot of comfort knowing that his family would have access to immediate funds even when he is miles apart.

The above in my opinion is a clear indication of the kind of adoption payment instruments would see in the huge currently untapped market. While brand building will be a tough one, the player who invests early in training/educating users how to use this securely would see a huge advantage. I hope my friends in the Payments industry are listening and are as excited as I am.