How the fight to kill brick - and - mortar is getting dirty

Rohit Mathur, one of the few thousands of teenage college-goers in the small tier III town of Bikaner (Rajasthan), in the past three months, he has ordered for himself an Angry Birds labelled tee from Myntra.com, a pair of Puma floaters from Jabong.com, and a pair of Red Tape boots from Bestylish.com. Mathur today symbolises the kind of equality that online retailing has brought about amongst shoppers in large cities and small towns; what one living in a metro city like Delhi can buy, he too can!

 The internet revolution has done much to lead the buyer crowd to the water. Actually, if you judge by the manner in which penetration in the country is growing (41 per cent CAGR as per Assocham and comScore), there is much to happen still. As the Internet and Mobile Association of India (IAMAI) and IMRB, the current number of Internet users in India stands at 150 million (divided in a  2:1 ratio between urban and rural India). This number as per McKinsey & Co is set to touch anywhere between 330 to 370 millon by 2015, giving 30 per cent of Indians access to online web portals that could guarantee huge cash flows for these portals. So how big are the potential revenues? As per McKinsey, this growth in Internet will boost India's GDP by over $ 70 billion over the next three years (to $100 billion by 2015). Of this pie, $34 billion will go to Internet portals by 2015 (in 2012, these portals earned a topline of $14 billion).

Though a couple of years back when online shopping was introduced to the nation, initial concerns were voiced over trust and security factors involved in the purchase process (related to quality of products and financial transactions), much of these concerns have disappeared today. This is evident from not just the fact that despite a cash-on-delivery option by portals, most shoppers use their debit cards (58 per cent; as per Assocham), but also from the manner in which visitor count to these online portals have risen in recent months. In October last, of the 67.86 million unique internet visitors, 60.2 per cent spent time surfing online retail portals (source: comScore). These are definitely encouraging signs for the online retail market in India, which still accounts for only over one per cent of revenues that the overall organised retail market makes. Brick and mortar still rules. But the equation is changing fast.

As much a party as Amazon, Flipkart, Jabong, Myntra, Indiatimes shopping, Snapdeal, Homeshop18 (the largest in terms of unique visitors since May last year) and others of their clan are having, there is a growing storm that brings with it a sign of trouble. Reality is, portals today are finding it hard to differentiate themselves.

Some choose to claim superiority based on volume – the count of brands in their inventories. Others have a price war going – giving the best at the least, a strategy that renowned strategy guru Michael Porter would not recommend.

Thankfully, a handful of the brains behind these portals do appreciate that promise on volumes (brand count) or prices do no good in the long run. It is  the excitement that a particular portal can deliver in the form of consumer experience that really matters – whether it be to promote good word-of-mouth or to pump-up toplines. Rashmi Berry, CMO, Homeshop18.com agrees: "E-commerce is about user experience and hence referral. One needs to understand that a lot of growth is coming through an engaging experience and hence word of mouth." Then there are companies like Jabong that not only offer the quickest delivery time (it became the first one to promise delivery on the same day in H2, 2012) but are also enhancing experience of buyers, by offering personalised services with their 'Stylist on Call' for all round support to customers for making purchase decisions.

Logistics is another area where players like Jabong, Snapdeal and Flipkart are a step ahead of the herd. Experts opine that it is the power of logistics that enables online retailers to offer prices on the lower side as compared to offline retailers. So to boost its delivery system, Snapdeal is looking to localise its production base. They are already in talks with local vendors that possess the capacity to manufacture but lack the support of selling the same on a national basis. To strengthen distribution, the company is also getting many localised small and medium enterprises on board. Makes sense, when margins are wafer-thin. Jabong is a classic example. The company has in place 55,000 special packaging units to ensure the shortest possible time of delivery. And the company has bigger plans. Highlighting the prospects of improvement in logistics to stay competitive in 2013, Manu Kumar Jain, MD and Co-founder, says, "We have a delivery mechanism that ensures same day delivery in the metros. In 2013, we will ensure that we follow the same concept in tier II  cities as currently, in those locations we have a next day delivery system. We will also be focusing on minimising the time involved in resolving customer problems for a hassle-free experience."

Portals are also working on building brand recall. Be it online marketing through social media or improving visibility on TV, print and Radio; companies like Snapdeal, Myntra and Homeshop18 are investing in promoting themselves to stay on top of the recall game. Talking about his plan, Sandeep Komaravelly, Senior VP, Snapdeal.com, says, "In 2013, we will adopt a 360-degree marketing strategy, keeping in mind the markets still unexplored. We registered a 1000 per cent growth in topline in 2012 and a multi-fold growth is certainly not an impossible task."

After emails and SMSes, players are even investing on the app market. Flipkart is some steps ahead in this regard with its app loaded on up to 40 per cent of the smartphones that are being sold in India. Snapdeal is another player that deserves mention. In 2012, up to 20 per cent of the traffic witnessed by the portal came from mobile devices. At present, though players like Jabong or Homeshop18 have no apps ready, they have promised something concrete by June 2013.

The battle to grab a big share of online shoppers' pockets is heating up. Not surprisingly, the leaders in the Indian online portal landscape are already working hard on delivering these ''new' promises through an exercise that would make Porter proud. Make buyers' lives easier and that of your competitors more than just difficult – that's where this war is headed. 2013 should be very interesting.

anirudh.raheja@planmanmedia.com