Opportunities & Challenges in Online Retail

I was at Startup Saturday, run by the Headstart Foundation. I was part of a panel discussion "Opportunities & Challenges in Online Retail". Since we are targeting retailers in the US and the UK, and since most of our website users reside in the US, my mandate was to represent the differences in the Indian and US markets. The other member on the panel was the redoubtable Vijay Sub from the Indian online retailer Infibeam, who was representing an Indian point of view. We also had some of my friends from Flipkart (online book seller) representing an e-commerce retailer. It was an interesting discussion, made all the more so by (what I thought was) a big crowd!

My broad points were

1. The market in the US is very mature, with a strong focus on profitability and scale. The market in India is nascent, at best, with a lot of focus on just establishing a presence.
2. Attracting traffic - via SEO, SEM, and direct marketing - is big business. Also, many companies are trying to leverage Social Media, but there are no clear winners (or strategies) yet.
   
3. Pretty much all parts of the online retailing eco-system - from merchandising and on-site conversion to post-order customer care - have multiple service and solution providers. Pretty much all of them promise to somehow optimize the sales process for retailers.
4. Great customer service - as shown by Zappos - can be a game changer.

With respect to India, I made the following observations:

1. Online retailers are still at a very nascent stage. Its not clear what their focus is - is it building a new market? Is it attracting lots of buyers? Is it scaling in terms of products?
2. Many best practices from the US - such as making use of advanced analytics - is not present.
3. Its not clear that online retailers are leveraging their natural advantages. Choice is actually less in many online stores!

Vijay from Infibeam - an Amazon alum - spoke about the need to focus obsessively on the customer. They seem to have built a great system for servicing e-commerce - it will be interesting to see how they evolve.

Quite a few people in the audience said that lack of trust in the order fulfillment process - especially from marketplace portals which serve as a front to a myriad small retailers - was a show stopper. The usual horror stories were shared. There were also quite a few puzzled questions on why none of the big retailers had a decent online presence.

So, where do I think that the opportunities are? First of, there is an idea arbitrage in pretty much any area one can think of, to bring best practices from the US to here. The trick is in selling to retailers, which is why its crucial for a startup to have the right sales and marketing DNA.

Second, I believe that much work needs to be done to better the image of online retailing in India. I was in the US when Amazon started selling books in the US, and remember their TV marketing campaign quite well. Choice! Convenience! Where's the equivalent marketing effort in India? As part of this, we also desperately need an organization like BBB which can serve as an ombudsman for customers.

There really do seem to be a lot of low hanging fruit in this eco-system! I have a strong feeling that someone, sometime soon, is going to make a huge impact on the Indian online retail space.