Online shops: sugar coated carrot approach

BANGALORE: It being the first phase of e-commerce revolution in the country, online shops are only expected to mushroom during the year. The start-ups are confident on their business growth. The most visible duality in the business models is that of geography. While some tend to operate locally, the bigger players are already offering delivery across the nation.

There is every attempt being made by these online stores to capture the

market and rope in new customers. Take for instance, Bangalore-based Fabmart (www.fabmart.com),

which covers 850 cities in the country for delivery through Blue Dart. Fabmart,

however, takes three days to deliver cassettes and five days for the CDs. The

company claims that it has been able to deliver the products in 48 hours. The

company is in the process of tying up with Federal Express for international

shipment of its products. Fabmart charges its customer Rs 5 per unit on

shipment.

Eshoppee (www.eshoppee.com), another

Bangalore-based company, has only begun its soft launch. "Right now, we are

soft launching the portal for Bangalore deliveries only. We shall piggy ride on

the manufacturers’ distribution network for some other select cities,"

says Eshoppee managing director Rama Subramaniam, adding, "We have tie-ups

with all major credit card issuing companies, but we are in the final stages of

a strategic alliance with a leading credit card issuer."

On the delivery time, Mr Subramaniam says, "We are working our logistics

of overnight deliveries for products in stock, but our ambition is to ensure

deliveries in 3-4 hours. Many times, this time period will be shorter than going

to a store yourself and obtaining the products. We are also in the advanced

stage of putting in place a crack team that can not only deliver the product but

also install it."

Online stores generally follow a virtual inventory stocking model, where once

an order is placed they source the goods from the manufacturer or distributor

and package it and deliver it to their customers' place. While, some online

stores stock only fast moving products and get in touch with their distributors

only to source its high value slow moving products. All online shops operate

like a typical retail shop and also get the commission of a retailer. For music

cassettes and CDs, Fabmart has tie-ups with music companies, for electronic

products Eshoppee has tie-ups with major brands, while Homedel, another popular

Bangalore online shop, has tie-ups with distributors for food items. Homedel

sources fruits and vegetables from Nilgiri’s and Food World, but for large

orders they procure it from Russel market.

Of course, promotions and incentives are the primary models on which these

companies hope to lure in and later retain their customers. Fabmart has a

discount of 8 per cent on MRP on all albums. While Fabmart Specials carry 15 per

cent discounts, the on select rock albums, there is a near steal offer of 40 per

cent discount. Then there is the quiz, with the winners taking away free CDs.

Fabmart visitors can send mails to their favorite artists and actually expect a

reply!

Eshoppee’s Mr Subramaniam says, "Value for money is most important. We

are the first retail store to have 'Measure of Pleasure' as our core process,

which means that, we track all the metrics at a corporate level and ensure that

our processes are adhering to the predefined thresholds."

When it comes to security, almost everybody seems to be ready with the latest

technology installed in their systems. Fabmart claims to be more secure than

Amazon.com because of the Secure Socket Layer (SSL) facility that it uses for

Citibank Suvidha customers. As Fabmart vice president K. Vaitheeswaran points

out, "The payment is based on personal identification number (PIN) using

128 bit SSL encrypted link, making it safe for the card holder to

transact." In the case of Homedel, payment has to be made against delivery.

Homedel managing director Pritam Shetty says, "In March-April, when

e-commerce laws get framed in the budget session, we will start accepting

Citibank Suvidha card. I will do an online verification with Citibank and get

the customer to enter his pin number on a portable handset and thereby

authenticate the transaction." For Eshoppee too, the credit card

transactions are through encrypted SSL connectivity. It also blocks the limit to

buy through an authorization from the issuing bank and delivers notes cum charge

slips physically signed by the cardholders to complete the transaction. This

means the delivery cannot be effected unless the cardholder is available to

receive the goods and sign on.

According to International Data Corporation (IDC) reports, the Indian

e-commerce market was Rs 15 crore in 1998 and Rs 68 crore in 1999. This is

expected to rise exponentially to Rs 236 crore in 2000, Rs 780 crore in 2001 and

Rs 2,538 crore in 2002. The expected growth is encouraging considering the

various infrastructural issues involved in setting up online shops.

Even as the number of these online stores go up exponentially, they will have

to gear up with more and more services and perhaps incentives to attract greater

traffic to their sites. The promotions and freebies are expected to act like a

sugar coated carrot to the customers. It is too early to say if the stunt has

been successful in driving them to these sites.