How Indian consumers are taking e-Commerce Companies for a Royal Ride!!!

Imagine that you are flying from Mumbai to Delhi.

And just when the pilot makes that silly announcement, "On our right is Ahmedabad and on the left is Surat"... you suddenly unbuckle yourself, stand up in the aisle, start stomping your feet and shout at the cabin crew to fly you back, 'coz you changed your mind!!!

Let me ask you:

- When you order a meal at McDonald's, you tell the guy at the counter what you want. Then when he goes to pick up your burger and fries, do you just change your mind and vanish from the counter?

- When Domino's delivers at home, do you yawn and tell the delivery boy, "Sorry yaar, I changed my mind?"

- When you go to a restaurant and place your order ... and when it finally lands up on the table, do you reject half the dishes and say, "You know, I want something else instead?"

I guess you got my point. No normal, sane, human being would change her decision (which has been made after certain contemplation) - "just like that" !

Now, consider this quote I read yesterday in this Economic Times report on the state of the e-Commerce business in India:

"Indiaplaza.com, which sells books and electronic goods, was the first to introduce the Cash on Delivery (COD) payment method more than a decade ago. It realised in about a year that COD was "painful". Rejection rates are at about 45%, partly because there is no upfront cash commitment, according to Vaitheeswaran." 

Wow!!

A rejection rate of 45%??? Let's round it off to 50%

Translating this to the real world, it would mean:

50% of passengers 'de-boarding' the flight they are in, mid air!

50% of Domino's deliveries being returned?!

Does that make any sense to you?

Obviously it does not.

Now, consider this familiar photograph:

There is no doubt that the BIG BAZAAR SALE is the most anticipated event for a lot of homemakers and shoppers who love to get all their basic amenities at 50% off!

I quote this shocking and amusing anecdote on the 'Big Bazaar Sale' from this source:

"As documented in It Happened In India (in the chapter Made in India), some customers tried to bribe the security guards to let them inside Mumbai’s Lower Parel store. In the Kandivali store, customers fell head over heals to claim their share of the Buy One Get One Free offer on Basmati Rice. Apparently the situation deteriorated to such an extent that one of the staff members was injured and had to be rushed to the hospital. The media covered the Sabse Sasta Din almost to the fervor of a one day cricket match. Television channels beamed live images of the crowds, turning the event into a topic of national importance.

In 2007, to avoid a repeat of the crowd management issues, people from the operations department visited popular temples across the country. There they studied the behaviour of the large number of devotees to gain insights into how they are managed. Procedures were then put in place across Big Bazaar stores accordingly."

So, coming to the point:

- Let's compare the BIG BAZAAR SALE and the e-Commerce business in India!

Similarities:

Both offer most of the stuff we want to buy at massive (50%) discounts.

Differences:

Going  vs Coming

People go to the Big Bazaar stores and wait outside for hours for them to open. I have seen the same at Crossword's Sales; so this happens for Books as much as for Basmati rice!

e-Commerce Courier boys come to consumers' homes and get turned away!!

Pain vs Pleasure

Consumers 'bribe' security staff to get into the Big Bazaar Sale (and also suffer the trauma of shopping inside etc, etc.) - so they definitely want to buy their stuff and go home as quickly as possible. They suffer pain.

Consumers sit inside their home and their e-Commerce goods come to them. This is potential pleasure.

Yet 50% of these e-Commerce shoppers forsake pleasure and return the goods they bought??

Cash vs Credit

People go to Big Bazaar with really fat wallets and working credit cards! They want to buy and they want to pay!!

As far as the e-Commerce situation goes, I am quoting from the Economic Times article again:

"In India, on the other hand, cash on delivery is the payment method for up to 8 in 10 transactions" (for online e-commerce).

"Online lifestyle retailers such as Myntra.com and Fashion and You say that at least 60% of their transactions rely on cash on delivery."

So, why does the same kind of customer Go with Cash to Big Bazaar and not pay online???

Check this quote:

"Cash on delivery is the most most inconvenient payment option. It allows customers too much time to change their mind." (K Vaitheeswaran, the founder of Indiaplaza.com)

Then why do all e-Commerce sites have Cash on Delivery options??

Real business vs a fake one?

Kishore Biyani gets it. He sells stuff. He is a businessman. He does 'Dhandha'. He is what I call in my North India, UP style, 'A bechoo aadmi' (a man who sells).

He does all these Big Bazaars and its Sales and repeats them because he has found a Real Business to cultivate and grow.

Now consider this 'shocking' quote from one of the e-Commerce business guys in the same ET article:

"As long as you have an investor who doesn't mind writing you a million dollar cheque every now and then, you will be fine", said Dhiraj Kacker, co-founder and chief executive at Canvera.com (a Bangalore-based online digital photography e-Commerce site, in which, venture capital firm, Draper Fisher Jurvetson has invested).

Fascinating!! So e-Commerce businesses are nothing but beach patios for VCs to have a party??

The real story:

My personal belief is that:

- Most e-Commerce businesses 'bribe' consumers to buy something by offering massive discounts, free deliveries and cash on deliveries.

They are playing Santa Claus for consumers, hoping that Christmas will last forever!

Well, Christmas does not last for more than a day.

- Consumers buying e-Commerce stuff are experimenting with a new 'toy'. They like being pampered and spoilt like this. Their real intent is unknown.

- If consumers would be asked to pay upfront for all their online buys, e-Commerce transactions in India would collapse by at least 80%.

Pooooof - Pufffff - there goes the dream e-Commerce bubble.

Keeping the Indian situation in mind, check out what really happens in the other markets (from the ET article):

"In developed Western markets, nearly 80% of online transactions are paid for by credit or debit cards, net banking and alternative online payment channels such as PayPal, according to a report by Nielsen. Only about 15% of deals were settled by cash on delivery."

Honestly, this is the stupidest, falsest Internet bubble I have ever seen!

Now, if Indian e-Commerce sites are serious to resurrect themselves and make Christmas last at least over the weekend, this is what they could do:

- Charge upfront and online for the delivery and courier charges. That would make sure that some original intent to purchase is genuine.

- Move to charging 25% to 50% of the total goods up front. This will make sure that the fakes are out.

- Share a list of common offenders between themselves, so that only one e-Com Company gets e-Conned!

To think of it, Indian e-Commerce is like a gang of Santas - running from house to house to deliver gifts. Only that, when they ring the bell, half of the people who open the door ask Santa to buzz off!!!!

**********

Super, Duper, Super, Duper ^^^ 100 times thanks to Asha for editing the original post which I believe was an 'Editor's nightmare'!

Tags: Cash on Delivery of E-Commerce in India, Cost of e-commerce in India, E-Commerce in India, Rejection rates of e-commerce sites in India

Views: 3379

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Replies to This Discussion

@sanjay agree 100%

Just goes to show how badly out of touch news organizations are.  Grab a few industry bigwigs, get a few soundbites and report that as news.

I seriously feel that the numbers are not correct , or may be correct only for Indiaplaza (exception)

I bought a laptop bag from e commerce website listed with the company (http://www.belkin.com/in/wheretobuy/onlinebuying/)

The retailer gets a commission of 50% on the same product for its retail commission and the website is selling it at 40% off with free shipment ....this kind of deal is called irresistible deal

one more example Flipkart ...books at unbelievable prices ....ok one last example ...Inkfruit...designs that you can die for ....In all my examples the Cash on delivery is comman and none of the company is having sad figures as quoted above.

The strategy that Online  buying sites are trying to apply is .... capturing Impulse buyers online and till the time product reaches ..., Impulse is being taken care of by looking at the money you are shelling out.

The strategy should be creating  value for the buyer not creating non repetitive buyer base and getting calls and mails for recall of product

This is only possible once we use the customer insights that would create a value which consumers do not get at retail shops/innovation /customization and trust

The Attitude with which the company handles the reject rate would make difference to online buying pattern in future.

First question which needs to be asked is if the return rate is so high then why it is so high?

I guess in most of the cases where goods are returned,the goods will be different from what user has expected or defective or delivery was late.....These are not the case where consumer is taking e-com guys on ride but it is e-com guys who are trying to take the consumer on ride and consumer refuses to oblige.....

Hi Alok you have mentioned Big Bazaar and why people carry cash and pay it reason is....Atta dal chawal surf ka taste aur usage same rehta hai par technology buys from ecom sites change often and that is why the mind of consumer changes.....make a big site like big bazaar which sell same items there will be no default in COD all will accept the COD of surf dal chawal etc

I dn't agree with Alok completely,its happening from  both sides.E-commerce companies also taking consumers for a royal ride.We have seen so many complaints against such companies in our Rodinhoods forum itself.One of such instance is ,timtara.com's fraud .NOTICEABLY THEY DN'T HAVE CASH ON DELIVERY OPTION.Indiaplaza had high rate of rejections because of their poor service and crappy products.You can dupe a person for once perhaps twice but not all the time.Thats how they had failed miserably .Flipkart became a huge success because of their quality products and excellent service.E-commerce is all about ''CREDIBILITY,QUALITY,SERVICE AND PRICE''.these four factors rules the roost .

Regarding shipping cost....Is it a big issues since there will be saving on a lot on electricity / inventory management / show room rent etc... and somewhat men-power (per product sold) ?

How does equation goes while deciding product cost ?

At www.simplelife.in we haven't faced COD rejection yet.  Reason, we call every COD order before delivery and ensure this is the customer who ordered and confirm whether can we ship it. 

One major problem during delivery is the absence of customer.  On absence of customer, the shipment will be taken back to courier office.  We have to painfully track every order to ensure whether it delivered or not. If not, we have to follow up with the customer and courier company.  Courier companies take less responsibility in attempting a missed delivery.  If the logistical partners focus on eCommerce delivery issues life will be really easy for eCommerce companies.

By far, in our business we have found more than 95% of our customers are genuine. Except in rare cases, our customers has never changed the mind post delivery. 

Traditionally Consumer still wishes to go to Business place and its a way of retail therapy!! Anyways, the joy of retail therapy happens when one goes in person to Business place.  B2C in e-C is yet to realize the way it is.

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