My humble take on the Online Industry in India

This interview appeared yesterday on TechTree.com

http://www.techtree.com/content/features/1598/interview-jitendra-gu...

These days, it's hard not to watch prime-time television without coming across screaming husbands and precocious kids imparting gyaan on online shopping. A good percentage of urban Indians with internet access have embraced the convenience and irresistible discounts that internet retail offers, fuelling the recent e-commerce boom. Even as I write this, every single item I'm wearing, including T-shirt, track pants, and shoes has been purchased online. This is true for most internet-savvy youngsters, with large online retailers making a massive marketing push to rope in the masses. What follows is a chat with Jitendra Gursingh, Director of Stuffcool.com, on the current state of e-commerce in India, what consumers prefer, and the future of the industry.
 

Interview: Jitendra Gursingh — Director, Stuffcool.com
 

Tell us about Stuffcool.com
Stuffcool.com is a one-stop portal for gadget accessories, covering smartphones, tablets, gaming accessories, and such.

 

What kinds of gadgets get you the most sales?
Smartphone accessories generate the most sales, followed by accessories for tablets, cameras, and gaming consoles.

 

Which platform's accessories are more popular: Android, iOS, or something else?
We have observed that owners of iOS devices are keener on accessorising their gadgets. One reason is that Apple users are more style-conscious, while another reason is the fact that these devices tend to be fragile. Since protection is a major factor in most accessory purchases, Apple users are our main buyers.

What's your take on purely cosmetic accessories, such as vinyl skins \ decals?
We have a very small range of skins, mainly for the iPhone 4S. Our experience in this sector tells us that Indians aren't comfortable buying skins. That's mainly because they are afraid that the skins might leave some kind of residue when removed. Conventional accessories such as cases are still the mainstay in the Indian market.

How does your 15-day return guarantee work? Do you charge the users a restocking fee for returning items?
No, we do not charge them any restocking fee. We send a replacement as soon as a user reports a defect, without waiting for the customer to return the product. Even the return shipping costs are borne by us. We rarely ask customers for pictures or other questions. This covers defects — as for the 15-day satisfaction guarantee, the window is meant to let users touch and feel the product. If they think it's not to their liking, we let them choose an alternative of equal or more value. If that also isn't acceptable to the customer, we refund the full amount. The only difference is that the customer has to bear the return shipping costs.

How do you secure sensitive user data?
Firstly, we don't store any credit card data on our servers. All financial transactions are handled by the payment gateways. Our website is SSL (Secure Socket Layer) certified to ensure safety as well.

How essential is COD (Cash On Delivery) for success, and how do you deal with the risks therein?
COD is extremely important in India currently. Initially, it was thought that Indians aren't comfortable with paying online with credit cards due to fear of misuse. However, I believe that isn't the case now. In fact, 60-70% of travel transactions that happen online are paid via credit cards, since there is no COD option available. However, most people opt for COD because flaky internet connectivity outside metros makes financial transactions unreliable. That's why, although COD is much more expensive, we are sometimes forced to tell such customers to opt for it nonetheless.

Have Indians warmed up to the concept of online shopping?
For certain product categories, yes. That's the reason why e-commerce is booming in this country. In fact, I was quite surprised to recently read a report claiming that 30-35% of the shoe industry's sales were happening online. Although I myself run an e-commerce portal, I still would not be comfortable buying shoes online. I personally would like to try my shoes on before purchasing them, but that obviously doesn't stop a lot of Indians from buying shoes online. This has broken everybody's perception that Indians don't like buying goods on the web.

My personal observation is that tier-2 towns have people willing to spend on luxury items, but lack the brick-and-mortar shops that are common in the metros. Do these towns contribute significantly to the online shopping boom?

Tier-2 towns hold immense potential in terms of numbers as well as purchasing capacity. Although the maximum traffic still comes from the metros, we do see sales taking off in tier-2 towns in the near future. As you rightly said, there are many brick-and-mortar alternatives available in the metros, so the real potential lies in the tier-2 towns. To cite an example, out of the 13.5 million total mobile phones in India, at least 10% are smartphones, while the rest are feature phones selling in tier-2 towns. Once these towns move on to smartphones, we will automatically see a positive impact on our accessories business. This will happen sooner than later, as most handset makers have already dropped the entry price point for their smartphone range.

The M in MRP stands for "Maximum", which means the sellers can discount prices, but not exceed them. However, Indian retailers in general are quite particular about sticking to the MRP. Are online discounts a major factor driving the growth of the web retail industry?

There are very few products available on discount in our website — that too, mainly on accessories for discontinued gadgets. Generally, we do not believe in offering discounts, because we don't see price as a differentiator on our website. We don't want a model where customers choose us because we are the cheapest. We want them to choose us for our product quality, variety, ease of use, customer experience, and after-sales service.

How then do you plan to compete with other e-tailers who offer discounts?
Today, every website that offers any kind of discount is bleeding; they aren't making any profits and are selling at a loss. We do not want to do that.

But aren't online shops supposed to have lower initial costs and operating overheads, as opposed to brick-and-mortar shops?
That is all rubbish, according to me. Even though there isn't much of a cost involved in setting up an online store, there is definitely a cost involved in providing a service — be it COD, technical infrastructure, logistics, or human resources.

Fair enough. You also distribute Capdase products. What happens when other websites start giving discounts on them?
The products that are distributed by us through our sister concern, Nissan Electronics, are sold only to those retailers who don't market it at a discount. We want the market to be fair for everyone. That's why, if you visit online retailers such as Flipkart.com, you will see that these products do not sell at a discount. Consider the example of Sennheiser; with the exception of clearance items, its products are not available for discounts either online or in physical shops. Even the brand's own official website sells everything at MRP.

How do you have the leverage to dictate terms to sellers? What if they start giving discounts?
Every retailer or online store that we deal with is told that if they are caught selling any of our products at a discount, we will stop supplying to them. We maintain a very strict policy for the brands that we distribute. Even for brands that we don't, we try to ensure that there's fairness in the market as far as pricing is concerned. If there's a product that's sold at 30% discount, we try to stay away from the brand.

That doesn't sound too good for consumers, though. Now, it's being said that the cost of acquiring a customer for online retail is too high, and this business model isn't sustainable.
I would agree that cost of acquiring a customer is extremely high today. But on the other hand, I would also say that while acquiring is one thing, what matters is how long you are able to hold on to him, which depends on the level of service and customer satisfaction you provide. This is important, because the customer has to shop at your website at least three times to break even the cost of acquisition.

This is the economics, but my point is that e-commerce websites have been spending a small fortune in marketing. Is this really sustainable? Do you think this online boom is a bubble?
I don't think it's a bubble, and that it can definitely be sustained. However, I believe the numbers are going wrong in terms of valuation. The way properties such as Flipkart.com and Jabong.com are being valued is unrealistically high. I think the valuations should be grounded in reality. They should be based on factors such as what exactly the company's doing, its customer acquisition cost, rate of repeat buyers, customer base, etc. Having said that, I believe the industry is certainly poised for growth. It's just that the companies are being valued at ridiculous rates. The industry is also moving towards niche websites, because the ones that sell everything under the sun are far too many, and the space is too crowded. I see websites selling specialised products rising to prominence in the near future.

How do you see the online space five years from now? Will e-shops have overshadowed physical stores?
I don't think online stores will ever overshadow brick-and-mortar shops, because the experience that the customer gets in both mediums is completely different. The experience of shopping in a mall with your family can never be replaced by online shopping, no matter how good the UI or service is. Both these mediums will co-exist. In my experience, the online industry will continue to grow at this rate. 95% of physical retail is still unorganised. In the future, the share of organised retail will really explode, thanks to Foreign Direct Investment (FDI). As soon as 50% FDI in the retail sector is allowed by the government, you can expect organised retail to expand.

That's a whole other controversy. Anyway, what kind of gadgets do you personally use?
I use an iPhone 4 and have a 13" MacBook Pro as well. I'll soon be upgrading to the iPhone 5 as and when it launches. This monsoon season, I'm using the water-resistant Griffin Survivor case to protect my iPhone. I'm also planning to buy an iPad soon.

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Tags: accessories, ecommerce, gadgets, online, stuffcool

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Comment by Jitendra Gursingh on August 9, 2012 at 1:37pm

@ Neil..sorry read your comment today :)) .. Thank you and I am glad that you share my views...We really need to focus more on the product quality, features and use these as differentiators to market your product / concept to the customer...You can make the first sale easily by giving a discount, but the customer will always remember the discount and not your product or store..lets hope for the best :)

Comment by Neil Bahal on July 28, 2012 at 2:42am

Nice going buddy!

This no discount policy will actually make your business flourish. "Think about self before the customers".

Anyways the others are killing themselves daily by selling below cost in most cases...:)

Though, we run a brick n mortar Pharmacy chain, even we strongly believe in NO DISCOUNT policy....no ways!

I am always happy to let the discount hungry customers go to my competitors lol.


Cheers & Best of luck !

Neil Bahal

Comment by Sanchita Dutta on July 26, 2012 at 9:34am

jitendra, that settles the point. nothing against those gizmos that r paid out of one's fund. the point i was highlighting is of cases when the business is just fledgling and promoters instead of analysing cash flow and business prospects end up buying these out of those critical funds

well if one pays well, he will get good stuff. it is infact better. Discounting i guess is here to stay. really wonder when the bloodbath will start, waiting it to happen before taking the serious jump. i too am building up www.indiacod.com but actually waiting for some liquidation and craze to tide over first

profit margins in accessories? well i m on the other side and it suits me more not to speak much about it :)

BTW even infosys works at 200-500% actual cash margin. that the net profit comes much down due to fixed costs is a differnt matter

Comment by Jitendra Gursingh on July 26, 2012 at 12:13am
:D firstly thank you for reading through and posting your comment and your wishes.

It's not necessary that I disclose this but nonetheless, those gadgets are from my savings and not billed to the company :) Stuffcool is not my first venture and I do have some limited businness experienc. Fortunatlely I own 2 of the most desirable gadgets. Those are not pre-requisites, but definitely extremely useful.

Also, to go a little off topic, I am sure every entrepreneur would be owning and igadget; as most entrepreneurs today appreciate quality, design and most important Efficiency, in which Apple products are incomparable. It is only when you own one, do you experience the joy of it. Couple of years back I had invested in the latest android & windows vista & have experienced a lot of frustrating moments.

I agree that currently we would be overshadowed by people who are discounting but I hope sooner or later common sense shall prevail. It shall happen when consumers and sellers alike shall begin to think beyond product prices.

PS: Please don't jump the roof in sheer anger :) profit margins are not high in our business. The unfortunate part about this statement is that every business says it and every consumer finds it false. If you are in business, I am sure you ll understand that if profit margins are high, this industry would have caught the eye of everyone. Worldwide, there are barely 3 or 4 online stores which are exclusively into gadget accessories.

Please note, none of the above are justifications; please view it as information which may help you understand my statements better :)
Comment by Sanchita Dutta on July 25, 2012 at 11:25pm

i cant stop smiling to myself.

Read the reply to last question. that is the singular largest factor that will bring the business in particular and the segment in whole down. there is a v important saying " Gao Basa Nahi, Daku aa Gaye"

If the iphone 4, Mac 13", iphone 5 and ipad is from money not related to business, then its ok, but if its a part of the "administrative or establishment costs" of running the business, i guess times are not going to be as good for long. how can one justify such items as part of requirement (if they are at first place that is) in running a start up where margins are thin n thinning, competition is stiff and stiffening, and saving cash is going to be the biggest key to surviving the impending bloodbath in the sector.

while, i m really impressesed with the views against discounting and i m with him in it, but i guess we would be in overwhelming minority and would hardly survive the onslaught of the flipkarts and jabongs..

Notwithstanding, best wishes for the venture.

BTW, if the common customers or buyers come to know what the profit margins are in mobile accessories business, they will go mad and perhaps jump from the roof in sheer anger at those sellers who are selling them. well that includes me as well :)

Comment by Jitendra Gursingh on July 25, 2012 at 9:49pm
:) thank you for the comment Milan. That holds really true for us and we are currently focussing a lot on both customer acquisition, which is not very difficult and customer retention, which takes time and effort to build up.
Comment by Milan Bavishi on July 25, 2012 at 9:25pm

this is interesting (as given above):
"the customer has to shop at your website at least three times to break even the cost of acquisition."

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