E Tailing & Auctions

In

India

A Report Submitted in partial fulfillment of the course of

Ecommerce in 3rd Trimester at Fore School of Management

Submitted By
Manik Aggarwal(70)
Apoorva Tripathi(58)
Lokesh Gupta(69)
Mansi Goyal(72)
Ritu Rungta(86)
Table of Contents

INTRODUCTION ..................................................................................................3
THE E-TAILING PROCESS .................................................................................4
STRAIGHT FROM THE CONSUMER ..................................................................5
E-TAILING PICKS UP STEAM.............................................................................5
FACTS AND FIGURES ........................................................................................6
ADVANTAGES OF E-TAILING ............................................................................6
E-TAILING BUSINESS MODELS ........................................................................7
VIRTUAL MERCHANTS ..........................................................................................7
CLICKS AND MORTAR ...........................................................................................8
CATALOG MERCHANTS .........................................................................................9
ONLINE MALLS ..................................................................................................10
MANUFACTURER DIRECT ....................................................................................11
CHANNEL COMPARISON WITH TRADITIONAL RETAILING PRACTICES ...12
THE CHALLENGES AGAINST GROWTH OF E–TAILING MARKET..............13
A KEY CHALLENGE –TO CHANGE CONSUMER MINDSET ..........................13
STRATEGIES FOR THE FUTURE.....................................................................14
E-AUCTIONS: WHAT ARE THEY? ...................................................................15
E-AUCTION BUSINESS MODEL.......................................................................15
E-AUCTION TYPES ...........................................................................................15
CONCLUSION....................................................................................................16
REFERENCES ...................................................................................................17

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Introduction

Internet Retailing or ‘e-retailing’ as is usually referred to as covers retailing using a

variety of different technologies or media. It may be broadly be a combination of two
elements.

» Combining new technologies with elements of traditional stores and direct mail models
» Using new technologies to replace elements of store or direct mail retail.

Internet retail also has some elements in common with direct mail retailing. For eg, e-
mail messages can replace mail messages and the telephone, that are used in the direct
mail model as means of providing information, communication and transactions while
on-line catalogues can replace printed catalogues. As with direct mail businesses, critical
success factors include:

• Use of customer databases

• Easy ordering
• Quick Delivery

Operational elements that the Internet retail model shares with both the retail store and
direct mail models include:

» Billing of customers
» Relationships with suppliers

There are, therefore, many elements that Internet retail and more traditional retail models
have in common. Indeed many of the most successful Internet retailers have been those
that have been able to successfully transfer critical elements from traditional retailing to
the Internet, such as customer service and product displays.

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The E-tailing Process

4
Straight From the Consumer

“Archana a student from Chennai, who had been reading Frederick Forsyth, took to his
style and wanted to read everything he’d written. A hunt for those titles in stores nearby
didn’t yield any results so on her friend’s suggest ion, she checked out an online
shopping mall. To her surprise, she found the entire range there. That’s when she
decided to buy all her books online.”

“Vikrant, an engineer from Bangalore, bought a peculiar telescope online, and that too
for Rs 8,500. He’s sure he would not have found it elsewhere.”

“Harini, a Chennai, architect, was delighted when she first booked movie tickets online
and realised how much time and energy she could’ve saved had she done it earlier. “

From Canon’s latest DSLR Powerhouse camera to a four-pin mini-USB cable for digital
cameras, Anand, an engineer from Mumbai, buys almost everything online. He argues
that online malls provide the best deals when it comes to gadgets and one can find even
those things that aren’t available in the store.

E-tailing Picks Up Steam

Drawn by the facility offered by the Web and the diversity of products available on it,
today’s Net-savvy Indian has started making online purchases like never before. Twelve
years after it started, e-tailing – the online version of retail shopping – has finally come of
age; and with the online community growing in strength, there’s now a larger platform
for retailers to scout for potential e-shoppers.

Today, you can buy anything from a stereo system to an iPod, not having to step out of
your seats. Not only are they ready to serve you 24 hours a day, but they also do it in a
trouble-free manner.

5
Facts and Figures

E-tailing accounts for about 10 per cent of the overall e-commerce market.
According to the Internet and Mobile Association of India (IAMAI) and Indian
Marketing Research Bureau (IMRB) report, the e-tailing market was worth Rs 850 crore
in 2006-07 and it is expected to grow by 30 per cent, touching Rs 1,105 crore in 2007-08.

Globally, the market for online shopping has increased by 40 per cent in the last two
years, according to the latest Nielsen Global Online Survey on Internet shopping habits.
As a matter of fact, industry body Assocham has pointed out that the volume of products
sold online are expected to grow by 150 per cent in 2008. Additionally, the increasing PC
and Internet penetration is helping accelerate the share of e-commerce in India.

Advantages of E-tailing

9 Sheer convenience.
9 Wider choice.
9 Better value.
9 Unique gifting opportunity.
9 Saves time and strain.
9 Integrated source of information.
9 Micro targeting.
9 Mass personalization.
9 Know customer preferences.
9 No Real Estate Cost

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E-Tailing Business Models
9 Virtual Merchant
9 Clicks & Mortar.
9 Catalog Merchant.
9 Online Malls.
9 Manufacture Direct

Virtual Merchants

• Single channel Web firm that generates almost all its revenue from online sales.
• These firms do not bear the costs associated with building and maintaining
physical stores but they face cost in maintaining website and marketing.
• Customer Acquisition cost is high and learning curve is steep.

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Clicks and Mortar
• Also called “store based retailers” ,they have a network physical stores as their
primary retail channel but also have online offerings.
• They face high costs of physical buildings and large sales staffs.
• They have advantage of brand name ,customer base ,warehouses and trained staff.
• Acquiring customer is less expensive.
• These firm face challenges in coordinating prices across channel and handling
returns of web purchases at the retail outlet.

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Catalog Merchants
• They have a national offline catalog operation that is their largest retail channel,
but they have recently developed online capabilities.
• These companies faces high cost for printing and mailing millions of catalog each
year, which has a half life of 30 seconds after the customer receives them.
• They have few or no physical stores.
• They have high margins.

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Online Malls

• They are variation on the virtual merchant business model.

• Like offline malls, these online malls generate revenues from rents and services
paid by the retailers who sell under the mall’s umbrella.
• These firms benefit from not having to spend millions on physical mall, but they
face large cost in building the website and marketing.
• They offer consumer a wide array of products, and mall do not face the direct cost
of inventory, order entry and fulfillment that are handled by participating retailer.

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Manufacturer Direct

• They are either single or multichannel manufacturer who sell directly online to
consumer without the intervention of retailers.
• Some of these firms had retail experience prior to web.
• These firms faces channel conflict challenges.
• These firms have advantage of brand name, large customer base and lower cost
structure.

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Channel Comparison with Traditional Retailing Practices

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The challenges against growth of E–tailing Market

9 Controlling customer data.

9 Integrating on- and off-line orders.
9 Delivering the goods cost-effectively.
9 Handling returns.
9 Untimely Delivery of the Products.
9 Credibility in Payment System.
9 Seasonality.
9 Lack of “Touch Feel Try” Experience.
9 Consumer Bias.

A Key Challenge –To Change Consumer Mindset

The key problem that needs to be countered by the sector has more to do with consumer
mindset than a change in business model.

The biggest barrier is lack of trust. In this highly technologically advanced market,
people do not trust the payment mechanisms and are skeptical about online transactions.
“Security is not a concern for us; the perception about security is a concern. “

Another mindset problem which e-retailers are facing is that of touch and feel. Indians
are used to buying products after feeling it with their hands. They buy clothes after
verifying the quality by touch, and this becomes a bottleneck for apparel sales online.
“The mindset of touch and feel of Indian consumers reflects in the product categories.
Those products which don’t require the consumers to touch and feel do very well online,”

Another typical Indian tendency is to ask multiple questions before buying. This is
missing from the Internet platform, which is another hindrance for the e-commerce
industry.

13
Though all these problems are fading with generation change and youth confidence, there
are a few other disadvantages—low PC and Internet penetration, flawed or untimely
delivery of products, and extreme competitiveness due to falling prices.

Strategies for the future

9 E-tailers should create economic value for the customer rather than a curiosity value.
They should find out reasons, as to why customers should buy from a web site rather
than a brick and mortar store and try to communicate this reason effectively.
9 Reviews and feedbacks, Rediff.com does a background check on all sellers who are
also encouraged to maintain a user feedback system. Buyers can leave a positive
feedback for a satisfactory purchase. This feedback system acts as reputation
management system which are useful for fresh buyers.
9 Companies are adopting several methods for payment and not restricting themselves
to only credit card transactions. Mobile payment, cash on delivery, DD, Net banking
and many other means are picking up. Partnerships with banks and other separate
payment gateways are also on the rise. Tie-ups with bodies such as Verisign and
Paypal increase customer confidence.
9 Indian language support on shopping platforms and introduction of social shopping
will help the industry to grow further. It will lead to large scale participation and
social shopping will help in increasing conversion rates.
9 With the advent of Web 2.0 and user generated content, Internet shopping companies
are making the best use of this trend. They plan to integrate features around it in the
near future. Web optimization, better user reviews and discussions about products,
and increased personalization will enable users to shop more and more online.
9 Retail companies have two important elements: products and customers. These two
elements have to form the focus of strategic developments

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E-Auctions: What Are They?
E-Auctions “provide an electronic forum in which a large number of buyers and sellers
can meet and exchange information and bids online, greatly expanding sales
opportunities for sellers, and often greatly reducing the purchase price for buyers of bulk
or difficult-to-find items”.

E-Auction Business Model

There are three main types of online auctions:
• person-to-person
• commercial
• Commercial auctions feature companies selling their products in an
auction format
• real-time Web casts.
• Real-time Webcasts are live auctions that are broadcast to the
Internet. Participants can bid either from the auction premises or
from the Web, although you'll almost always have to be pre-
registered to bid

E-Auction Types
• Sealed Bid Market
• Vickery Auction
• Dutch Traditional
• Dutch Internet
• Japanese Auction
• Yankee Auction
• Reverse auction
• Group Buying
• Double Auction

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Conclusion
On balance, what we are witnessing at the moment is certainly a tip of the iceberg. Such
is the growth potential in the e-tailing industry that it is not possible to put a figure
against the industry's size or growth. So, there are pluses and minuses in the case of
retailing and e-tailing. With so many hurdles around for e-tailing, it would be long time
before e-tailing really catches up. But, the trend has begun. The model which will work in
such an Indian context is this: a peaceful and complementary co-existence of retailing
and e-tailing.

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References
1. http://www.financialexpress.com/old/fe/daily/20000411/ffe06092.html.
2. http://www.businessline.in/cgi-
bin/print.pl?file=2008021450010100.htm&date=2008/02/14/&prd=ct&
3. http://www.indianmba.com/Faculty_Column/FC180/fc180.html
4. http://www.expresscomputeronline.com/20080121/market01.shtml
5. http://www.fibre2fashion.com/industry-article/free-retail-industry-article/e-
retailing/e-retailing1.asp
6. Kenneth C. Laudon, Carol Guercio Traver, E-commerce 2005

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