Tag Archives: eCommerce

The App World is Flat!

The App World is Flat

With Apps / Mobile growth, things are changing at a fast pace in the eCommerce / mCommerce space in India & around the world; for purpose of simplicity – calling it eCommerce without bothering about on which platform the transaction happens on.

The world is fast discovering web on smartphones, gets on-boarded to services like WhatsApp & Facebook, doing their first online transactions on Mobile Recharge services like FreeCharge & Paytm, and evolving to eCommerce, On-Demand Services & Travel. Unlike the previous predictions made in 2011/2012 – which were very company specific, this time the focus is largely around the trends in the Mobile App world.

 

The (App) World is Flat!

In old days of Internet Marketing, there were strategies to acquire users / customers by categories through multiple marketing channels – Adwords, SEO, Email, Display advertising, etc

The App World is flat. Be it large commerce startups like Flipkart, Snapdeal, Ola, Uber or the ones that were launched yesterday in any space, the common ground for everyone to get started today is exactly the same – getting the App Installed. This is disruptive in many ways – if someone has $1 Mn to spend on user acquisition – no matter at what stage / scale a startup is, the cost to get the app installed now remains the more or less similar for everyone.

As other core functions of eCommerce like Logistics, Merchants, Payments get more organised & commoditised; and User Acquisition starts with getting the app installed – a new ecommerce marketplace startup that launches today with $5 Mn Series A investment has much better chance to succeed than ever before or give existing large players good competition.

That puts everything in a interesting perspective – As cost is exactly the same, what are the differentiators? Its the core value proposition of the startup – the one communicated before user installs the app and one actually delivered. This change makes every startup focus a lot on building a great product and an awesome consumer experience than ever before!

 

Discovery, Marketing & Product Experiences:

In the ‘web’ world, Google allowed marketers to reach ‘users with intent’ through Adwords (or SEO) and so did Facebook to reach a certain demographic of users on its platform. This has changed fast. For high growth mobile startups that are scaling up in India – Google & Facebook’s share of marketing spends is shrinking when compared to others.

App Installs plays a level playing field in User Acquisition today; networks & affiliates are able to drive App Installs at better volumes with very competitive rates when compared to Google, Facebook or Twitter. Discounts, cashbacks & user driven growth form new means of acquiring users at a exponential rate. Share of wallet from marketing spends for Google & Facebook is going down.

Any consumer app like Flipkart / Snapdeal or Google / Facebook can now read multiple signals off user’s phones – apps, locations, contacts, texts messages, and so on and redefine how users are targeted for advertising. Flipkart’s plans to build online advertising business are well known; could be huge opportunity if kept independent.

Mobile App capabilities can also translate into building relevant product experiences for end users. For example – a Cleartrip trying optimise its Hotel Booking Offering for users when it reads a Flight Booking SMS from Airline website on user’s phone; Housing showing financing options for house from HDFC knowing that the user has the HDFC Bank App installed on phone; or Flipkart showcasing user products based on how quickly they can be delivered; of a Finance App recommending user investment options based on his Account Balance and so on. In one of my recent conversations this came up – today a user’s mobile phone location is his delivery address.

Till now, Ecommerce products today have just transformed from web to app, not essentially unlocked the value the mobile platform brings. If existing players don’t innovate, some new startups will. Focus on building awesome products.

 

App Discovery will evolve:

App Discovery and Install today act as the top of the funnel for every User Acquisition effort. Visiting a App Store to download any app is a redundant step; its not required if app is discovered through other channels. Expect Google Play to take the Install button (or trigger) outside the Google Play Store and let users install apps without explicitly visiting the Play Store in background. If that happens, expect APIs that will trigger app installs for publishers & advertisers making user acquisition & advertising dollars more efficient. Yes – that possibly kills ASO, App Discovery as we know of today on App Store, and Google’s Adwords product for Play Store.

Mobile Apps ecosystem is cursed with high uninstall rates. Users & Marketers would want to move towards the philosophy – you acquire user only once, does not matter through which channel – App Store or Browsers. Users would want the product / service on-demand on every platform – Smartphone or Desktop Browser whenever they want without hassles of user / account management. Expect browsers integrations & enhanced capabilities on Chrome with App Stores (Google Play to start with) that enables users to access the Apps installed on their smartphones on desktop or any other platforms without having to log-in separately.

App Stores like Google Play or Apple iTunes will also evolve from their current stage of ‘enabling discovery of mobile apps’ to ‘authentication of user credentials’. App Stores will retain user information – personal details, payment info (saved cards or wallet), delivery details and so on to transform into 1-click authentication platforms. Example – Users while shopping on Snapdeal, Flipkart or Amazon Mobile App can do 1-click checkout with App Store authentication that gives the Ecommerce service all user information w/t payment information data that is required for Ecommerce sites to fulfil the transaction.

This is something similar to what Facebook did earlier where Apps & Games on Facebook Platform received user information on Login-with-Facebook. Its still early days for Mobile App Stores, they will evolve in big way going forward.

Note: Google is already working in this direction to distribute Install action with App Invites (Beta)

Engagement v/s Instant Gratification:

As consumers get habituated to transactional & on-demand services – social products & social commerce products (like Wishberg – my previous startup) or any other would find it extremely difficult now to scale up or grow without providing the instant gratification experience.

Existing large companies in this space are picking up clues and started to move towards a transactional experience with Buy buttons. To ecommerce companies, working with large networks for such 1-click transaction experiences is a big win.

Expect focus of large social networks (Facebook, Twitter, Snapchat, etc) & discovery channels (Google, Pinterest, etc) to move from top of the funnel (i.e. product discovery or media spends) to bottom of the funnel (enabling transactions or margins). They are currently driving Mobile Installs or Traffic for their current advertisers, going forward may be looking at driving customers. Such products or services know more about users than anyone else.

Products like Facebook, Google will retain customer information (delivery, location & saved card details) and move towards enabling the one-touch buy experience.

 

Frequency is all that matters now!

This topic itself calls for a longish post (may be for some other time), for now the point to note is that Mobile App makes perfect use-case for a high frequency consumer behaviour. There are already many studies that have concluded that consumers prefer to have only few apps on their smartphones – ones that are frequently used.

Apps like WhatsApp, Facebook, Twitter, Snapchat, Instagram etc which see extremely high engagement (and frequency) are less likely to be uninstalled by user while an app that is not used for few weeks (or even days) is very likely to get uninstalled. Ecommerce products would not be able to match levels of usage demonstrated by Social Apps.

Transactional apps that have a daily / weekly use case like Cabs, Food Delivery, Grocery, etc would see better usage compared to others. As that gets discovered, expect Ecommerce apps to expand into multiple categories / segments that could be completely diverse – Paytm moving to eCommerce or Travel, Ola moving to Food Delivery and so on to drive frequent usage.

This strategy works well with two big motives – increases app usage as users have more reasons to open & engage with the app and also adds up to their topline. But for vertical commerce players like Home Repairs, Home Furnishing, Jewellery, Footwear or others – surviving in App World with infrequent usage will be extremely challenging.

Today, Success or Failure of any startup is just an uninstall away!

 

OnDemand Services may disrupt eCommerce forever.

In past few months, many on-demand services have raised massive Series A rounds, the ones focussing on infrequent use-cases like Home Repairs, etc will start struggling with user retention and other ones who are driving high frequency use-cases like groceries, food delivery will start bleeding because of poor unit economics.

Ecommerce today as we know it has its own challenges – relying on third party logistics, depending on unverified sellers & products, deep discounting of products to drive volumes and their attempts to move from cash on delivery to cashless transactions.

On other hand, offline retailers in India are up in arms against online players but have little competition to offer. If OnDemand services like Groffers, Swiggy and others in this on-demand space started delivering users Ecommerce products partnering with your offline retail giants and local stores – eCommerce changes in this country forever.

No more waiting for even for 24-48 hours, the product that you want, from the trusted store of your choice, in the payment mode of your choice, in your hand – in next 30 minutes. The Amazon Prime or Flipkart First experience delivered to you, every time. This changes everything we have learned or known about ‘traditional ecommerce’.

Concluding Notes

Mobile app & growth story is just getting started. Its too early to declare winners because the App World is Flat!

Ecommerce Product Management – Getting the Product Page Right

Just few days back I exchanged some notes with Founder & CEO of a Ecommerce company on why I never shop online with them. This venture is among the best known Ecommerce brands in India, but its product experience never gave enough confidence to transact with them.This post is result of that interaction. All screenshots included in this post are not meant to single out any particular ecommerce website and this is meant to be a general post on best practices.

This post is also an extension to my previous post on the topic – Product Management and Ecommerce that was written about two years back. While that post was about general product management principles for Ecommerce, this one is a series of posts that are specific towards reducing cart abandonment and improving conversion rates in transaction businesses. Limiting the scope of this post only to Product Page -> Checkout, this post is first in this series and talks about building the right Product Page and best practices to be observed.

Getting the Right Product Page for Ecommerce – Best Practices

When users land up on product pages through some effort (search, discovery, social, email, adwords, etc), the intent of a users here is positively inclined towards ‘knowing more about the product’ or ‘making a transaction’ and not towards abandoning the page.

The positive reinforcements on a product page are –

  • Product (the product itself), Photos, Price
  • Shipping Information (and Payment Details)
  • Additional Information – If the product, photos & price do not help make a purchase decision, then the additional information that can assist in decision making process.
  • Alternatives & Suggestions

Building Product Pages is a science & art put together with lots of common sense. They should be built / designed as decision enablers and not with the focus that allows users to look at other options in an event the user is not interested in these products.

a. Focus on One Action – ‘Add to Cart’

Yes this is the obvious point. Why is it here, everyone knows this right?

It is here because everyone knows this and because they also know everything else other than this. Simply look at the product pages of the Ecommerce websites, the number of colors on the design elements of page, multiple call to actions – take away the focus from ‘Add to Cart’ button.

As a standard practice, don’t let more than 3-4 colors creep-in on to the product page. Having a color palette helps here and intelligent use of shades of gray to highlight important information if required. Also most critical aspect is knowing that all information cannot be considered as important.

Showcased below are screenshots from top ecommerce websites in India. Notice the excessive focus on highlighting every piece on information, use of ‘design’ and colors in every product element. Have specifically chosen products that have variables like Size, Color – since those are the most complex ones to get right.

Multiple Components asking for Attention, One of top Ecommerce Sites in India

Multiple Components asking for Attention, One of top Ecommerce Sites in India

Multiple Components asking for Attention, One of top Ecommerce Sites in India

Multiple Components asking for Attention, One of top Ecommerce Sites in India

Know how to make ‘Add to Cart’ stand out – look at a product page from NastyGal.com

NastyGal Product Page - Notice the focus on 'Add to Cart'

NastyGal Product Page – Notice the focus on ‘Add to Cart’

 

b. Getting all Decision Enablers next to ‘Add to Cart’ Button

The most important decision enablers (either features or information) should be as closed to the ‘Add to Cart’ button as possible, not miles away. The information should be presented in a top-down readable format – specially for categories and verticals like Clothes, Shoes and others where to process the order you need Size, Style, Color and other such information.

Factors making up the Purchase Decision

Factors making up the Purchase Decision

It is first essential to figure out what are the most crucial 2-3 factors / information that a user needs to know and also accepting that not all information is must.

Add to Cart on Bonobos

Add to Cart on Bonobos

Add to Cart on Zappos

Add to Cart on Zappos

c. Use Standardized Communication & Symbols

One of the key things to focus on your product page (or anywhere on the product) is user communication. From simple things like should it be ‘Add to Cart’ or ‘Buy Now’ or ‘Add to Bag’ to another simpler things – its a tough job.

Standardization? Its a mess out there.

Standardization? Its a mess out there.

Choose widely used terms for communication. I would always suggest using ‘Add to Cart’ because 90% of other websites use it. Remember user is moving on multiple websites, and he has got familiarized with the term. Do not re-invent things for the user. Even for symbols, Shopping Cart has a universal symbol across millions of website.

Same for terms like Cash on Delivery. Free Shipping.

Another issue with Ecommerce websites is the excessive focus on branding everything. It starts from ABC TrustPay, XYZ Assurance, LMN 100% Purchase Protection or PQRS Guarantee, etc to putting up details for Sellers (Marketplaces) – ratings, stars, % feedback, etc. While all that is great, why does a customer need to know this? If its for assurance – there is no need to copy paste such fancy terms across the website.

Thinking from a consumer point of view, if there is any goof-up on any transaction – user will hold the website liable for its service, whether or not it is a marketplace or a store. A simple message like one from ASOS – “Free Returns. Not quite right? Send it back for Free” or from Jabong – “30 Days Free Return / Exchange” does the trick.

One of the leading ecommerce venture says uses the term ‘Free Home Delivery’ which I relate more with restaurant food deliveries and less with ecommerce.

PS: For some reasons, Indian Ecommerce websites love coming up with their own Glossary of Terms!

d. Handling Exceptions on Product Pages

Some of the best user experience practices are seen on products that handle exceptions really well. Only following a simple principle – “Do not show user information that is not applicable’ goes a long way in removing information overload and simplifying user’s buyer experience.

Here are the few common ones that should be displayed only when applicable –

  1. EMI on Rs. 3000 – shown for all the products even those priced below that limit.
  2. Showing Cash on Delivery for products on which it is not applicable
  3. ‘Free Shipping’ when not applicable or Showing ‘Free Shipping on products above Rs. 500’ when the product is already above that amount.
  4. Ships from Chennai – Shown to user who is from Delhi. (Unnecessary second thoughts for the user – what matters is that product is shipped in time, not from where it is)
  5. In Stock. Of-course, why else would you display ‘Add to Cart’ button.
  6. Offers. Most offers kill Ecommerce profits (and the service too) – but since it is a trend now to show them, display only offers applicable to the product. Avoid blanket offers for a category.
  7. Twin Carts
  8. Asking ‘Are these reviews helpful?’ when there are no reviews.
  9. Private Listing of products shown to all.
  10. Free Returns or Exchange displayed on products that are not applicable like Lingerie, Cosmetics, etc
Showing EMI when not applicable

Showing EMI when not applicable

Dual Carts – Not applicable to > 95% users

Private Listing? Why show it to users then.

Private Listing? Why show it to users then.

Feedback on Reviews not written yet.

Feedback on Reviews not written yet.

Showing Offers when none available

Showing Offers when none available

Product  In Stock. Offer that is super-stretch for the user.

Product In Stock. Offer that is super-stretch for the user.

Ships From? Why a User needs to know as long as it reaches him on time.

Ships From? Why a User needs to know as long as it reaches him on time.

Handling Exceptions are really important for every product that is being sold on a Ecommerce site. Simply because every product is different, so are its attributes and not all of them apply all the time.

 

e. Staying away from Fancy Features

Get rid of fancy features on the product pages, some of them really make no sense.

Some of the top fancy features that are seen frequently on ecommerce websites are listed below. Though its debatable that few of them are required, the point to suggest here is not letting them interfere in the transaction process and keeping them passively available.

  1. Compare products on your site. There are different sites available for comparison and decision making.
  2. Ship to my pincode. While this feature has value, actively showing it to everyone does not. Good execution by Amazon India as a passive feature.
  3. Ask seller a question in Marketplaces. Is it scalable if the response is delayed by hours or days. Even users do not ask questions on top selling products.
  4. Login to Save in Wishlist. Almost everyone has feature – why. How many people come to wishlist on ecommerce sites again.
  5. Add to Favorites. This feature is great for social commerce or 100% design-only focus websites like Fab or Etsy, provided it adds value to user.
  6. SEO Fanciness – Many ecommerce services use without understanding how difficult it is for users to read.
  7. Vendor Information. Yes, we know you are marketplace, but there is a beautiful way to telling who the real seller is. (like Etsy).
  8. The filter for filters. Cool, but over period of time they all die and the data operations kill the user experience then.
  9. Comments on products. Again – engagement v/s commerce. Most services that have comments enabled, see user complaints and customer service related comments that further discourage buyers.
  10. Zillion Reviews that make no sense.
Fits SEO, but how helpful is this for user?

Fits SEO, but how helpful is this Product Descripion for user?

Fancy Filters

Fancy Filters – Helped me discover unknown Brands, Irrelevant Form ~ Touch is Qwerty or no. CDMA. Other OS > All known ones.

Reviews that make little sense

Reviews that make little sense

Facebook Comments - Why?

Facebook Comments – Why?

Favorite & Add to Compare

Favorite & Add to Compare

Definitely users don't want to enter in a relationship with the seller.

Definitely users don’t want to enter in a relationship with the seller.

How does this information matter?

How does this information matter?

Thanks for making this complicated. Users only care for price they will buy it for.

Thanks for making this complicated. Users only care for price they will buy it for.

There is a huge buzz around content + commerce, I believe that both of them should not mix. Content products (like Twitter, Quora, or even Wishberg for example) should focus on engagement and time-sink for its users, while Commerce products (like Amazon, Flipkart and others) should focus on transactions that are completed as quickly as possible.

 

f. Photos: Picture Perfect Product Pages

How important are photos on your product pages. If the answer is yes very important, make it a standard practice for product photos to be over 500 x 350 pixels. Optional images are great, zoom-in to see larger photos absolutely great – but those are optional features, the main product image makes a lot of difference.

Large Product Photos on Etsy. Also look at NastyGal's page shared above.

Large Product Photos on Etsy. Also look at NastyGal’s page shared above.

g. Recommendation that kill the Product Experience

Ecommerce sites should put a limit to the number of recommendations that are shown to the users. One of the best known Ecommerce site displays a stunning 9 set of recommendations on its product pages, that includes 35 products being recommended under pretext of ‘for you’.

Recommendations shown for a Mobile Phone

  1. More Mobile Phones from Samsung.
  2. Feature Phones from Samsung
  3. Recently Sold in Electronics & Gadgets
  4. Products Frequently purchased together
  5. More Android Mobile Phones
  6. People who viewed this item also viewed
  7. Top Selling Mobile Phones
  8. Products You Recently Viewed
  9. Recommendations based on your browsing history

Showing 35 recommendations does probably less for making up a buying decision and more for increasing dropouts or bounce rates of product pages. The ideal number of recommendations to be shown to user are 3-4 sets not more than that.

The ones that are most likely to help in conversion are:

  • Products Frequently Brought Together (provided the combined price is not greater than 3X of product price). This recommendation can be also displayed at Cart Level.
  • Customers who viewed this Product also Viewed. (Actual Recommendations)
  • Recently Viewed Products
  • Recommendations Based on Browsing History.

Flipkart & Amazon India does a great job with product recommendations.

—————————————————————————————————————–
Since I do not want this post to sound like a rant, I have attempted to re-create the first scroll product page (of the one mentioned in the first point here) by applying these best practices that I have mentioned here. This is how it looks. (Note: I am not a designer, this is recreated out of plain copy-paste tools.)

Product Page based on the best practices mentioned here.

Product Page created by me based on the best practices mentioned here. Redesigned the first image.

Concluding Notes:

Indian Ecommerce is coming out of age now, its off to a great start. While challenges like operations, logistics and customer experience are being tackled with great enthusiasm to delight users, it is time to also look at getting product management principles right and ensure users have a right user-experience.

Something I missed completely is that not a single ecommerce site reminded me of their mobile apps, isn’t mobile supposed to be the next big thing? A simple feature like ‘Send this to Mobile’ will do wonders – there is a chance that I will further share the product on WhatsApp and ask friends & family.

Remember, users that come to ecommerce websites are not here to build relationship, they are merely here to transact. Some features like Add to Wishlist, Write a Review, Rate this Product, Comment on this Product, Showing Auto-Pop to ask Email (and later spamming with newsletter), etc are not the ones really care about when they are here to transact. They are passive features, completely optional. Don’t irritate your users!

“I’m not here to enter into a relationship. I just want to buy something.” from the famous post – The $300 Million Button by Usability Expert Jared Spoon.

Ending this post with one of my favorite quotes on this topic – “Every feature has some maintenance cost, and having fewer features lets us focus on the ones we care about and make sure they work very well.” – David Karp, Tumblr.

—–

The next post in this series will be Best Practices for Shopping Cart & Checkout Process.

Why Ecommerce acquisitions make no sense in early / nascent stage

Few (Series B / Series C) funded ecommerce companies in India have started making/announcing acquisitions of smaller players. Recently when I posted about the 2012 Predictions & Trends, I made an comment that in an early ecommerce market, acquisitions of competition or startups really makes no sense. Trying to put few thoughts on that here.

A typical such small ecommerce startup that gets acquired by larger & known ecommerce player is structured as follows –

  • About 2-4 founding team members; 5 to 10 employees; up to 25 or so if the venture has received any institutional stage funding
  • Focused on one vertical – sports; electronics; kids; jewellery – Catalog of 1000 to 10000 product SKUs
  • Order Acquisition Channels – Direct Traffic, SEO, SEM, Social, Affiliates, Email Marketing, Display Advertising.
  • Team Structure: Founders, Product Development & Management Team, Online Marketing, Category Managers, Logistics & Operations Managers, Customer Support
  • Social Media presence – Fans on Facebook; Followers on Twitter
  • Business Partners – Vendors for Procurement, Logistics, Payment Gateway, Customer Support
  • Product, Platform & Technology
  • Warehouses & In-house logistics for Series A funded players
  • Gross Orders – between 50 to 100 per day; few Series A funded players may have from 200 to 500 per day.

What happens when a considerably large & deeply funded ecommerce player (say LargeEcom.com) acquires a small startup (SmallEcom.com) with assets as mentioned above –

  • Category Focus:
    SmallEcom.com will be either a horizontal player or vertical focused player. If horizontal, then most of the products will be already present in acquiring company. If vertical then it might be a small ecommerce startup with about 500 to 5000 SKUs, the acquisition further does not make any sense. The acquiring LargeEcom.com could have directly poached category managers or could have developed that category in-house just by hiring few more category managers!
  • Order Acquisition Channels:
    Any online ecommerce venture’s assets are how they are acquiring new customers. The biggest challenge is not acquiring SmallEcom.com, but making the most of these channels. Post acquisition, these channels are ‘unfortunately useless’ to the acquiring company – LargeEcom.com. Here is why –
    .
    • Direct Traffic >
      If website of SmallEcom.com needs to be shut, the direct traffic will be redirected to LargeEcom.com post acquisition, doing that quickly reduces the value to its existing users. If website is shut – value of all other channels die on its own, explained below.
    • Natural Search or SEO >
      SmallEcom.com’s URLs in Google Index no matter how well optimized will lose rankings when the traffic is diverted to another domain. All time and money invested in search optimization over months / years is diminished immediately.
      .
    • Paid Advertising: SEM & Display >
      Search Campaigns are optimized over a period of time to reach lower the cost per clicks. Though the same can copied from SmallEcom.com in to account of LargeEcom.com’s adwords account, the same CPCs will not be maintained. Well, otherwise the acquiring company LargeEcom.com’s has its own online marketing team, it will be a max one week job to create new campaigns for the catalog of SmallEcom.com.
      .
    • Social >
      Post acquisition, SmallEcom.com’s Facebook Fans & Twitter followers cannot be moved to LargeEcom.com’s brand page or twitter handle. Again – value of the time and money spend behind this channel is reduced to zero on day 1 itself.
      .
    • Affiliates >
      There are few affiliate marketing companies in India, they work with all ecommerce companies. Most likely LargeEcom.com would have better negotiated rates (cost of acquisition) with the same affiliate partners thats SmallEcom.com has partnered with.
      .
    • Email >
      There might be few duplicate email addresses, but is this a reason for LargeEcom.com to acquire a ecom startup with a small number of email addresses knowing that email marketing has diminishing returns over a period of time.
      .

The conclusion is – to retain the value of the startup’s order acquisition channels, the venture needs to be up and running. The big question for large acquiring company – should be it done at a cost of duplicating every resource available – two marketing teams, two product teams, two tech teams, two customer support teams or two operations teams?

The answer is No in both the cases – that is why acquiring a ecommerce startup is senseless; and most of them happening in India now can be termed as Acqui-hires, hired for talent.

  • Founding Team:
    The founders are retained, most likely to quit post the expiry of retention period. Once entrepreneur is always a entrepreneur by heart.
    .
  • Team Structure:
    Post acquisition, most roles will be dual and overlapping in both organizations. Unfortunately many cannot be accommodated since the larger entity cannot have – say two Online Marketing Heads or two Operations Head. Only in the case when the acquiring company has open positions, high chances that the team members are accommodated, else asked to quit.
    .
  • Business Partners:
    Vendors for Procurement – will be added to LargeEcom.com if it was acquiring a vertical ecommerce player and was not present in the same category. Most likely, this will not be more than 100 new vendors; again which could have been easily acquired just by hiring 2-3 new category managers (so why acquire?). If horizontal player was acquired – there would a overlap in vendors too.
    .
  • Logistics & Payment Gateway:
    LargeEcom.com would already enjoy better pricing for both with its partners, needless to say they both work with similar service providers for logistics. Acquiring a startup will not increase footprint in terms of pin-codes served.
    .
  • Customer Support:
    In a small startup, customer support is usually handled by a very small team; often by founders. If acquisition is across city – a Delhi based startup is acquired by Bangalore based one, clearly means that the team is either axed or goes on job hunting mode as they would not be open to relocation. This also holds true for other teams as well.
    .
  • Product, Platform & Technology: 
    The smaller startup that gets acquired will probably be running a ready-to-integrate ecommerce platform. Surprisingly, even the larger acquiring company might be as well running on some ready to use ecommerce platform and struggling to hold it up. There is absolutely no question of seamless integration here, ask your engineering folks! Either ways, since the acquisition is not for technology, the product and platform improvements on the smaller startup’s ecommerce platform will be lost as well.
    .
  • Warehouse & In-house Logistics:
    Few funded startups today have started with own warehouse & in-house logistics. Post acquisition, the lease on such warehouses expire (for two reasons – acquiring ecom startup already has own warehouse in that location with excess space + managing two warehouses in same city at a distance from each other means doubling operational costs). In-house logistics employees are either temps or contract workforce or on rolls of another company.
    .
  • Gross Orders:
    The SmallEcom.com site that was just acquired was doing about 50 to 200 daily gross orders; The LargeEcom.com site who acquired it will usually claim to do between 10,000 to 25,000 daily transactions. On order to order basis – acquiring an loss making ecommerce startup that will does 0.5% to 1% transactions will add any value to large entity? No.
    .

So why are these acquisitions happening?

  • New Vertical?
    No. It is not right to acquire a company for say $1 Mn or even 1 Crore to add new category to your product portfolio. Hire two category managers and have the new vertical rolling in 3 months.
    .
  • Acqui-hires?
    No. They happen if it was a case of known proven talent who build a super kewl product / technology platform but did not hit a right idea or execute it well. Examples – Oink (by Milk), or Gowalla and so on.
    .
  • Revenues?
    No. A large loss making ecommerce entity acquiring another loss making small ecommerce startup – two negatives don’t add up to positives.
  • Assets? No.
    Clearly no assets are doubled post the acquisition. Nothing on revenue, product, process or technology.

May be signs of desperation. May be lets try out something new. May be even VC / PE signaling – ‘Hey, we guys are growing inorganically, new category, new vertical and so on – we will require more investment capital in next rounds, care to participate?’. They may participate or may not – but is this a right strategy to present or package to existing investors where the net value of acquisition post 12 months (or even on day of acquisition) is zero.

However, some acquisitions do make sense – Homeshop18 acquiring Coinjoos or Flipkart acquiring Mime360. (Sorry – I don’t name bad acquisitions). Venturing into new vertical at times makes sense for acquisition – for verticals like huge catalog driven businesses – Books & Digital Music. It takes months together to build a team and build this massive catalog and then start business operations; acquisition makes more sense than building it grounds up; but not for any other category.
.
So Amazon.com acquires? Why can’t we?
Amazon acquires cause it should acquire and own large ecommerce companies to maintain its undisputed lead. It is a listed company, needs to focus on growing is topline revenues and at the massive size that Amazon.com is – it has capacity to absorb losses and yet show some superb green numbers in balance sheet.

My guess is Amazon keeps all acquired ecommerce properties (Zappos, Woot, Diapers, Soap, Audible, etc, etc) live and independent post acquisition not alone for the culture of startups – but for reasons explained above. They need to maintain order acquisition channels for these acquired companies active and generate revenues.

While in India, a Series B / Series C funded ecommerce venture cannot run dual operations or two loss making entities.
.
Concluding Notes:
I am not against acquisitions & exits, they are must for startup ecosystem. And they should be in plenty to keep the ecosystem building. But don’t agree with such acquisitions made by Series B / Series C funded ecommerce companies which end up adding no value to the company. They hurt in long run, when multiple investors get involved – burn their hands and then completely give up on the sector or market itself.

Otherwise I will stick to what I wrote earlier on predications for investments made in both horizontal & vertical ecommerce in India.

 

What has Product Management got to do with Ecommerce?

Everything! No, that will be a over statement. But it is definitely an integral part of value chain, which is completely ignored by many Ecommerce services in India. Few completely clueless about it, on what product/platform to develop and often mistake UX as product management (which is also an important function in itself).

Ecommerce is (still) hot. In a domain that has many funded companies today in this space; everyone is struggling for differentiation. With an exception of few; to say that we do more products in one category; we have strong vertical focus; our cost of acquisition is low; our seo is better; etc, etc – does not make any sense. These differentiating factors can be replicated overnight. If everyone is on-board same plane, its absurd to claim that someone will reach destination before others.

Rather than subjective opinions about Ecommerce which are in plenty already, this post is specifically targeted towards one aspect – Product. Internet businesses are all about building awesome products backed by a super technology team presented in an intuitive user-experience, nothing else. Its kinda unfortunate to see dollars spent on advertising by companies that have raised investments that continue to run on ready to use Ecommerce platforms installed over-night.

I’d be happy to see fellow entrepreneurs implementing / following basics of ecommerce product management and investors emphasizing focus on product before writing their next cheque for yet another ecommerce investment. On twitter (@beingpractical), I have tweeted number of times about lack of product focus by Ecommerce companies in India – here is why I keep saying that.

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1. On-Site Search:

The way Google is gateway for searching the web, same applies for on-site search for users to discover the 100,000+ products in catalog. On-site search as a discovery tool should contribute minimum 15% of all sales generated. A kick-ass search algorithm should contribute to 30%-35% of total sales.

On-site search is broken if –

  • Total search queries per day < Total unique visitors per day
  • 20% of all search queries generated show zero results
  • Even a single search query of Top 100 searched keywords shows incorrect result in position 1. For next 400 keywords, in first 5 results.
  • Contribution of transactions generated through on-site search is < 15%
  • Order Conversion Rate of onsite search is < 2X of site average.
  • Option to search on homepage is not prominently highlighted; Take clue from Amazon.com – as you always do 😉

What users search for on your website is the true-indicator of what consumer demand is. Rather than bidding for expensive keywords on paid search, analyze how effectively on-site search queries can be converted to actual sales.

To simply put, if X effort is put behind search engine optimization & Y effort is put behind paid search marketing, then effort spent on on-site search should be X + Y.

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2. Search Engine Optimization:

Why SEO is mentioned here? Because content experience should be delivered as a part of product. Many Ecommerce sites continue to believe that search-bots transact online and their product pages forcefully include content snippets. Design web pages and build user experience keeping real users in mind and not for search-bots.

SEO should be integral part of product, not random content/text written and inserted across product or category pages merely to increase keyword density of the page. Understand dynamics of content wrt to product in catalogue. There will always be two types distinct type of products – standardized (eg. Canon PowerShot 550D camera) and non-standardized products (eg. Diamond Ring for your Valentine). Focus on each type of products should be separate. (Have explained a bit of how it works in this post – Junglee and how it impacts Indian Ecommerce).

Search Engine Optimization is about playing with Google search index. Don’t overplay with multiple pages, unwanted content – in short don’t spam Google index with similar content. Maintain a healthy product to page index ratio of 3X-5X (indicates if there are 100,000 products in catalog – the search index should not exceed 500,000 in any case).

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3. Persistent Shopping Carts:

By now persistent shopping carts have should have became a standard, but there are few who are yet to enable this. For starters, there are tons of resources available on the web on benefits of it; for advanced product managers – there is simply much more to do –

  • Link shopping cart data persisted with a user session whenever is in a logged-in session.
  • Send email notification to users to remind of items still in shopping carts (please don’t spam – just a gentle reminder).
  • Over a period of time product prices decrease, once the same happens for a product that is lying in user’s shopping cart inform him via email.
  • Abandoned shopping cart is still an incomplete intent, convert that into a sale at a right opportunity.

Enable smart product marketing through a product versioning system. New Apple iPad is a successor to Apple iPad 1 & Apple iPad 2, inform users when next version of product is available. Similarly for Books or Music, when next book by an author is available or even a new sound track by Madonna. Remarket abandon carts when such event occurs.

 

4. Multiple Sites, User Communication and more.

In recent days, couple of ecommerce services have gone ahead and created specific domain for every vertical they are expanding in. Abc.com for electronics and xyz.com for fashion. These are most pathetic executions of product management since they tend to leverage existing platform for efficiency and end up being perfect playground for chaos.

Here are the most common mistakes that happen (all real experiences) –

  • Register at one website, receive welcome message from another.
  • Same Order ID sequencing is followed for multiple sites.
  • Same database used to store user information – imagine the chaos with operations, customer support, logistics, packing, and do so on – order from abc.com shipped with xyz.com packing. Its a product management mistake, and employees in operations are suffering.
  • Using same platform to collect any behavior information (if collected) for all sites. All algorithms will work incorrectly, expect Apple iPad recommendations to include a T-Shirt or even a Diamond Pendant. To patch up with a fix will lead to further complications, cause basic data collected itself is incorrect.
  • All email sender names, communication, notifications, marketing messages, are mixed up.

 

5. Deals to Product sales; expanding to new category. 

Many deals sites have pivoted to pure play ecommerce or with every passing month ecommerce services move to a new product category. To use same catalog or database structure is the simplest thing to do, but in order to really conquer every new category or verticals, some focused effort is required.

There is a huge difference between selling a travel coupon and selling a complete travel package. To win in every category some focused effort is required, which typically takes a backseat once launch target dates are set and to meet them the team ends up utilizing the same platform used to sell iPad, Spa coupon or travel package.

 

6. Controllable v/s Non-Controllable Factors.

Their is a weird assumption with few ecommerce companies that product management is limited only to consumer facing aspects – like website or mobile app. Its not, let me explain with an example.

Recently ordered an product from an site, its order id was 20579512UE82852111. First reaction – even morse codes are easy to decipher! Of all the calls received on customer care, 95% are order related queries. Just imagine the situation of consumers trying to communicate an 18 digit order id in variety of Indian accents. Complete chaos! There are bounds to be mistakes in communicating leaving room for multiple mistakes. A simple product management mistake leads to an exponentially higher average handling time per customer at its call center and increased hold time for customers wanting to connect.

Controllable factors like number of transactions, quality of search, payment gateway approvals, cart improvements, etc should be measured in improved efficiency of funnel & micro-funnels (explained further) conversion rates; while uncontrollable factors which are mostly about logistics, customer support, operations, COD operations, repayments/refunds, etc should be measured in amount of time saved.

 

7. Micro-Funnels: 

For every Ecommerce service, the only one determining factor to look at how efficient its transaction process is the conversion funnel ratio. Only few players have actually gone ahead and have started measuring performance of micro funnels in an matrix format per product vertical or category.

A conversion funnel cycle is typically Visitors > Product Pages > Added to Cart > Payment Page > Order Confirmation page.

Micro funnels typically mean building such funnels under each of the following 3-4 criteria –

  • By Traffic source: Natural Traffic, Natural Search, Emailers, Affiliate Marketing, Paid Search, Social Media, etc
  • By On-site properties: Search, Categories, On-site promotion banners, Product Recommendations, etc
  • By Product Categories: Fashion, Electronics, Health, Books, etc

Deep dive in data, 1% improvement at any stage of any funnel – will significantly improve volumes of transactions. Keep constructing micro funnels, they are fun and they are plenty more – by transaction size, payment types, and so on. In addition to dull excel sheet reports that have number of transactions / avg ticket size / gross merchandize value – look at such micro funnels data. If you have $100 to spend, it will tell you where exactly to get $200 returns.

Label your weekly friday reviews as Funnel Fridays!

 

8. Payment Gateways:

Payment Gateways or Logistic services are usually most blamed in this country as hindrances to growth of Ecommerce services. About two years back just before the ecom boom started, I wrote a note about – “How Reserve Bank of India can facilitate ecommerce and online transactions in India“. Not much has changed, and Cash on Delivery became the default payment mechanism.

Order rejection rates on transactions processed through payment gateways successfully are < 5%, in most of the cases only if incorrect product is shipped or there is a physical damage. If 100 orders are shipped, 50 are pre-paid transactions and other 50 are COD, on an average between 20-25 will be returned. The operational cost involved in managing COD orders will be close to 2X of pre-paid transactions, dissatisfied customers not accounted for.

Product Managers, make payment gateways work. There may be no science to this – but work with multiple payment gateways. Alternate the transaction flow between them and figure out the best time, best payment gateway from time to time. When payment gateway transaction fails, then offer Cash on Delivery or payments by Cheque.

Take clues – Number of transactions for online recharge services for prepaid mobile services are on increase; they allow users to only pay electronically through either credit cards or net-banking. Then why not for Ecommerce services? This is the same mobile subscriber base living in missed-call economy and maintaining average balance of less than INR 100.

 

9. Cash on Delivery and Logistics:

Since the last point discussed on Cash on Delivery, this comes next.

A strange equation about COD is, if an additional convenience charge between 25 to 30 INR if levied on all transactions below the avg ticket size of Ecom service, their entire cost of COD operations tends to break-even (Try this with historic order data, the number will be close). Maybe Cash on Delivery should be the last attempt to acquire a customer instead of first motivation to transact. But this does may not happen in real world, so COD is the biggest USP of this business now.

For any post-paid order (read COD) that is delivered within 48 hours of order, rejection rate is less than 10%. COD order delivered after 7 days of transaction, rejection rates might be as high as 70%. Product Managers need to find out smart ways to make this complete process efficient to ensure 90% of deliveries within 72 hours, this includes –

  • Maintaining dual address (work / residence) of users to ensure prompt delivery.
  • Call / SMS / Email notification before delivery to ensure user keeps the said amount ready.
  • Maintain performance of COD acceptance or rejection rates by users / pin codes / and logistic partner; shuffle logistic partners by performance for every delivery location. Some logistic partner will always deliver better than other for every pin-code. Find them and route more deliveries to them.
  • Extend this to pre-paid orders as well.
  • Work closely on technology with logistic partners that ensures quick reverse logistics, which is the biggest challenge in operations and also nightmare for customers.

 

10. Track Performance of every Property owned:

Heard of an website called – milliondollarhomepage.com? Have similar approach about every pixel on homepage.

Go insane about about deriving value of every homepage property (search, banners, browse, featured products, etc) similarly as retail outlets do about shelves – sale per shelf. Once every homepage property is labelled similarly, figure out its value based on transactions/revenue generated per day, get the average value of sale generated per property on homepage. More microfunnels to manage for homepage.

Shuffle between product categories, price range, images, product offer text, etc for every property. Understand distribution of transactions by every property, gather such information in logs, mine data and productize this marketing strategy – strive for efficiency.

 

11. Affiliate Marketing. Show Respect and build this Channel.

There are only few categories that have a lower acquisition costs, but with the amount of competition coming up in every horizontal / vertical segment – this is bound to increase with time. The average customer acquisition costs for any Ecommerce website in India today varies between 400 INR to 1200 INR, one company acquires customers at 2000 INR to sell them – pen drives worth 399 INR.

In between all this, there are few really effective business channels like affiliates, price comparison portals and so on who really work hard and acquire customers by sending qualified shoppers. Most of them have extremely poor affiliate commission structures which are typically between 100 to 250 INR, much lower than cost of acquisitions on paid search or display advertising. Show respect, they are acquiring customers at a cost that is usually less than half of the site average.

Nurture this channel and make them available with a series of affiliate tools similar to the Amazon Affiliate program. This channel is currently under-developed / un-explored, any ecommerce service providing better affiliates product and awesome commission structure can actually take a big leap ahead!

 

12. Email Marketing

I had once tweeted this – ‘Buying from you is not my consent to SMS/Email spam’ mentioning few brands I admire. Later Hursh (Cleartrip) wrote an interesting piece about it later on their blog – ‘Why we don’t spam our customers.

Email Marketing has a diminishing value proportionate to the rate of emails per user per month. Though an important channel for traffic/transactions; if abused, at a certain period of time the cost involved in sending a mail to million subscribers will be much larger than the revenue earned from the email campaign itself.

Product Managers need to put in rules in place to ensure that the marketing activity remains contextual to users interaction on the site and also user is sent the emailer at a certain time where buying intent by user still holds true. Ensure adequate gaps (of about 30 to 45 days) between two marketing emails if sent to same user. Consumers behave much like us, will they really buy watches or sunglasses on a daily basis? Find a context!

 

13. Product Recommendations

Unlike what many think, the amazing product recommendations of amazon cannot be build overnight with correct context. It requires tons of data which can be only generated post millions of transactions, product views, buying patterns and an platform that really enables up-selling of products.

There are different aspects of an Amazon Product page – which can be observed on any one of its product page. The experience is so delivered that it brings multiple benefits to Amazon – highly content rich pages that affects search engine traffic positively (as mentioned in point earlier, productize the SEO content), Promotions available at that time, Up-selling related products,  customer actions, product details, description, related purchases, customer reviews and related products.

Enough to satisfy consumer of all his questions, alternatives and options. All packaged beautifully with appropriate content on a page with multiple opportunities to up-sell or cross-sell. Ain’t that good? See how far it seems to go. Love data, insights and bring it to users, don’t be satisfied with plain jane product pages.

 

14. Behavioral Data Trends and creating Marketable Insights.

This completely comes from the stuff we build at my previous stint with Ohana Media – capabilities to track every user interaction, generate tons of data and segment that into trends and actionable data. (They call it bigdata these days).

A brief explanation of the same is on this presentation – Audience Clusters & Intent Analytics and also another deck that Shameek presented at Adtech 2012 on Online Marketing Success Strategies for Ecommerce companies.

While at Ohana, we had pitched this platform to one Founder & CEO of an funded Ecommerce company. Answer – “Not sure if this stuff works.” Result, we went ahead and signed an exclusive non-compete deal with their competitor and today their cost of acquisition has reduced by more than 50% in less than 12 months. Another Ecommerce founding team we proposed replied, “Cannot use this product. Data collected by this platform resides on the same server as our competitor.” That stumbled us, don’t 1000s of Ecommerce sites run on Amazon instances (every customer had his data stored in private cloud). Having a product person driven by data & analytics is essential in every founding team or should be one of the first people to hire in senior management.

Discover cross-channel marketing efficiency like –

  • Natural search keywords converting are automatically bid for on paid search.
  • Automatically decrease bids when competition stops bidding or lowers their bids.
  • Email intent data is used to remarket category banners on-site
  • Search to Display remarketing
  • Onsite customization based on users previous intents.
  • This list could be endless…

Respect data and figure out capabilities to increase its efficiency across medium. Same users reaches you through multiple doors – Search, Paid Search, Social Media, Display, Emails etc. Unless you are able to gather his intent-cycle over a period, it will be impossible to have efficiency in marketing. Every 1% increment on top of funnel conversion may lead to 2X at its bottom.

Full Disclosure: I led product & marketing for Ohana Media in my earlier role. Its founder Shameek Chakravarty is on Board of Advisor of my startup. Both presentations linked are in public domain.

 

15. Team Structure

Since last point touched based on the people aspect, want to extend it bit beyond the purview of direct product management. While one big mistake could be not having a product focused person in founding team or in the senior management team – other simply is how teams are structured within an organization.

Have noticed that in multiple organizations, the User Experience, Product Team, Technology and Online Marketing teams working in silos heading in different directions. It will be subjective to mention what is a right structure and there is no thumb rule to decide that – one common criteria should be love for data, numbers, & micro funnels. Stitch it all together and build an rocking platform.

This pointer is a filler, 15 is a round number. Nevertheless, message is important.

 

Concluding Notes – 

There are couple of posts I wrote earlier which might be also in line for Ecommerce services –

Signing off. Oh yes – a $75+ Mn valued company is still running a Facebook advt since its day of launch (about 2 years back) promising a Blackberry for INR 1999. Its CPC must be 8-12 INR and I have clicked on it innumerable times trying to find out that phone. Online marketing inefficiencies? – maybe will reserve that for another post. This one is already too long.

Going back, product / platform is the core differentiation for every Ecommerce service. Love data and believe in numbers. Every aspect of ecommerce business can be divided into two aspects – controllable (managed internally) and uncontrollable (managed externally like logistics, operations, etc); measure efficiency of everything that is online with improvements in micro funnel conversions and everything that is offline with improvements in time.

Want more inspirations – for online look west (at Amazon); for offline look east (at Taobao).

Junglee and how it impacts Indian Ecommerce

Junglee has once again got us to debate on our current favorite topic – Ecommerce. Many of us doubting that if current Ecommerce models did it right because Amazon chose an completely diagonal approach to enter Indian market with Junglee.com.

Facts first – Junglee.com has not invented product discovery and price comparison. Pricegrabber.com is one of the best products in this space for US. Shopping.com is owned by Ebay, and many other players in India as well.

There are already lot of posts talking about how Junglee has got it right and it will be the door or gateway to drive traffic and enable transactions on Indian Ecommerce sites. Well that may be true, but honestly I find this really weird, just because Junglee is backed by Amazon – does not mean it will be success or that it is the correct approach. Herd mentality thinking! I guess it is too early, driven by speculation without valid reasoning.

Google Buzz went wrong; Google+ is a disaster; Google Search plus your world is a messed up product. Facebook withdrew from daily deals, Twitter launched activity tab (silently withdrew that in new roll-out) or Netflix tried Qwikster. Point is – big companies make big mistakes.

On the other hand – Amazon has a thing of entering market at very early stage by introducing new products/verticals like AWS, eBooks, Kindle or making an very thoughtful late entry like Kindle Fire (Tablet) or by acquiring category creator or owners like Audible, Diapers or Zappos.

 

Here are some points I would want to specifically highlight about Junglee –

Competition –

  • Junglee is not competing against Flipkart or Letsbuy or any other Ecommerce player in this market at this stage. Product discovery & product transactions are distinctly different verticals., but what Junglee is attempt affects these players.
  • Junglee is not competing even against Google. With 1.2 crore products, it means Junglee will contribute more pages to Google’s search index than any other Ecommerce site in India. Most consumers will discover Junglee through Google.
  • Amazon.com has unmatched resources/experience in Search Engine (paid & natural) expertise; it clearly highlights it as one of the reasons for partners to list on Junglee. (Read point 3 here: http://services.amazon.in/services/product-ads/how-it-works/#/services/product-ads/faq/)

 

How Junglee might change the rules through discovery –

Ecommerce services have limited options of online marketing – Direct Traffic, SEO, SEM, Display Advts, Affiliate Marketing, Email & Social Media. (The funded ones get to do – TV, Radio & Outdoors). Compared to the cost associated with other formats of marketing – SEO guarantees long term and sustainable traffic acquisition mode. Overall high cost of acquisition in other formats of marketing is leveled down only through Direct traffic or SEO. Yes, Social is free but cost of acquisition is still a big proportion as users are acquired through discounting coupons.

Taking previous point ahead, SEO is pure content play and Amazon is master at that. With 1.2 crore products – Junglee will add approximately 3Mn+ pages to Google index, index size is typically 3X-4X for factors like review pages/ recommendations pages / category pages and so on. Due to this sheer size of index and high quality content placement, Junglee will quickly start rising in its natural search rankings. This will affect both – partners who has listed on Junglee and others like Flipkart who have chosen not to.

Here is why –

All products listed on Junglee (or any Ecommerce site) can be classified as two

  • Standardized catalog products (Books, Digital Cameras, Laptops, DVDs, etc)
  • Non standard products (Jewellery, Toys, Clothing, etc)
  • For standardized product like say this Canon Digital Camera – the content includes product description which is standard on every site; but will be enhanced on Junglee with recommendations, reviews and more.
  • For non-standard products like this Mayur Pendant Sapphire offered by CaratLane, despite content being exactly the same, even without reviews or recommendations – Junglee will quickly be listed above CaratLane for multiple factors, key being vastness of catalog for Pendants & Jewellery.

And this is one of the key reasons why natural search traffic on both websites listed or not listed with Junglee will be affected big time. Over time, a high proportion of natural search traffic will be taken by Junglee and will be distributed by it.

This also provides a very large opportunity for small players (including unfunded) or offline retailers (who are lost at times on online marketing) to acquire qualified users.

For those who have not listed, it makes some perfect sense to get their products listed on Junglee as they will witness a gradual decline in natural search traffic. And to get traffic & acquire those customers from Junglee – they will require to be competitive on pricing.

 

Product listings are Free.

Really? and you believed that.

Amazon is selling Kindle Fire below its cost, because it is confident that it will recover revenues of the device through content consumption. If you are thinking that Amazon will not make anything out of Junglee.com – you are wrong. When it comes to churning out online user behavior data and consumption patterns, no other Ecommerce service can do it better than Amazon.

Junglee has the entire product catalog required for Ecommerce. Soon Amazon will have all the insights it wants to know about Indian consumers – Products consumer are searching for, Product-Price ratios or even Demand / Supply for all products categories.

 

Challenges for Junglee –

A product discovery catalog with 1.2 Crore products is not easy thing and Amazon is doing this more efficiently than anyone else with its own core product – amazon.com. Challenges for updating inventory, prices, reviews or recommendations exist, but are not big for Amazon. Junglee can really force upon real-time price and inventory updates to its partners and get them to standardize it.

What would be more interesting is Amazon could localize the product – showcasing partners who can ship in least amount of time to say – Panaji or Kolhapur; deep integrate with offline retailers and help making purchase decisions – like a Apple iPad 2 is available now in Croma (2 Kms away from your location) at Rs.500 discount than buying at an online store.

From what I know – Croma maintains a list of products available for sale in every store on its central inventory management (I was once asked to visit another Croma store to pick up an mobile phone, the staff kept the last piece off shelf). Currently Junglee.com is a minimum viable product, but can Amazon get to this?

 

Where does this all lead to for Amazon – 

Two options ahead for Amazon –

  • Amazon Market Place
    If Amazon is keen – this can happen tomorrow. Junglee has the product catalog, simply enable an payment gateway and instead of redirecting traffic to partner sites, start sending customer transaction orders which its partners can fulfill.
  • Amazon Store
    Keep it slow, learn more about users / markets. And when the time is right launch a full fledge Ecommerce service.

And its very likely that Amazon will take the route two. Feel like investing in Amazon now? Ouch.

What problems are the Mobile Payment Services trying to solve?

When I heard of Twitter founder Jack Dorsey’s announcement of mobile payment startup – Square, I loved the simplicity of the service. Few months Jack Dorsey tweeted that Square is processing transactions worth $1Mn per day – that is a cool revenue run rate of $10Mn per year for a two year startup (Square charges 2.75% charge per transaction when paid through credit card)

With very little knowledge of how offline transactions work in US, but it is definitely a card driven economy. Coming to Indian scenario – unsure if any Mobile Payment Services company in India will declare the value of transactions it processes per day. For a country like India, although the opportunity for mobile commerce looks huge – unable to relate if existing mobile payment services are trying to solve any consumer problem.

Back in 2006, when penetration of mobile phones in India was growing at an exponential pace – with falling talk times, it was predicted that India will be one of the largest telecom markets in the world. Well, that has surely come true. In internet world – there was another wave of prediction. Analysts & Enthusiasts found another buzz world – mCommerce which was supposed to be a multi-billion dollar industry by 2010.

With time, the definition of Mobile Commerce is itself a cliche’d.

  • Is it mobile commerce when a consumer books a airline ticket online, gets a confirmation and PNR number on to his mobile number . Displays the PNR ar airport counter and gets ticket?
  • Is it mobile banking when consumer receives confirmation of debit/credit transaction on his mobile
  • Or is it when the discovery, intent & transaction for a product/service starts and ends on mobile phone?

The definition is now debatable – but with mobile communication included, online transactions and services have scored a big mile.

The proposition of Mobile Payment Systems is (or was) very simple:

  • Offline Merchants – Allow consumers to walk-in to any shop with his mobile phone, buy stuff and make payments
  • Online Merchants – Tie-Up with multiple online eCommerce/Travel portals – allow them to purchase products through their payment service
  • Own Marketplaces – Create own marketplace on mobile that combine eCommerce, travel, utility services etc and enable payments for such transactions through their own system

Honestly, this would have sounded amazing to everyone back then. Undoubtedly very huge potential – Offline retail transactions are worth billions of dollars everyday, Online Merchants wanting to reach out to very high percentage of consumers who have not come online due to lack of internet connectivity and mobile device seemed very logical, & of course with own marketplace strategy they too wanted to own a sizable chunk of users/revenue and be a destination for commerce.

The mobile boom did happen. It is very difficult to find someone these days without a mobile phone. But then why is it so rare that we don’t get to find people using mobile payment services as it was predicted earlier.

Trying to analyze why did this zillion dollar plan on paper did not translate to even millions of dollars in reality. Here are few thoughts, there may be many other reasons as well that contributed to this –

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Limited size of Market –
With 95% mobile subscription in country on prepaid, and average ARPU of less than 200 INR (& steadily declining with time) – mobile payments or transactions is definitely the last thing on such user’s mind. Addressable market for this service is considerably very small and will be a subset of eCommerce market.

Active Credit Cards in India are declining –
According to recent numbers published in this TOI report – number of active credit users in India has tumbled down from 20.7 Million (in March 2008) to 10.8 Million (in November 2010).

eCommerce Services discovered Cash on Delivery –
India is a cash driven economy and most eCommerce services have realized this by today. COD accounts for anywhere between 30% to 60% of transaction for players who have enabled it. IVR payment mechanism also has widespread acceptance for ordering directly through call center.

Banks play their own Game –
In fact they already have started playing their own game. Banks are launching their own mobile banking applications and promoting it aggressively. That leaves mobile payment services out of their own play-field.

The 3G Magic may not happen –
The 3G magic shall happen to other services, but in my opinion nothing dramatic will happen for mobile payment services companies. There is simply no connection between acceptance of 3G by consumers and why ‘new consumers’ will subscribe to credit cards or link up their bank accounts to a mobile payment service company. They will fight for existing consumers between competition and the banks.

Radical shift to app-economy –
Smart Mobiles & Tablets devices are making a huge difference to the way consumers are accessing services on handheld or portable computing devices. With advent of app-stores and in-app payment systems – the mobile ecosystem has grown more radically than any of these players would have thought about.

Money was always Mobile –
If the pain point that mobile payment systems were (or are) trying to solve was allowing consumers to do transactions wherever & whenever they want – then this consumer pain never existed. Money in whatever format – cash or card was always mobile.

 
I see and hear of Mobile Payment systems usage in India only in the context on prepaid recharges & utility bill payments. But that was not what they aimed for, correct?

To sum up the article –

  • Money was always mobile; the consumer pain point mobile service providers were trying to solve never existed!
  • These businesses were way ahead of time; and in most scenarios got investments before validation.
  • mCommerce model evolved differently and in a way that kept such players outside the ecosystem.
  • mCommerce will evolve along with eCommerce; will go hand in hand – but definitely not before.

In my opinion this vertical is classic case of ‘ahead of time’, ‘investment without validation’, and ‘dynamic changing ecosystem’. Lesson for entrepreneurs and investment managers – make sure your companies are a part of “validated ecosystem” and solves a “valid consumer pain.”

 

Why Foursquare is better for Local Businesses than Groupon

While Groupon has redefined local business and is in news for its fastest billion dollar revenue + its $700 Mn IPO, from a long term perspective I think Foursquare is a far better bet than Groupon.

Some of the many criticisms of Groupon

  • Socially unconnected users
  • Concerns on validity of Business Model, just 3 years and now a IPO
  • Merchant side issues – 75% discount on products
  • Not much metrics available for merchants, no user contact information
  • Are new consumers acquired or are they deal seekers only
  • No technology barrier, 100s of Groupon clones have hit across the Globe
  • Though not many players are as large as Groupon, LivingSocial; Merchants have a choice
  • Intensive feet on street business with huge sales force.
  • Groupon Now – merchants are able to create own deals through Groupon

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Take case of Foursquare – they could possibly over throw Groupon.

My contention is that any platform and service that can empower merchants to run business and acquire consumers (new/repeat) will be able to overthrow Groupon in long run. While Groupon clearly demonstrates that local deals work, Foursquare has the technology & product to take it to the next level and give a tough competition to Groupon where it hurts most – at supply side (Merchants or Local Business Owners).

The biggest ‘cry’ we hear against Groupon is merchants complaining – its only the existing customers who use Groupon coupons for deals, and new consumers are not acquired/retained.

On the other hand, Foursquare –

  • As a product, consumers checkin at all locations and businesses (small, local & large)
  • Foursquare need to move beyond check-ins for two reasons
    > In sometime real consumers (not technology savvy early adopters) will not find value in badges & points.
    > Foursquare will need to have a monetization model that works!

Foursquare has valuable insights about users for the merchants – people who have checked in. They just need to quickly enable self-serve platform for business owners with a global sales footprint.

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Foursquare can just topple off Groupon and with its solution for merchants that covers every pain they have with Daily Deals services like Groupon, Living Social and 1000 others only for one reason – Business owners know who are new/repeat customers

  • They can enable deals for individually and for specific type of customers
    > Consumers who check-in for first time
    > Repeat & Regular customers
    > Consumers who have not checked-in since last 30 days
  • Decide what deal goes live when based on user interest, inventory available, and so on

More than that, they can –

  • Decide how much discount they should offer. To whom.
  • Take private feedbacks from customers on service
  • Push deals to customers on special occasions like birthdays & more
  • Pass on details about business Facebook & Twitter presence to customers – so that they can stay connected.
  • Analytics – who checks in, cost of acquisition of new customers, competition overview in same location

And most importantly – Foursquare should give ability to businesses to generate coupons, pass on to consumers in vicinity or existing customers which users can redeem immediately.

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In short – daily deals websites exploits local merchants. Foursquare can empower them!

The pitfall – Foursquare does not have a global sales footprint to enable this. Though technology savvy merchants back in US might adopt it, the business would scale when 1000s of merchants across the world are able to enable it. But again, thanks to the 8 Mn+ users – Foursquare already knows which businesses are popular and when they should start.

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If I had a million dollars and choice to invest in Groupon or Foursquare – i would surely bet on Foursquare!

My Prediction – Groupon or some player who has intention to venture big in local deals space will eventually acquire Foursquare or a majority stake.

Daily Deal Aggregators – what is your business model?

Deal Aggregators – what is your business model?
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Movie 300 – One of the most inspiring scenes, when King Leonidas asks his army – Spartans, what is your profession?
watch it here – http://bit.ly/4csyEj
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Post the series of daily deal sites that have come up in India (or across the world) – there are many deal aggregation services that have been launched. There are on going debates – is there a business model for deal aggregation services?
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While daily deals and coupon services are growing in India and else where – many users/customers of daily deals services as well as critiques of this business models have complained that people usually end up buying things that they do not want or would not have purchased otherwise. Which is little illogical because you buy it for the deep discount – and you buy it by your choice.
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My example – I am a regular eCommerce transactor – at least 10-12 product/books (non-travel) transactions per year. However I am yet to buy a deal/coupon as most services are offering deals that are not relevant to me or not close to my location. As a consumer, here is my take – I will not be interested in a coupon that gives me Rs 200 off at a restaurant in Andheri (Mumbai). The economics does not work for me, total travel time of 4 hours, commuting cost between Rs. 100 to 500 depending on mode of travel and accessibility of the service provider.
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There are two primary needs of consumers in this space that are not yet solved completely:
– Relevance of the Deals
– Location of the Deal
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While this is the problem that most daily deals and coupon services are themselves trying to address – the aggregators can do a better job at this for following reasons:
  • Most deal sites are limited to anywhere between 1 to 5 deals at any given time. That limits their reach to about 5-10 suburbs in a city like Mumbai (Mumbai + Navi Mumbai + Thane) or Delhi (Delhi + Gurgaon + Noida)
  • A deal aggregator can get such 5 deals from 5 different websites – and will have 25 deals to showcase and in most cases the span of reach will be wider – about 20-30 suburbs (which covers 40-50% of Mumbai)
The above statement is very logical, however deal aggregators now have to think beyond just aggregation and focus on distribution of such deals to relevant audience – relevancy by deals and location. At least in India, it may not be the daily deal websites that can take this business hyper-local but definitely the deal aggregators can if they wish to.
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If deal websites are focusing on – Deals in Mumbai; aggregators should focus on Deals in Andheri, Bandra, Chembur, Colaba, Ghatkopar and more!
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My two cents – Business model for Deal Aggregators should not be aggregation of deals. That is a simple job and that is minimum expected out of them. Your business model should be Distribution – distribution of deals, thats where they start testing their capabilities and adding value to the ecosystem!

Social Commerce is Simple

Social Commerce is Simple. Here is how you solve it in 24 hours!

The Context of this post: Have been hearing & participating in some awesome conversations lately about Social Commerce. Someone explained me this – Transactional eCommerce is Big. Social media is where all users are today, it is already very Big.

So, Social + eCommerce = Social Commerce = Very very big!

Hence there is lot of interest today in products and platforms that are trying to bridge the gap. Analysts are predicting that its the next big thing and stating it is reaching its inflection point.

Completely agree with all that. But Social Commerce is simple, here is how you solve it.

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Oooops, btw did I tell you that more than $50 Million has been invested till date to solve this Social Commerce problem that merchants can do it themselves in less than 24 hours!

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The following text is not included in above presentation.

Some key insights for players in Social Commerce:

Existing ecosystem of eCommerce and Social Media is sufficient for building a Social Commerce without intermediation of players who do not add any value.

It will be difficult for a:

  • Existing social player to exploit potential of social commerce by introducing a new ecommerce service
    (Facebook or Twitter trying to build a Amazon)
  • Existing ecommerce player to exploit potential of social commerce by introducing a new social service.
    (Amazon trying to build a Facebook or Twitter)

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Most current players who are trying to build solutions are concentrating on building their own ecosystem of users & products – which is not impossible but extremely challenging. Reason being – such players do not own the products or the users (users that have more tight social connections as on Facebook & Twitter)

Unless a third situation happens – someone builds a valuable middle layer that provides affinity to both – social & commerce. As an platform in this case you need to provide enough value to users (either users from Social Media or users from eCommerce).

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One such promising player is FourSquare. They add a new value of – “checking in” to its users that are socially connected. Their current efforts are concentrated on getting these Social Connections to checkin to venues – which is demonstrated by its 6Mn+ users.

For purpose of this presentation I have kept other Social Models out –

  • Foursquare: Because its reach is still 1% compared to Facebook’s 600 Million users.
  • Groupon: It is a commerce player, but not social player. Groupon is not user engagement – view Fred Wilson’s comments here: http://t.co/p78buu0

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Drop me a mail, Available for Coffee and endless Product Management Conversations on weekends :-)

Predictions – Biggest Exits in Indian Internet Space in coming years

There would be multiple Consolidations, Mergers, Change of Strategies by lot of VC-invested companies by 2015.
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Product based eCommerce companies:
Lot of interest seen in recent times by VCs. LetsBuy, Snapdeal, FashionAndYou, Flipkart, and so on, Infibeam as well (though still not part of any portfolio yet). Future of eCommerce companies will depend completely on two factors:

– Internet penetration in India > 200 Mn by that time
– Improvement in eCommerce transactions (Infrastructure + User Comfort)

The rate at which investments are made are much higher than rate of growth of both the factors mentioned above – which in a way may be good – as all invested companies will act as catalyst in growth and get new set consumers on-board.

If we see an IPO exit for atleast one of product based eCommerce companies that will be awesome;  One or Two VCs in India (without naming any here) have been actively investing in eCommerce space. There may be a very high possibility that they may merge two or more portfolio companies to form an large entity, which may be just a good acquisition target for Amazon or an IPO exit.
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Group Buying companies:
Was surprised (like many others?) with GroupOn‘s decision of acquiring SoSasta. There are established players in Group Buying space, I’m sure GroupOn has seen some merit and synergies. For existing leading players like SnapDeal, Deals and You and Taggle – they will continue to grow and have to.

Possible exit for them will be Google (since they are starting with Google Offers) or an acquisition by eBay; or maybe GroupOn India may now want to expand presence with one more acquisition. Not to forget that LivingSocial will also come knocking. Now that eBay has ventured into Group Buying space – it has much higher accountability as deals are now served by eBay and not marketplace. eBay India may acquire someone if they decide to have an experienced them to execute this business vertical.

Expect one very large player to enter Group Buying space in next 1-2 months, if well executed – in all probability it may give tough challenge to current market leaders.

Unfortunately many small players will hit the dead pool (few of them have already) due to execution challenges, expansion costs, and lack of operating revenues to keep going as the model is very easy to replicate, but not easy to scale with thin-margins and high acquisition cost.
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Online Travel Companies:
Clear IPOs for Yatra & Cleartrip. Will be great exit for all invested players. GoIbibo and ezeego1 are also leading players in travel domain – Goibibo’s exit may depend on ibibo’s overall plans, ezeego1 may raise capital through markets directly bypassing VC route.

Redbus is promising, they are very high on number of transactions – ticket size may be lower compared to Airline tickets, but % margins will be definitely higher. In all probabilities – Redbus may too hit an IPO or will be an acquisition target for Yatra or Cleartrip (listed travel companies by then as MakeMyTrip has acquired Ticketvala)

I hope someone in Indian Government thinks of the opportunity of listing IRCTC on stock markets.
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Ticketing eCommerce:
BookMyShow will expand to more geographies – they have presence in Malaysia & New Zealand. To get to more such markets, they will require more capital – further investment and definite IPO candidate. Reliance ADAG is trying to make it big in entertainment through BIG – they might knock doors.
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Technology Companies:
Pubmatic (industry’s first yield optimization player) may get acquired in few years. It faces good competition from AdMeld & Rubicon Project, however none of these yield companies are focusing on small publishers (the long tail) which may be the key to larger success.

iYogi by all speculation is IPO bound. Slideshare is leading in its segment and may be a great exit story. Fusion Charts is another one that may be acquired for technology and customers; and so is Martjack.
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Advertising Networks:
Existing players – Tyroo, Komli, Ozone Media, AdMagnet and others. Do not forecast a immediate exit for these players – the number of players in this segment has been same for long time (no new entrants) – and otherwise too existing players seem to looking outside of India, are they hinting saturation of market? The frequency of acquisitions of pure advt-networks has decreased outside India (no big news in so many months?).

There is no distinct advantage over each other and offerings (if Vizisense is treated as product outside of Advt-Network). Would have been great to see an situation like AdMax Network (owns up majority market share in countries they operate – very tough competition to Google as they have leveraged on local language audience which is majority).

Google has played a flattener by opening up its unlimited inventory on Doubleclick exchange through Google Certified AdNetworks program. Post which the publisher development story may have taken some hit, but wondering why have not the Indian Advt Networks integrated on Google’s Doubleclick exchange yet – expand you publisher network!

InMobi which is now the largest mobile advt network (outside of Google/AdMob) – maybe one of the biggest exits through Nasdaq IPO. There is no immediate need for Google to buy another mobile advt network – that leaves IPO as only logical exit unless AOL, Yahoo or Microsoft realize that they haven’t looked at the mobile monetization business seriously.
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Matrimony Portals:
BharatMatrimony (Consim Group) would be going for IPO in coming times. Not aware of any investors in Shaadi.com (although there are in Mauj & Fropper), if business is profitable and there are no investor pressures – unlikely to see an IPO from them (at least before BharatMatrimony).

Read somewhere that Jeevansathi has abandoned markets in South India (not sure of this), however its already a part of listed InfoEdge group, spin-off very unlikely as numbers are reported as part of InfoEdge.
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No Clear Exits:
SMS GupShup, Guruji, mCommerce companies (PayMate, mChek and others) are few companies I am not convinced of having an clear exit strategy. (Someone do throw light on this)
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Promising Startups:
The next wave of promising startups in India will be product-driven companies. Although the eco-system to fast acceptance of technology products is not so strong right now – it will be in coming years. Emergence of interesting start-ups like Practo, Zaakpay, Grexit, emo2, Workasaur are first steps in that direction.
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Hoping to see many success in next 5 years! Best Wishes

This opinion was posted originally as an answer on Quora at: http://www.quora.com/Which-Indian-internet-company-will-have-the-biggest-exit-by-2015