Growth of e commerce report

Conceptual Framework for this project

The approach that is taken for the project is purely based on case study
approach where in the organization is sliced into several aspects of the life
cycle.

From the conceptualisation to the realisation is been addressed in the project.
Also, there are several entities amongst the ecommerce domain which has been
also highlighted which swept the domain completely.

The slicing of the picked up organization is purely on the basis of steps towards
each strategies, anomalies, key dominant players, customer centricity and
various other topics have been shared with inputs from the team itself.

Growth of e-Commerce in India (An insight in the life of one of the key entrant)

Preface

This document will be useful in understanding the overall impact, the Internet
has on our lives. Be it online shopping, movie ticket booking, and railway
tickets, auctioning your old stuffs, exposure of small and medium business over
the internet.

With the growing enterprises around the world, one of the strategies is to
define its own space in the consumer mind and with the ever increasing
Internet spread on the globe; the milestone is an achievable and sustainable.

And with the same view, I have personally aligned myself in providing this
approach of slicing one of the leading retail giant which has its presence in an
online domain. Future Bazaar India Limited is an online e-tailer which has its
prominent position in the online segment.

Project for the 3rd Year MFM 2009-2012 Page 2


Growth of e-commerce in India
(An insight in the life of one of the key entrant)



Table of Contents

Sr. No Title Pg. No.
1 An Introduction (www.futurebazaar.com ) 6
1.1 What is e-Commerce 7
1.2 Scope of e-Commerce 8
1.3 Personal space in the Consumer’s mind 9

2 Growth of e-commerce 10
2.1 Insight on the various e-commerce companies since 1999 11
2.2 Investment in India 12

3 Business model, Strategy & Cost 14
3.1 Success Criteria Factors 14
3.2 Change in Model from time to time 16

4 Benefits & Cost 17
4.1 Strategic Benefits 16
4.2 Operational Benefits 18
4.3 Implementation Costs 19
4.4 Profit & cost centre 20
4.5 Business-Revenue models 21
4.6 Cost Challenge 22
4.7 Financial Benefits 24
4.7 NON Financial Benefits 24

5 Hindrances and the Leap 25
5.1 The Recession 25
5.2 Pre-conceived mindset and notions 25
5.3 Platform Change 26

6 Analytics and Search Engine Optimization (SEO) 27
6.1 Trends and patterns 28
6.2 Conversion rates 31
6.3 Traffic source 32
6.4 Visitors 32

7 Promotions and Campaigns (ATL & BTL) 34
7.1 Role of marketing 35
7.2 Past-Present-Future 36
7.3 Current promotional activities 41



8 Role of SCM & CRM 42
8.1 Warehouse Management System 43
8.2 Customer Relationship Management 45
8.3 Diseconomy of a Sale 46
8.4 The problem (Deduce from Mckincey report) 47

9 Facilitators of e-commerce in India 51
9.1 Online business associates (Payment Gateway) 51
9.2 Loyalty and rewards 52

10 Opportunities & Convergence 55

11 Future of e-commerce in India 56

12 Bibliography 57



1.0 An Introduction (www.futurebazaar.com )

In India, online services like ticketing, banking, tax payment, bill payment,
hotel room booking, entertainment, online games, matrimonial sites, job sites,
etc. are showing signs of development in business-to-customer transactions.

There has been tremendous boost in the online business with the stock
exchange coming online. Online valentine gifts and Diwali gifts are also
becoming popular along with the birthday cakes. No doubt, the total value of
the B2B transactions is much larger than that of the B2C transactions, because
typically B2B transactions are of much greater value than B2C transactions.

It seems that the B2C market in India has come to a stage where it will take over
the old fashioned thought of online transactions.

For Example, MakeMyTrip.com has shown Rs 1000 crores of turnover. Travel
alone constituted 50% of Rs 4800 crore online market in 2007-08.

FutureBazaar provides an integrated shopping site where consumers are able to
buy products from the flagship stores including eZone, Pantaloons and Big
Bazaar online and get home delivery of products.

FutureBazaar.com is the e-commerce arm of the Future Group. It delivers across
more than 1500 cities and towns in India covering 16,000 pin codes.
FutureBazaar carries genuine products and offers manufacturer's warranty (as
opposed to Seller's warranty) which most other sites offer.

FutureBazaar offers products where the complete supply chain is managed by
Future Group entities unlike other sites that are marketplaces.

By the virtue of being a part of Future Group, FutureBazaar is able to offer a
wide range of genuine products at very competitive prices, confidence of
buying from a trusted source and the convenience of returning in our physical
stores.



1.1 What is e-Commerce

In a layman’s language; purchasing products on the Internet is called e-
commerce. It is an act of having a commercial activity over an electronic
medium.

The transactions that happen on the medium can be B2B or B2C and currently
there are many players who are in the league of capturing the market segments.

In simple words, Electronic commerce involves buying and selling of goods and
services over the World Wide Web. Customers can purchase anything right
from a car or a cake sitting comfortably in his room and gift it to someone
sitting miles apart just by click of a mouse.

Shipping method is generally used for the delivery of the goods ordered.

Retailers who have gone on the internet are termed or coined as e-Tailers.



1.2 Scope of e-Commerce

Home Internet usage in India grew 19% from April 2006 to April 2007. In April 2007 it
became 30.32 million and the eMarketer accept that there will be 71 million total
Internet users in India by 2011. India is showing tremendous growth in the e-
commerce.

Undoubtedly, with the middle class of 288 million people, online shopping shows
unlimited potential in India.

The real estate costs are touching the sky. The travel portals' share in the online
business contributed to 50% of Rs 4800 crores online market in 2007-08.

The travel portal MakeMyTrip.com has attained Rs 1000 crores of turn over which is
around 20% of total e-commerce market in India. Further an annual growth of 65% has
been anticipated annually in the travel portals alone.

The primary objective of Online Shopping is “convenience” as compared to the
individual shopping at the malls of any offline stores. The user has the liberty to
compare multiple products at one go without having the hassles

Also, specific strategy involved and one of them is assortment and deals. Taking these
2 on the online space drives in the most visitors to the store front

The journey of purchasing the relevant products happens in a matter of minutes and
that too without standing in a queue.



1.3 Personal space in the Consumer’s mind

With the recent study, the customer’s mind is occupied, over an ideal state, around
70% of the time against a Mobile or Television or Kiosk or a Computer (Internet
Medium). Based on this fact, the organizations are targeting all these mediums to
capture and have their share in the consumer’smind.

Have a look at the figure below on the next page which will showcase you the
company’s approach towards the

The emotional benefit stage of the brand ladder implies that the brand is now
projecting an emotional bond with the consumer as the reason to buy.

Brand Laddering, i.e. moving up the brand ladder is the ultimate goal over the life
cycle that every brand follows.

The earlier you are able to establish a strong emotional connect; the better it is
for the brand.



2.0 Growth of e-commerce

“It looked like India is ready to shop online” – flipkart.com

This is the statement which earmarked the entry of books with big bang and
successfully has turned the table since its launch.

There various online retailers like IRCTC, MakeMYTrip.com,
BookMyShow.com, and uread.com have shown significant rise in terms of the
numbers.

The retailing sector in India is 5,00,000 crore and out of which 30,000 crore
comes from modern retail.

With the Internet Entrepreneurship and Venture capital sectors dying in the
early 2000, the modern retail picked up heavily. Shops like Big Bazaar,
Hypercity, Croma, Mobile Store & Shopper’s Stop acquired the form that they
have today.

75% of India’s Internet generation comes under the age of 35 yrs and younger
generation has fewer restrictions on the purchase cycle over the internet.

June 2011, 4.6 million of internet users accessed the coupons from home or
work. Year 2009 was the year of travel and 2011 is the year of non-travel.

And today- Flipkart, Yebhi, Letsbuy, Myntra, FutureBazaar put together
doesn’t even add upto 1500 crores in sales.

So, this is said to be a 2nd coming of e-commerce.

Globally, the largest retailer- Walmart and the largest internet player-
Amazon.com has a net margin of 4 %. It isn’t the money that is important for e-
commerce.



2.1 Insight on the various e-commerce companies since 1999

Summer of 1999 seems to be vividly in the mind of K. Vaitheeswaran, the CEO
of Indiaplaza. Entreprenuers were worse off and many venture funds of that
vintage period.

“There more than 1000 e-commerce businesses in India at that time.” says K.
Vaitheeswaran. ‘dotcom’ had gone from “hip, cool” to “naïve, lamb”.

Hitesh Dhingra, the founder and CEO of letsbuy.com says, “e-commerce” is the
thing. And with the same belief he started his journey in 2009 & today he sells
electronics worth a crore/month. “Quitting his job with Tryoo was the greatest
thing that happened to him” states Mr Dhingra.

www.letsbuy.com has grown 10 times in the last 6 months and expects to do
sales of 25 crore per month with an ambition of doing 2000 CR over the next 3
years.

Fashion and You started in early 2010 as a ‘private shopping club’ by Pearl
Uppal; where a select group of members could take part in ‘flash sales’ and this
could be @ 70 to 80% discounted rate. Every minute today, there are 5
subscribers and by December end, the revenue will be odd 150 crores.

BigshoeBazaar is an online cash and carry wholesaler for hundreds of shoes
across the country and has a warehouse of 25, 000 sq. feet. Within few months
the company will add another 1,00,000 sq. ft. to its existing capacity. This is
purely because of the demand and service the company is experiencing it today,
says Manmohan Agarwala, CEO- BigshoeBazaar.com

Ticket booking as an industry itself comprises of 80% of this 32, 000 crores says,
MakeMyTrip, Cleartrip, IRCTC & Yatra. All these sites have disproved the
hypothesis that India is not ready for E-commerce.

There is a 70% rise in the number of buyers available to make a purchase as
compared to 10 Million users last year.

With the exponential growth in this domain, the expected internet users in the
year 2015 would be 237 million.



2.2 Investment in India

The biggest backer of the India Internet Story is a fund that has no home or
office in India and neither do they have an internet site (web site)

It doesn’t even publish any information on the companies it has invested in nor
does it speak with the press. Its name is “TIGER GLOBAL”.

It is of the many ‘Tiger seed’ or tiger club funds that sprang forth following the
demise of Tiger Management, a legendary fund- hedge by Julian Robertson.

The same was started by Chase Coleman in 2001 in New York.



Presently, the Tiger fund manages over $8 Billion
across various hedge, PE and ventures & capital
funds.

Tiger Global has been one of the most gung-ho
investors in the internet space.

It has invested in Facebook and LinkedIn. In
India too, it has emerged as the largest investor
since 2009 and has invested over $82 Million.

“Tiger’s is a binary play- either they lose
everything or they win. Therefore it doesn’t
matter whether they spent on 15 Million Dollars
at 30 million dollar valuation. Other VCs might
moan” –

says Mohanjit Jolly of DFJ India.

Flipkart.com has received a wopping 700 crores
of investment from General Atlantic Partners

And Snapdeals.com has got an astounding 200
crores of 2nd round of investment from IndoUS
Ventures and Nexus Ventures.



3.0 Business model, Strategy & Cost

Different strategy at different time has created an evolution in the life of Future
Bazaar India Limited. We will touch in depth on the said topic and explore its
unearthed values.

3.1 Success Criteria Factors

Can e-tailing be a profitable business? And if it can, how does it work? These
questions arise looking at the well known examples of e-tailing companies.
Amazon,perhaps the best known brand in e commerce with great revenues has
still failed to show a cash flow positive business. Etoys, one of the biggest pure
play e-tailers, has recently closed their operations when they ran out of cash, the
same with mercata, Boo.com.

The Critical Success Factors for E-tailing E-tailing is all about six critical success
factors that drive the business performance (see Table 1 below). These success
factors may look similar to brick-andmortar retailers but they are significantly
different. Average order size is probably the biggest concern in most of the e-
tail businesses. Due to high cost per order as well as high acquisition cost, it is
essential in e-tail to achieve high average order sizes.



One of the successful criteria for the business to hit the top line was the strategy
that came up with several stakeholders within the team and within the group.

Successful executions of these strategies have made the organization reach the
goal that it had been eyeing since a long time.

The strategies were defined keeping in mind what are the weaknesses,
strengths, threats and opportunities. What came to the team’s mind was there
are multiple “SO” Strategies which will result in driving the 1 Crore number a
day but the major 3 were the hero which could result in significant change in
the sales number.

The above table only talks about few from each quadrant and as a result only
depicts the real heroes of their respective quadrant. So, for example, in the “SO”
strategies; the topmost is the Future Group Store integration which will ensure
the advantage of the real-estate of one over the other which reduces the real-
time inventory cost, estate cost, manpower cost and other in the pipeline



Another significant of the quadrant is ‘One Call Shopping’ in the “ST”
strategies where in the customer will be exposed to a similar experience as they
have on the website of ‘Guest Checkout’- one page checkout.

Let us also consider one more from the list and this is API stack on the platform
for the affiliates and this one is belonging to the “WO” strategy quadrant. This
will ensure the online world is well connected with the external world more
efficiently and seamlessly.

3.2 Change in Model from time to time

Various business models were proposed from time to time and these were
typically around the retail (offline) stores.

Considering the life of this eCommerce organization, it has travelled through
lot of different phases. Be it Product Assortment, Kiosk, Phone Commerce,
Vendor Affiliate, Marketing Channels, Retail Integration, and others.

Few years ago, the direction was completely different and distinct then today.
The team had a vision which was comparatively significant and robust but due
to lack in leadership attributes the organization had suffered its journey.

From time to time, the journey had rough patches across its way. Perhaps, the
most vivid reason as to what went wrong in the whole journey.

Constant change was creating a set back in the arena with low enthusiasm on
the floor. Despite all this, several policy and legacy changes in the recent time
had done wonders to the organization in terms of creating a market place and
customer centric experience for the online shoppers.

Following event in the document also will highlight as to what all worked and
few more as to what made it a place which is tappable.



4.0 Benefits & Cost

eCommerce and eBusiness benefits are difficult to quantify for a particular
situation - we are dealing with relatively new technology with a limited history,
and every situation is different.

eCommerce-eBusiness is closely related to EDI (Electronic Data Interchange)- a
technology that has been in place for around 30 years. The major difference is
that modern Internet-based technology provides the same benefits as EDI - but
at a much lower cost.

Like EDI, implementing eCommerce-eBusiness can provide strategic and
operational benefits.
• Strategic benefits include strengthening relationships with customers
and vendors, resulting in a greater advantage against the competition.
• Operational benefits include reducing both the time and personnel
required to complete business processes, and reducing strain on other
resources.

4.1 Strategic Benefits

Whether eCommerce-eBusiness can provide your business with strategic benefits is
probably best answered by asking yourself the following questions:

• Is the ability to meet customer and vendor demands and requirements a driving
factor in your business, perhaps even more a factor than pricing?
• Is the timing and accuracy of the delivery of goods and services critical to your
customers and vendors?
• Could a significantly faster delivery time to your customers and distributors be
turned into a competitive advantage?
• Will being "eCommerce enabled" allow your firm to penetrate new markets or find
new suppliers?
• Are customer loyalty and long term alliances a high priority for your firm?
• Would eCommerce enabled systems systems favourably affect your payment terms
and agreements with customers and suppliers?

If you answered "Yes" to any one of the above questions, then your company could
probably benefit from eCommerce-eBusiness systems. Future Bazzar has yes for all
the above question.



4.2 Operational Benefits

With an eCommerce-eBusiness system in place, you should save time and money
processing and executing customer orders. Studies of EDI systems show that it takes up
to five times as long to process a purchase order manually as it does electronically. With
eCommerce-eBusiness in place, documents such as invoices are processed electronically
and error-free, minimising processing time and the number of staff required. The
following is a list of key operational areas that can benefit from eBusiness-eCommerce.
(The estimates are based on EDI experience).

Reduced Administration Costs - EDI studies suggest that an automated system saves
2/3 of the costs involved in manually processing a customer order.

Personnel Reduction - A properly enabled eCommerce-eBusiness system will reduce
labour time and cost in the following areas:

• document preparation
• error detection and correction
• reconciliation
• mail preparation
• telephone calling
• data entry
• overtime
• supervision expenses

EDI studies show as much as a 50% reduction in required staff.

Cycle Time Reduction - Cycle Time is the amount of time between a customer placing
and order and receiving the goods. Reducing cycle times can:

• increase competitive advantage
• decrease carrying costs
• decrease shrinkage costs
• improve cash flow.

Studies show EDI is able to reduce order cycle times by 50%.

Inventory Reduction - eCommerce-eBusiness systems can reduce inventory costs
because of:

• more accurate demand forecasts
• reduced cycle time
• more dependable supplier schedules.

To estimate the possible reduction of inventory, multiply the number of days by which
order cycle-time can be reduced by the value of inventory on hand. For example, if you
carried an eight-week supply of finished goods and were able to reduce cycle time by
25% from 30 days to 22.5 days, it may only be necessary to hold a six-week supply of



finished goods. This would result in reduced costs including cost of goods, storage space,
service, and insurance.

Cash Flow Improvements - Reduced operating expenses and improved accuracy when
purchasing provide direct cash flow benefits. With eCommerce-eBusiness systems you
should be able to:

• negotiate better payment terms
• take advantage of discounts
• enter more long term contracts

Although this area is difficult to quantify, most accounting departments can attest to the
numerous benefits of improved corporate cash flow.

Improved Order Fulfillment - EDI-based reporting provides managers with access to
data and process-status information, which enables them to make more accurate and
informed business decisions. EDI-based reporting can also improve the analysis of
pricing changes and promotional ties. Most importantly, it can maximize product
availability, despite shifting demand, by enabling faster analysis and recognition of
demand trends. EDI-enabled manufacturing firms reported an average inventory
reduction of 10%.

4.3 Implementation Costs

Identifying the types of costs associated with eCommerce-eBusiness are relatively
straightforward. Quantifying the costs is not feasible until you have a clear
understanding of the system objectives and have identified the best technology for the
job. The types of costs you need to consider are:

Software Purchase price - Totally dependent on the selected solution - hence the range
of menu options in our eBusiness sections of the site.

Ongoing Maintenance cost - allow for 15-18% of the initial cost annually.

Communication expenses - Dependent on the bandwidth your system will require, the
number and nature of the connections.

eCommerce-eBusiness Personnel - Very dependent on whether you are running your
computer systems in-house, and how far you integrate your systems using
eCommerce-eBusiness techniques. A key to success is to have at least one person
within your organisation taking charge of your eCommerce-eBusiness systems.

As far as ROI goes, once you decide what all the pieces of the shopping system are,
you will know your costs. Then estimate how many of your visitors will buy
something - on average, this will be about 1.8%, can be much higher if you are in a
targeted niche and do a good job with merchandising the store - clean, easy to use



layout, shipping options are clear, etc. Estimate your average sale and margin, and
you have all you need for ROI:

On a monthly basis:

Traffic = 1000 visitors per month
1.8% buy = 18
Average sale = $60
Sales = 18 x $60 = $1080
Profit Margin = 40% = $432
Cost = $25 for cart + 2.5% of sales = $54

ROI = $432 / $54 = 800%

This calculation ignores whatever it might cost to get set up in the first place - build
the store pages, etc. If that cost $2000, then it takes 4.6 months for you to
"breakeven", meaning you have paid for the set-up and are now into makin $432 a
month in profits:

$2000 site cost / $432 in margin each month = 4.6 months to pay for set-up

4.4 Profit & cost centre

o Tech is the most expensive
With cost of the platform being the highest
Resource cost is the 2nd highest
Infra + Network = Highest
DC cost
Licences cost (unlike the ones used for Open source)

o SCM is the 2nd
The cost of deliveries (starting from 40 for a single way)
Cost for non-delivery/returns/lost/damage is more than the product cost.

o Payments is the 3rd
Payment gateway cost
Refund + Cancellation cost

o Cost (fixed &variable)
The call center cost
Cost per call
Payment charges per order
Shipping charges per order (if this is Free then the charges bore by the
company increases)
Acquisition cost per subscription
Cost per Visitor



4.5 Business-Revenue models

o Platform
Can use the platform as service to the small segments
Plug-n-play model

o Reader offers
Large spread publication like times of India does 1 CR a day orders
If done with multi-lingual partner publication then a day orders worth of
2 to 3 Crores can be achieved

o Retail integration & Digital presence
Daily Future Group retail presence has around 1 million footfall across the
formats
Conversion of these footfall on the digital medium will save tremendous
cost

o Opportunity Cost
One of the concepts of the Cost -Benefit Analysis is Opportunity Cost,
technically, which is for the cost of another selection. For example, if the
government builds a High-Speed-Railway in Taiwan, then the domestic
airline industry will lose some of the market because Taiwan is a small
island. Therefore, the opportunity cost of this case is losing some of the
domestic air transportation market.

o Consumers’ Surplus
If a consumer buys an a book online, it is cheaper than buying in a real
bookstore
in this case, the consumer saves time and money, which is Consumers’
Surplus.



The below diagram gives a graphical representation of the cost benefits of an eShop vs.
Landed shop

4.6 Cost Challenge
The challenge in this case study is do the following
Analyse the costs and benefits associated with the implementation of an ecommerce
website

Costs for technology
To produce an ecommerce website requires a high speed connection to the Internet, a
web server, and software. Other costs that are relevant is the cost of the payment
system, whether it is taking online payment directly from the Societys web site or an
alternative third-party like Pay pal or more expensively using an online bank.

Costs for technological development
This will involve a number of programmers who are able to interpret your functional
requirements and program/create your website.

Costs for the consultancy support (design and implementation)
You would require the services of specialists in ebusiness design and implementation
to guide you through this process.

Costs for the organisation for piloting training
During the technological development of a website it is always a good idea to allow
admin staff who will be using the system on a daily basis to pilot the system to as a
training initiative.


Running costs
These are an upkeep of the web server and maintenance costs.

Running costs for change process
This is the cost of factoring in for your employees to train and adapting to the newly
introduced technology, mainly the strategies used to make the change as smooth as
possible.

Additionally being on the Internet would result in the your company having to
become familiar to respond to emails, queries, and complaints that require instant or
quick responses as opposed to replying to a Customer/Client via a letter. To be
successful online, your company would have to address this issue of Change
Management in that it would have to incorporate into its business, processes in order
to guide the company to successfully maximise its effectiveness on the Internet.



4.7 Financial Benefits

Improve Cash Flow
Online payment would result in the lead-time to receive payments for membership
within the same day of the application being made rather than the average 14 day
delay. E-enabling the membership process is not just about reengineering a process
so that it is quicker than before, it would result in a complete overhaul of the
previous way of managing membership. Figure 1 illustrates the current membership
process on the left and the E-enabled equivalent. As you can see in the E-enabled
application and payment are made online. Once the application has been completed
the documentation is sent via email to the member adding value by cutting the
waiting time. This also saves on printing and postage for the Society. Even if the
member does not have an email address the documentation will be available for
download for registered members to the web site.

Increase Revenue
The Internet will increase the volume of members. By going online with your
business, you will generate revenue from places you never imagined" (SolSystems
LLC: E-Commerce, 2001).

4.8 NON-Financial Benefits

Communication
Direct email marketing incurs little or no cost compared to the traditional direct mail marketing.
Direct email marketing allows the flexibility of sending the your companies message day or night,
exactly when they want.

Transparency
The Information Management Website will allow the membership process to become
transparent. For example, for the first time ever, Management will be able to know as a
matter of fact:

1. The total number of members
2. Those members who need to renew their membership
3. Those members who are in arrears with their membership fees
4. Total number of members and accredited members
5. Forecast for the expected revenue that will be generated in advance and
look at historic monthly generated revenues.



5.0 Hindrances and the Leap

The Major step that made the company take a backward step and also how the
company overtook one of the hurdle in their growth.

Let us take a sneak-peak in the below bullet points.

5.1 The Recession

The 2008-2009 recession which swept everyone from the root caused panic
across the floor and brought the business to a halt in every aspect.

There was a sweep of grief because of the job loss and eventually lack of orders
on any online segment, be it travel or non-travel.

People started to hold on to their purchases or delayed their purchases with the
intent that the economy would bounce soon. As a result, the sales dipped
further and slowed down the entire consumption cycle.

The organization also took a cautious step in ensuring that there is minimum
amount of spent happening on their foray. Just to be SAFE.

5.2 Pre-conceived mindset and notions

The scope for E-commerce in India is no doubt tremendous in the years to
come, but still there are some ways in which pitfalls can be avoided & below are
the few which should be taken care:

a. Studies revealed that 23% of the customers quit even before they register
themselves at a site.
b. The time of delivery stated is unclear.
c. The time taken for downloading is very long.
d. People in India have habit of buying goods only after feeling the goods. This
drawback can only be removed if matured companies enter the E-commerce in
whom people have good faith.
e. The behaviour of the Indian customer is very need driven as compared with the
US customers who are impulsive buyers.
f. Most of the entrepreneurs in India lack sufficient capital or resources and hence
cannot wait for a long period of time for positive results.
g. Visibility of the Order.

Ways to remove the pitfalls::

a. Consistency in execution.
b. Strong government policy against cyber crimes and frauds.
c. Tight integration of the system by the online retailers.



d. Stating clearly the time required for the delivery of the product and
delivering the goods within that time period.
e. Safer payment mechanism.

5.3 Platform Change

The radical change in the life cycle of FutureBazaar is the technology platform
which offers robust integration to various system and the best part of it is, the
same being Open-Source.

The change in the life of FutureBazaar was in such a way that the entire table
got turned. With technology driving the business till a point in time, it was
Business driving the technology.

No sooner the team realized, revenue soared in heavily with a strong mission
statement and principles of Customer First.

Also, there were many factors that had a combined effect on the overall sales
cycle of FutureBazaar. Constant involvement of each member of the family had
taken the organization in whole for an upward movement.

The core values, hand-in-hand, of the organization helped achieve the sense of
belong ness and ones own business rather than salaried mindset.

Team had joined hands to change the habit (shopping) of a crore Indians and
with the mission to bring the mall to the customers' doorstep, while making it
cheaper.

The team embraced the Future Group values (Indianness, Valuing & Nurturing
Relationships, Simplicity & Positivity, Respect & Humility, Flow, Leadership,
Openness, Introspection, and Adaptability) and were committed.

The extensions of these values helped them in servicing the digital commerce
customers and build a leading digital commerce business and organization to a
different level.



6.0 Analytics and Search Engine Optimization (SEO)

Speaking of the analysis, the e-commerce driven business needs a benchmark
against its own set of processes and competitors.

And with the same intent to drive the consumer to the door of their store, the
Analytics helps in understanding the behaviour pattern.

a. What works for the company and what does not
b. What is exit point for the customer and
c. Where the customer entered from.

There are various factors that help the business continuity and the overall
organization’s strategy. The SEO is one the pre-requisite parameter for the
growth of the organization.

Some of the guidelines about the Optimisation report that FutureBazaar
implemented are as follows:

a. URL: Existing URL of the page

b. Current Title: Existing Page Title

c. Optimised Title: Recommended modification to the existing Page Title to
incorporate new keywords/increase keyword density.

d. Current Meta Description: Existing Meta Description



e. Optimised Meta Description: Recommended modification to the existing meta
description to incorporate new keywords/increase keyword density and
maintain optimum text length

f. Current Meta Keywords: Existing Meta Keywords

g. Optimised Meta Keywords: Recommendation to incorporate additional
keywords/removal of non-targeted keywords and maintain optimum number
of keywords

h. Internal Linking: Recommendation to incorporate links pointing to the internal
pages of the website.



6.1 Trends and patterns

Considering the trend pattern, we analysed the Q3 of 2010-2011 and the
analysis have shown some uncertainty patterns towards the entire quarter in
the life cycle of www.futurebazaar.com

Let us see the same analysis over the next quarter (Q4 of 2010-2011) and we can infer
that more or less the pattern or behaviour over the site remains spooky.

Not to forget, that in the month of January, the SEO and Analytics were being
implemented with another tool for a distinctive observation and analysis.

However, if the trend is seen for the day of any month it typically reveals that the first
half of the day is where the visitors would barge in to the site.



The following screenshot reveals the same information as mentioned aforesaid.



6.2 Conversion rates

Conversion rate is the one which determines the no of customers who came to the site
and purchase the products online. The following conversion rate of 0.93% is for one
the month in the same quarter (Q3 of 2010-2011).

This number is of the utmost importance as this determines the growth of the overall
organization at each quarter of.

The same trend if viewed the previous quarter (Q2 of 2010-2011) the number states
something different and here is the showcase of the aforesaid statement.



6.3 Traffic source

The Source of medium from where the visitors are pouring on the site are either

a) DIRECT
b) SEARCH ENGINE
c) REFERRAL PROGRAM

When we look at the program overview we will notice that the majority of the visitors
are coming directly on the door step of the online site.

The following table displays the percentage share of the overall traffic for the entire
financial year 2010-2011.

6.4 Visitors

The activity that helps the footfall to the site is referred to as “Visitors”. Indirectly these
are the footfalls for the online store (present in the digital medium).

What we will do is really look at the sale quarter and trickle down to each segment in
depth as we proceed with the topic.



Let us also see the different scenario where in the flock of visitors have turned the e-
tailer down. And we shall discuss the reason as to why the same have erupted in the
lifecycle of www.futurebazaar.com

This particular point also reveals the true strength of what sets in and sets off for the e-
commerce business.

There are plausible scenarios where in this has set in the trend pattern. And some of
these will be marketing stints, Alliances, Business Strategy and change in leadership
and beliefs.

We have covered this part whilst talking about the following topic “Promotions &
Campaign”.



7.0 Promotions and Campaigns (ATL & BTL)

Following display the true number in terms of the activity carried out with one
of the business associate and this reveals a quite true experience in terms of no.
of visitors got attracted to the site along with the TV campaign that
FutureBazaar carried out in the month of October – December.

• Posters –30,000 (Oct-10 to March-11 )
• Flyers –72,00,000 (Oct-10 to March-11)
• E-Mailers –12,24,850 E-mailers (State Bank Group members)

Next, we will study few of the strategy that Marketing has played in the period.

• Regular Communication
• Offer Based Campaigns
• Campaign Result



7.1 Role of marketing

The BATTLE which accounted for the maximum no. of traffic has truly been an
outstanding performer. This has a proven record with history to tell. However, the
influx is always directly proportional to the amount of money pumped in.

First a TV campaign; and now a new selling strategy, www.futurebazaar.com definitely
seems to be getting aggressive in e-commerce space. www.futurebazaar.com unveiled a
new strategy ‘The Battle’ to boost the sales of products through its website.

The Battle lasted for 96 hours non-stop & had consumers vying to possess the cheapest
consumer electronics with genuine manufacturer’s warranty. The ‘Battle’ allowed the
consumers’ to buy their favourite electronic gadget at the lowest prices the market had
ever seen. The lowest price guarantee is an outcome of the strong sourcing leverage
that Future Group brought on the table and this was then available digitally and
delivered to the customers’ home or office free of cost.

The company had and has collaborated with leading brands in the country to offer
deals that are exclusive only to Futurebazaar.com and thus providing the maximum
value across any online or offline mobile retailing network



7.2 Past-Present-Future

As discussed aforesaid, there are many contributors to the traffic as well and here is
what we will discuss in concise.

Let us go through the snapshot of few:

A) SBI Loyalty Rewards Program

Catalog feed is exposed to the partner who reveals the information of the
products and various categories that are present in the FutureBazaar.



B) BATTLE

With a window period to purchase a product, the queue is heated up for a
preview and the angle of fear and greed is created.

This is the shown in the marketing campaign across the nation that created a
buzz in the TG.



C) LUCKY PRICE

The below concept creates a sense of fear and greed and grabs the attention to
the product. And overall it gives the user a feel of what one feels at a gambling.
And more or less, the limited no. of spins and a fencing of time period make
one feel the need of being missed out.

This is surely a distinctive feature where hardly anyone on the online segment
has ever attempted to do this.



D) Deals of the Day (or rather STEAL of the day)

Everyday gorgeous deals struck out for the customer directly from the farm of
fresh deals. Never ending saga of deals continue

E) Top 10 (products by celebrities and sportsperson)

With the increasing competition to be on the top, various modus operandi was
used and one of them was to list of the celebrity’s favourite or the “Must
Haves”.

And one of them was the “Top 10”. These are celebrity picked up 10 items from
the catlog which must be with an individual.

Similarly there were categories for “Better Photography”; “Monsoon”; “Luxury
Picks”; “Weekend Travel” and etc...



If we look at the sales for the overall period Oct 2010- Jan 2011; there is a
significant sales spike for that period.

A significant 40% rise in the overall share of the sales.



7.3 Current promotional activities

SMS and Emails are the ones which are commonly used and as a daily regular
staple diet on the floor. Along with these, there several alliances that are part of
the digital commerce segment of FutureBazaar India Limited.

Current Email Trends on the E-commerce of the strong background of retail
industry.

Few points which are notable in here are as follows:

A. Bounce rates have shown the downtrend in Q3.
B. Open rate was marginally high
C. Click Rate, in Q4 was higher than Q3.



8.0 Role of SCM & CRM

The most important aspect of e-tailing is the delivery and tracking or visibility
where most of the cost is incurred and could not be avoided because of the era
of CRM.

And as a result the team leverages over the existing Future Supply Chains’
expertise and not only to its offline stores but also to online stores.

With the relevant below features and advantages, the organization could drive
the business goals

1. 600 vehicle strong dedicated fleet
2. +1000 HD
3. +1000 employees
4. 2.6 Million SKU
5. +2600 retail stores
6. Upto 4 million transactions (peak)
7. 67 warehouse



8.1 Warehouse Management System

The WMS played a major role when the business went from ground level to the
learning curve. To achieve this, technical and functional knowledge with the
current businesses were prime importance to the Future Bazaar team.

Average size of Sales Order messages: 3.62 MB for 1000 Sales Order
Intermediatory document (Idoc) with 6 line items. Maximum there were 10,000
transactions per day (~ 37 MB of data) for real time.



With this amount of detailing the design was drafted and the resultant was the
below high level architecture with detailing with time.

The target of 1000 orders per day was achievable and there was no lag in terms
of a delay w.r.t. the expectations with the customers.



8.2 Customer Relationship Management

The major chunk of data was revolving around the piece which is customer
relation. With ever increasing number of subscribers and doubling the number
over a span of a year (F.Y. 2011)

Subscriber list was close to 0.3 million in the year 2010 and with 6 months left in
2011 – the number has doubled and is close to 0.59 million.

With ever increasing customer base, the in-house system is suppose to be rock-
solid and must handle all the interactions as well as touch points the customers
are entering from.

The mandate of the Centre of Excellence across the organization/businesses
came into existence. This step ensures the unlocking of the life-time value of our
customers.

Because of this the below was drafted in the on-going management meet

Customer 1st

• Create customer analytics and customer insights mechanism.
• Facilitate movement of customers across various formats of the Group.
• Roll-out the group-wide multi-partner coalition loyalty program for all formats,
• Develop and monitor success of program, customer segment, and campaign
level by creating analytics modules and metrics to understand overall customer
retention/repeat behavior across key businesses/segments.

Customer Service
Creation of CEM (Customer Experience Management) team/module which
enhances the level of customer satisfaction by delivering on various modules of
customer service – from customer promises to grievance redressal.

Incubation
Incubate, develop & pilot new business concepts and an eco system that
accelerates & systematizes creating successful and satisfied internal and
external customers across the channel.



8.3 Diseconomy of a Sale

Many e-Commerce companies aren’t making money as on time and we can
purely blame these on ‘FREE Shipping’ or Cash-On-Delivery or Deep-
Discounting.

In addition, as they about in adding multiple warehouses and hiring their own
delivery employees and stock piling inventory, the cost of operation and
inventory is way ahead of current revenue.

Companies spend anywhere between 500 to 2000 INR on Search Engine
Marketing (SEM) in order to acquire new customers. It is purely the faith they
have that customers would come back for their next purchases.

And thereby becoming a profitable model.

Legendary US investor Mr. Warren Buffet is a global favourite among investors
because his belief in long-term value-driven investing.



The cornerstone of his philosophy was his following quote “In business, I look
for economic castles protected by unbreachable moats”.

Nonethless many VC believes that there can be $1
Billion valuation of e-commerce companies from
India over the next 5 years or so.

In turn, implying, the rest of them will close
down or be acquired by the Biggies.

Generating a sales of 200 Million Dollars

Let us look at the figure and let us evaluate this.

Step 1: MRP 499/-
Step 2: Estimated cost @ e-commerce is 299/-
(margin
@ 30-40%)
Step 3: Book Cost + Delivery Cost = 344/- (top 8 cities)
Step 4: Book Cost (including CoD)= 379/-
(assuming
35/-)
Step 5: Consumer Price= 324/-

Costs not Considered are as follows:
1. Cost of returns
2. Refusal of CoD
3. Cost of acquiring new customers
4. Cost of supply chain and Technology.
5. Cost of shooting the Delivery Date.

And hence the conclusion that the e-commerce companies are not making money is
purely because of
these factors along with a defined leadership along the pathway.



8.4 The problem (Deduce from Mckincey report)
Most e-tailers lose money on every transaction. Even the flagship e-tailer, Amazon, is
losing about $7 an order on its nonbook sales after taking into account product, shipping,
and fulfillment costs. (Its book sales generate about $5 an order.) Fogdog Sports, a
sporting-goods outlet, loses $5 an order. For others, the losses are even starker:
Drugstore.com loses about $10 to $15 an order (Exhibit 1).

Three weaknesses lie at the core of this problem:
1. Many product categories, such as toys, start off with a big disadvantage— they are
difficult to pick, pack, and ship; they attract only small orders; or both.

2. Plain inexperience and lack of scale are inflating fulfillment costs to as much as $12 to
$16 an order for many pure plays.

3. Inexperienced merchandising and sourcing organizations, intense price competition,
and problems with inventory management and product returns give pure plays
particularly poor gross margins. Established retailers in categories like apparel and drugs
enjoy an advantage of 2,000 to 3,000 basis points in gross margins. They are thus in a
much stronger position to make profits and prosper.



To post comfortable contributions on each transaction, e-tailers would need efficient
order fulfillment, average order sizes of at least $100, and gross margins of at least 25
percent (Exhibit 2). Since money generally vanishes with each order, it follows that
almost all e-tailers are losing money on every customer, for those customers generate too
few orders or too little profit per order to cover the cost of winning them. Soaring
acquisition costs of $50 to $100 a customer, generated by the difficulty of building virtual
brands without stores or catalogs, put pure plays in a deep hole. In addition, many of
them have relied on scattershot marketing campaigns using high-profile ads that
generate buzz among investors but don’t bring customer accounts to the servers. This
combination of low repeat buys, high acquisition costs, and small orders explains why
pure plays are destroying value with every customer.

Retailers with established brands and marketing engines are relatively insulated from
such problems, for these retailers can leverage their traditional marketing mix to acquire
on-line customers more cheaply. In highly brand sensitive categories like apparel,
multichannel retailers can spend as little as one-third or even one-fourth of what their
pure-play rivals pay for that purpose.

Fixed costs come unfixed
The lower costs per order and per customer of multichannel retailers help them break
even. But contrary to the early business plans of many players, e-tailing doesn’t amount
to a free new channel where established retailers



can test new product categories, reach new customers, and increase revenue. Few fixed
costs are truly fixed in e-commerce. Many supposedly fixed costs actually increase in line
with revenue growth, so that largescale
operations are very difficult to create.

Maintaining an industrial-strength Web site and its associated back-end systems, for
example, costs between $15 million and $25 million annually, and this doesn’t decrease
over time. If anything, expenses associated with hardware and software—about 30
percent of total Web site costs—increase with site traffic and therefore with
revenue growth. Other types of fixed costs, such as warehousing, grow as a percentage
of revenues. They are either huge, up-front hits that depress earnings through
depreciation costs or smaller, ongoing expenses that depress earnings through rental
costs. Even if e-tailers could manage to make a profit on each order and each customer,
the level of sales required
to break even would remain high. These economic realities define the arduous task
facing e-tailers. Gross margins and fulfillment costs must improve dramatically to make
orders profitable, so on-line prices can’t be discounted against off-line prices. The cost of
acquiring customers must drop while their loyalty must rise if investments in customers
are to be profitable. And just to break even, Web retailers must achieve revenues in the
neighborhood of $1 billion a year, especially for lowmargin categories such as books. For
most pure plays, these challenges will be impossible.

For the multichannel players, however, the numbers are a great deal better: higher gross
margins make the per-order economics stronger, while lower marketing expenses make
fixed costs much lower. Indeed, the breakeven
point of a multichannel retailer is typically half the breakeven point of its pure-play
counterpart.

Moreover, adding e-tailing to a lineup of sales channels creates synergies. More and
more customers browse on-line before purchasing off-line, and early anecdotal
indications suggest that consumers increase their spending on products sold by “landed”
(physical-world) retailers that add new channels. So even if e-tailing turns out to be just a
breakeven proposition for multichannel retailers, it is still a worthwhile way to reinforce
and extend the franchise.



9.0 Facilitators of e-commerce in India

A. Information directories:
The products and services are listed with appropriate sub-headings to make it
easy or a serious information-seeker to find what he wants. Allied services
provided by them: Message boards, chat rooms, forums, etc.

B. Banks:
1) Net banking/phone banking: This is an online banking facility available for
savings account holders as well as current account holders. Some of the special
Net banking services are: Demat accounts for sale/purchase of stocks and
shares, Foreign Exchange services, Direct/Instant payment of bills on the
account-holder’s behalf, Financial Planning & advice, Electronic Funds
Transfer, Loans to account-holders.

2) Credit/Debit Cards- Banks facilitate E-commerce by providing the most vital
trade instrument, namely the Credit or Debit Card, without which E-commerce
would be impossible.

9.1 Online business associates (Payment Gateway)

Payments, as a project in the life of futurebazaar.com was a major step towards
the success of providing what the customers desires for and fulfilling their basic
shopping needs.

Initially, the site was geared up for Payment Gateway only with credit cards
and netbanking as an option. Slowly and steadily other modes were also a part
of the payment stream and there were

Cheque
MChek
Paymate
Cash and CoD (being the most preferred after credit card).
Payment on Interactive Voice Response.
Banks (ICICI, CITI, HDFC, AXIS)
Payment partners such ICW
Business Associate such as Easy Bill, Suvidha, Itz Card

And for the time on the internet world, a unique, easy & convenient feature
available to the end consumer was “Easy Finance”.

Being the retail giant, the company had a leverage of using the sister brand of
Future Money to extend the service to our online customer.



This was a piece which acts as a differentiator when it comes to payments. The
foray of complete scope under the payment was very critical.

Integration with the banks for the credit card plays a vital role because of the
double benefit that the customer gets

On the 1st hand – it is the points that the customer avails
& on the 2nd hand – the extra discount that one gets because of the affiliate
program that the organization runs.

With these 2 in hand, a real-time integration is the key to the success of any
model in the e-commerce segment & the benefit of this giant group’s coverage,
the customer; finally gets the benefit of this kind of arrangement.

9.2 Loyalty and rewards

Reward is the future of customer excellence, and this is indeed in the mind of
several players across the domain. With reference to that, the organization is
handling a major step towards this; it is Loyalty coalition program with a
German based company “PAYBACK”.

Recently, the Parent company, American Express took over iMint and its
division “Payback” will roll out the coalition loyalty program.

PAYBACK Nov. 2010- Germany:
45% penetration rate among German households
More than 13,000 partner POS
More than 18 million active cards

Advantages of this program:



Large ‘Active’ base = 10 million members @ imint.
Total base ~ 25 million
Points worth more than Rs. 200 Cr lying un-burned with imint
Lift and shift of more than 10 million consumers from the program
Impact to 2.5- 5%jump to overall revenue.



Redemption based model provides the retail an added advantage of higher
revenue and adds the topline with the aforesaid percentage.

Ideal situation to let the consumer burn their (worth 200 crores) points on the
online platform because this would ensure that the earn partner would bear the
heat of these burned points.

In addition to this, there are several partners at the regional levels and smaller
retailers which will ensure the program is a widely accepted concept in the
industry.



10.0 Opportunities & Convergence

Going forward the online retailing would not be restricted to only Internet on
the computer but it would also be available on the mobile phone, kiosk, TV.

Basically, there will be a convergence. Typically, 80% of the time, a human life
is in front of a digital medium and keeping that in mind, the e-space will be pre-
dominantly be utilised back and forth several times.

Knowing that there is a distinct evidence of 2nd round of E-commerce in India;
the next big thing would be convergence, which would bring in a plethora of
opportunities on the table. As

Digital medium enables limitless inventory

Digital medium boosts customer excellence

Digital medium enables high margins and lowest prices.



11.0 Future of e-commerce in India

Point in time, we are talking about e-commerce progress level of India, the
seventh-largest by geographical area, the second-most populous country, and
the most populous democracy in the world. Indian e-commerce space
percentage is getting higher as more and more online retailers enter the market.

Although this level of entry in the e-commerce market is good from a long term
perspective, the challenge is that most entrepreneurs don’t have the resources
or capital to wait for years before they can get profits.

The past 2 years have seen a rise in the number of companies' embracing e-
commerce technologies and the Internet in India. Most e-commerce sites have
been targeted towards the NRI's with Gift delivery services, books, Audio and
videocassettes etc..

Major Indian portal sites have also shifted towards e-commerce instead of
depending on advertising revenue. The web communities built around these
portal sites with content have been effectively targeted to sell everything from
event and movie tickets the grocery and computers.

This is not to say that the e-commerce scenario has been bad in India as highly
successful e-business like bababazaar and India mart have proved. Indian
Banks too have been very successful in adapting EC and EDI Technologies to
provide customers with real time account status, transfer of funds between
current and checking accounts, stop payment facilities. ICICI Bank, Global
TRUST BANK AND UTI-Bank also have put their electronic banking over the
internet facilities in place for the up coming e-commerce market speed post also
plain to clone the federal express story with online package status at any
moment in time.

The future does look very bright for e-commerce in India with even the stock
exchanges coming online providing an online stock portfolio and status with a
fifteen minute delay in prices. The day cannot be far when with RBI regulations
will able to see stock transfer and sale over the Net with specialized services.



12.0 Bibliography

1. Personal Interaction with Future Bazaar employees.
2. Forbes magazine- July edition of 2011.
3. Mentor and guide- Prof Askhay Damani.
4. Product Manager: Mr. Parag Dhakan.
5. www.mckinseyquarterly.com/electron/hoet00.asp


Growth of e commerce report

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