E-commerce: new exciting industry for MBA graduates, or is it?

Clockwise: Mr Deep Kalra of Make My Trip, Simrandeeep Paramar, Gunajit Brahma, Deepak Nanwani and Mohit Maheshwari

That e-commerce is the most rocking business idea to hit Indian markets and pockets is an established fact. That fresh MBA grads are using the e-commerce route to fulfil their entrepreneurial dreams is a relatively contemporary drift. Every top b-school is proudly reporting at least a couple of student-e-commerce ventures as part of their triumphs every year.

And why not, with an internet base of over a 100 million users, rising living standards, a plethora of products available online and an increasingly infectious habit of buying and selling on the net, e-commerce is the place to be. Yes, the industry has its pitfalls and the recently reported slowd own is a point of worry, but the young players are not too worried. They are willing to risk a few years, a bit of money and plenty of ideas to go the e-way.

PaGaLGuY spoke to a couple of MBA grads who have just embarked on an e-trip, a few who have been at it for a while and also veterans like Deep Kalra (Make My Trip CEO and an Indian Institute of Management- Ahmedabad alumnus), one of the pioneers of the online travel booking in India.

The newbies

Deepak Nanwani, a 2012 pass-out of IIM Bangalore opted out of placements to join a friend who was toying with the idea of an interactive online learning platform for GMAT and CAT aspirants. Got together with a school friend and the two launched one52 a few months ago. Reasons out Deepak: “Online is the medium to be. Everything is going to be online sooner or later, whether it is shopping or learning so I definitely wanted to be part of it.”

According to the IIM B graduate, it is not easy to set up a website, especially if it is niche and involves immense interaction. “There is a lot of research and back-end work that goes in before launching. We worked on a scientifically designed algorithm which was tested with test takers and experts over many months and only when we were confident that we put it up,” he added.

Gunajit Brahma from IIM Indore also stepped out of placements to work on multi-brand online retail store on organic and eco-friendly products. The website www.jeevanksh.com is still under construction but Gunajits ideas are clear. “I knew I wanted to work in the organic sector as being from Assam I have consumed organic food for most of my life.” Gunajit too, was engaged in many months of gruelling exploration and field work before he actually let his idea take shape. “My team and I have done extensive primary and secondary research, plus we did a detailed online survey to determine online purchasing habits of customers. The secondary research was also submitted as project work during his PGDM,” he explained.

Three others, from IIM B, Mohit Maheshwari, Nitin Chandra and Anand Kelaginaman, also 2012 pass-outs, decided to take e-commerce to another level. They have been working on two fronts – roping in mobile service providers and geting in entertainment experts to produce a personalised entertainment service for the traveller. Which means if you log on to their site, choose the music/show you want to hear, pay up, your mobile will play exactly what you want, when you want.Their justification: “With most cities sporting unending traffic jams, this service will make travel and waiting in jams more livelier and a happy experience.”

According to Mohit, their venture called Transitainment and should be up very soon. The trio is well aware that FM channels and iPods more than adequately serve the entertainment need now. “Yes, but something like the FM is for mass consumption. It is not a personalised service. An iPod will play what you have saved. Our service will give you a personalised amount of entertainment just the way you want it. Once you tell us your likes, we will prepare individual packages,” explained Anad.

Been there

Simrandeep Parmar an Indian School of Business (ISB) alumnus launched Employeestreet.com a couple of months ago. It originally started off as a website to provide discounts/deals to employees of professional companies, but change course soon. “Over time we found out that many non-corporate users were also trying to sign up for the services so we shifted to a more B2C model,” said Simrandep.

The ISB student took to e-commerce as a future because he always felt that internet was the way forward. “Internet holds huge opportunity for a large country like ours. I have worked with technology in my professional life and wanted to do something with it to create a business impact,” the ISB alumnus added.

Qualitative value addition to technology is what drives e-commerce sites. Whether it is the best deal, most convenient way of payment, unique merchandise, innovative ideas or simply satisfying a lifestyle need – no end to imagination. Take for instance, The Better India website founded in 2008, by Dhumant Arun and Anuradha Kedia, both IS students. According to the duo, the idea of the site came out of an outcome of scarcity of positive & developmental news in conventional sources of media.

The duo explained: “The Better India is an attempt to bring out happy stories, the unsung heroes (and heroines!), the small good deeds, and showcase them to the world.”

Been there, done that

For these young players, established e-commerce businesses provide the stimulation and the brace to go on. Deep Kalra CEO of Make My Trip told PaGaLGuY that his company in a sense started the online travel agency concept in India in 2000. “There were a couple of websites then which offered air tickets but they did not cut across categories and offer propositions like we started. Besides, people had started booking rail tickets online so the confidence in transacting online was there.”

Mr Kalra added that improvements in technology not only enabled a more seamless user experience but also enhanced data security, abating customer concerns regarding privacy of their confidential data and card related information. According to the Make My Trip CEO, the success or failure of an e-commerce business has much to do with employees. “The can-do spirit of employees and the untiring need to innovate keeps companies like ours going.”

Another facet, that Mr Kalra holds as the key to good e-commerce ventures is focus on technology and the early investments into building a strong technology back-end with in-house expertise. “This all has to lead to newer ways of enhancing consumer experience,” he said.

Agrees Nitin. “Those in e-commerce need to build partnerships at multiple places. The important work is not just to get the customer but getting the entire team together to make it work,” he says.

Sections of the media reported a survey by ASSOCHAM earlier this year which concluded that in the e-commerce space, it is critical to gain repeat customers to stay strong. “Repeat purchases or loyalty is determined by perceived usefulness, trust, satisfaction, and perceived value of the product. Looking at the condition of goods when received, the customer builds a perception about the product and its supplier.”

But those can also become problems

All players, young and new admit that keeping update with technology which streamlines user experience plays a big role in keeping the venture afloat. But that can come with its share of snags. Simrandeep confesses that in e-commerce creating something that people will pay for is a big hurdle. “Mainly because many in this field are first time entrepreneurs, who may lack a business acumen. The whole industry is new and everyone is learning. Few entrepreneurs have taken their companies public so there is a general lack of mentors.”

E-commerce may be the sunrise industry that everybody is flocking but it can generate a lot of sweat. . Notwithstanding the recent reports that the big players are facing a huge bunch of issues, the Return on Investment (ROI) i s compulsorily a bit skewed in e-commerce business. While investments tend to be low, marketing costs and inventory costs dont always stay in tune.

According to experts, the average cost of a click is in the region of Rs 13-15. So to generate some 50 clicks, a company has to incur a cost of Rs 700. Again, on average, for every 100 clicks, only one person buys a product. And the costs to get that one person to buy the product can scale to Rs 2500 and up. Those are huge numbers for any e-commerce site to stay in step.

These figures may vary a bit for the new guys in the ring. Another MBA grad who has been at it for a few months explained. “The click cost can be anywhere between Rs 7 to Rs 20 and display ads on Google can be even higher. Then depending on the signup rates which can vary between 5-25% and then conversion rates which can be 0.5-4%, it is not so much of fast money. Some of the well-funded start-ups, might have their acquisition costs in that range because they are selling expensive stuff (holidays, clothes) and rely on customer lifetime value (meaning you will keep buying without requiring any additional investment so will return their cost in next 3-4 transactions).”

Expectedly, none of the players were willing to discuss funding avenues and revenues made. With regards to b-school ventures, most start-ups are either funded by incubation centres or small funding groups.

Thankfully, all in the business know that the road ahead can be bumpy. Says Simrandeep: “High failure rates should not deter anyone from going ahead and doing anything. E-commerce in fact has many favourable factors compared to other businesses. Entry barriers are less, scope of innovation huge and if you can make thing work on a small scale, you can attract capital to scale it up quickly, so you dont have to wait for a lifetime to see if your idea has potential.”

They all wanted to jump the deep e-commerce pool

Nitin answered that most people in India have an aspiration to start a business but would like to do it later when life is more settled. “I want to do it now when there is technology by my side so thats why I am here,” he said. .

And the scope to go from one to the other gives adventurers more scope to dabble. Deepak for instance, ran a neighbourhood website some years ago but on not sustaining the right kind of audience, he closed it and now is into online learning. “I have not thought of failure. Entrepreneurships are about taking a risk and I have not thought of a back-up plan,” he said as a matter-of-fact.

Same with Gunajit. “No plan B as yet. But I have the belief that it will work, not because it is unique, which it is not but because it is beneficial to everyone.”

According to this IIMI student, even if the ecommerce market may be in news for wrong reasons, the organic market is growing. The current slowdown is actually an opportunity for us and other entrepreneurs who have taken calculated risks. Besides, since we are into organic, our paybacks will be long term too.

Others think that the present turbulence is nothing but a passing phase . Says Mr Kalra: “Shake-ups are inevitable when a new category is created and aspirant take cue and hope to replicate or even eclipse the success of the former.

Having been in the business for a while, Mr Kalras take on youngsters going the e-way is: “As consumers looks for value, convenience and great service, the internet is a great medium for budding entrepreneurs to create a low-cost model requiring lesser capital investments and can be scaled up quickly.”

And when there is government-support to anything, future can only be bright. ASSOCHAM, which is conducting a mega event on the e-commer industry next month states on its site that Indias e-commerce market is poised to grow by more than five-fold by 2016 as the number of online buyers and per capita online spending increases rapidly. The government has decided to layout the National Optical Fiber Network empowering the rural Indian through broadband. This will only lead to more online transactions and growth in e-Commerce. The market is gaining more attention as global brands look to markets that are in the early stages of e-Commerce adoption but offer significant long term potential. The e-commerce sales in India is expected to reach $ 8.8 billion this year,” the site has projected.

And adds Mohit. “This is the time to do a lot different things with the website. May be ten years later the technology may become superior but the craze may not still be there.”