In a move to tap the growing e-commerce market in India and increase its access to consumers, Coca-Cola recently piloted an online store for home delivery of its products. Coca-Cola is among the early birds in the fast moving consumer goods (FMCG) sector in the country to set up a standalone portal. But even as e-commerce is gaining traction in India — according to Bangalore-based management consulting firm Zinnov, e-commerce is expected to increase from US$6.3 billion in 2011 to US$23 billion by 2016 — the buzz is growing around mobile transactions.
With more than 900 million cell phone connections, India is the second largest mobile market in the world after China. A recent report by Boston Consulting Group stated that the total number of Internet users in India is expected to increase from 125 million in 2011 to 330 million by 2016. The report noted that, at present, around 45% of online consumers in the nation use only the mobile to access the Internet. This is expected to increase to 60% over the next three years.
“I think mobile is key to the next e-commerce boom in India, because if you take pure e-commerce — eliminating mobile — the reach is very limited at present,” said Kartik Hosanagar, a professor of operations and information management at Wharton. Noting that only 150 million of India’s 1.2 billion population is on the Internet, Hosanagar added: “But even the 150 million figure is not relevant because most of these [Internet users] don’t have broadband connections nor are they comfortable shopping online.” Indian mobile users have already engaged in some forms of commerce on mobile devices through ringtone downloads and the like. “So, the trust factor is already there. If 3G rollouts happen fast enough, there is little doubt that mobile may be the technology that pushes e-commerce into high gear in India.”
According to Hosanagar, the biggest challenge in the mobile commerce space is in the presentation. “You are trying to showcase a product in such a small screen and nobody has successfully cracked it at scale as yet,” he noted, adding that with a large proportion of online users in India accessing the Internet only through the mobile, one is likely to see new business models around mobile commerce emerging from here. Other areas where he sees the mobile Internet emerging strong are education and health care. “That, for me, is the true promise of mobile in India,” Hosanagar said.
Hosanagar was in India recently to conduct a three-day Wharton Global Modular Course (GMC) on “Technology and Entrepreneurship in India.” Held at the Indian Institute of Management Bangalore (IIMB), the event was attended by students from Wharton and IIMB and focused on Indian tech-enabled sectors like mobile, the Internet and software. The course included site visits to start-up businesses, panel discussions and guest lectures from Indian entrepreneurs.
Like Hosanagar, Mukesh Bansal, co-founder and CEO of online fashion and lifestyle store Myntra.com and a guest speaker at the event, expects mobile Internet to be a game changer. According to Bansal, while 4% of Myntra’s revenues last year came from transactions over mobile devices, at present this number has gone up to 12%. “In the next 12 to 18 months, we expect around 20% to 25% of our revenues to come from mobile. We have redesigned our portal for mobile interface and we plan to launch some mobile applications in the next couple of quarters,” said Bansal. “The biggest challenge for us with mobile is that fashion shopping is all about images and videos. Recreating that experience on mobile is hard because the screen real estate is very small.”
Phanindra Sama, co-founder and CEO of redBus, India’s largest bus ticketing company, is also enthusiastic about the business potential of the mobile sector. “A significant amount of our sales today are from our mobile application. Over the next three years, we expect this to cross to 50%,” he noted. According to Sama, he and his team decided early on that they would not position redBus as merely an online bus ticketing company but that the business “would be open to every possible means of selling tickets.” At present, redBus’ channels include the company website, a call center and 40,000 point of sale outlets. Sama is now exploring the option of selling tickets through direct-to-home television. “When we started, we realized that the world is changing rapidly, and we told ourselves that ‘While today the Internet is popular, five years later it may be a different scenario altogether,'” he said. “This has worked in our favor. If we had not been ready for the mobile world, someone else would have come with a mobile bus ticketing solution and we would have become obsolete.”
Ashish Bhinde, executive director at Avendus Group, pointed out that while technology in India has been services-led up to now, the non-linear side of technology — digital and mobile Internet — will outpace and outgrow services over the next two decades. “The minute the enablers come in place, the leapfrogging that we saw from fixed lines [telephones] to mobile is likely to happen in segments like online travel, online classified and music downloads on mobile devices.” Bhinde predicted that the expansion of 3G services and the launch of 4G services will make a huge difference to in-home and on-the-go connectivity. “Mobile broadband will be the primary driver of overall Internet penetration in the country,” he added.
Bhinde suggested the online payment landscape in India is at an inflexion point. “We are a cash economy and digital payment in the country is still nascent.” He said that cash-on-delivery, an Indian innovation, is likely to continue as a significant mode of payment, but that in-store prepaid e-wallets, multi-purpose prepaid cards and mobile wallets will gain momentum. “The hybrid kiosks or ‘trust point’ that offers a combination of online and offline shopping is something to watch out for,” he added. “Companies have to keep in mind that there is a large segment of the country that will take much longer to go online; therefore, ignoring that segment does not make sense.”
The India Challenge
In a session on “How to Build a Global Tech Business from India,” Krishna Mehra, co-founder and vice president of Capillary Technologies, a provider of cloud-based loyalty, mobile and social customer relationship management solutions, spoke about the challenges of selling software in the country. “Account management and customer management is extremely important in India. The client wants a warm body to talk to. Also, while the channel network for hardware is well established, the channel for selling software is very fragmented.”
According to Mehra, the software-as-a-service model works better in India as compared to shrink-wrapped products because Indian businesses are not in favor of heavy capital expenditures. “An operating expenditure-based pricing and servicing model is better suited to Indian customers. It also prevents piracy,” he said.
Mehra added that while Capillary Technologies has a 60% to 70% market share in the loyalty market in India, the company decided to expand globally because it felt that focusing on India alone would limit growth. He noted that the motivation for Indian software companies to go global is three-fold: “One, in India, there is lack of a large local market for software. Two, there is the currency conversion factor. And three, many venture capitalists prefer a global story.”
There are also regulatory challenges in building a global business out of India, Mehra said, which is why many Indian companies are looking to set up holding companies outside the country. “We moved our headquarters to Singapore because of the regulatory nightmare,” he noted. Describing the advantages of building a technology business from India, Mehra listed juggad or frugal innovation at the top of the list. “Customers are more forgiving about product defects. There is a lot of talent available in India and the ability to iterate quickly. And raising capital is easier here than in many other parts of the world.”
Sharing his experiences of being an entrepreneur in India, Gaurav Mendiratta, founder and CEO of SocioSquare, a digital marketing agency started in 2011, suggested that in a new-age business like his, micromanagement is very important. “You have to push the team to learn and stay updated every single day. You also need to ask for updates or set processes around getting updates, otherwise you will not get them,” said Mendiratta, adding that to customers, “relationships are far more important than any contract or sometimes even more than your offerings. If your relationship is strong and the client wants something new that is not part of your offerings, he will wait for you or even help you develop it.”
Naveen Tewari, founder and CEO of InMobi, the world’s second largest mobile ad network after Google, recalled that when company leadership decided early in their journey (the firm was started in 2007) to build a global footprint everyone discouraged them. “We were told that it was not the right thing to do because it had not been done before. But we persisted and that has worked very well for us.” Other key focus areas at InMobi, Tewari added, have been “to build and build a great product. Also, we always think big. We follow the 10X rule — at any and every point of time we want to grow 10 times in all aspects. We believe it is a mindset issue.” On the people front, Tewari said that he believed in hiring people with the right attitude and the right aptitude. “The smarts can come later.”