Top News

RoI for ecommerce companies from mass media spends like TV and print is likely to be poor

K Vaitheeswaran is
the Founder and CEO of IndiaPlaza, one of the oldest ecommerce companies in
India.  Vaitheeswaran launched India’s
first ecommerce portal, Fabmall.com, but as Internet wasn’t yet mature in
India, Fabmall.com became Fabmall, India’s integrated retail company with
offline presence as well in 2002. The offline chain of stores was eventually
acquired in 2006 by Aditya Birla Group, who renamed Fabmall as More. The online

K Vaitheeswaran is
the Founder and CEO of IndiaPlaza, one of the oldest ecommerce companies in
India.  Vaitheeswaran launched India’s
first ecommerce portal, Fabmall.com, but as Internet wasn’t yet mature in
India, Fabmall.com became Fabmall, India’s integrated retail company with
offline presence as well in 2002. The offline chain of stores was eventually
acquired in 2006 by Aditya Birla Group, who renamed Fabmall as More. The online
business, Fabmall.com, still with Vaithee, became IndiaPlaza.com after the
acquisition.

Prior to this, Vaitheeswaran
served as the Marketing Manager for Wipro’s Computer and Systems Integration
Business and was responsible for Wipro’s brand development for Personal
Computers and related products. He served as Regional Business Manager for
Wipro’s southern region and also held additional charge of business
development. In an exclusive interaction with India Digital Review, Vaitheeswaran
shares his thoughts about the current scenario on ecommerce market in India and
his plans about the company.

IndiaPlaza is one of
the oldest ecommerce players in India but we are yet to see it doing a TV
marketing campaign. Any specific reasons?

We believe that the return on investment right now for
e-commerce companies from mass media spends like TV and print is likely to be
poor. We have always been focused on investing wisely and focusing on profits
rather than mindless and costly customer acquisition. Hence we have not
advertised on print or TV. At the right time, we will certainly consider this
option.

This year, we hear
that IndiaPlaza wants to go deeper into the segments and focus more on the
lifestyle category, as well as books and electronics. What are your exact plans
and the objective behind this?

Our product strategy was laid out 13 years back and we have
not strayed from this. We have always retailed all categories and we are
continuing the same. The only change is that we will significantly increase
depth of selection in the lifestyle and gifting categories as opposed to just
width of choice.

With ecommerce in
India, the term funding goes hand in hand. But you have just done your Series A
in 13 years with $5 million from NEA-IndoUS in 2011. Please share with us your
sans-funding survival strategy in this cash-starved industry?

Retail is a capital intensive category and hence e-commerce
companies need to keep raising capital regularly. Under the circumstances, it
is essential for e-commerce companies to spend and invest carefully. That is
the policy we follow. We invest if we feel we can generate profitable sales out
of the effort. This is also the reason how we have managed to grow the business
steadily with just a Series A in 13 years.

How are you using the
funds and when do you plan to raise your series B?

We are utilizing the funds to expand the team, improve the
processes for user experience and upgrade the technology. We will raise Series
B sometime in the year 2012.

You once emphasized
that the company is actually competing with offline retailers like Landmark or
Croma, instead of the online players. How?

If you take retail, e-commerce is a very insignificant part
of this. When we started in 1999, I was clear that our competition is offline
and our challenge is to move customers to shop online instead of offline. There
is no change in our thinking. I continue to believe that our biggest challenge
will come from offline retailers, not online retailers.

What ratio of
IndiaPlaza’s business comes from Tier I and Tier II cities? What are your
revenue expectations this fiscal?

Around 40 per cent of our business comes from Tier II and
Tier III towns. We are planning sales of around Rs 200 crore this fiscal, up
from Rs 50 crore last fiscal.

What are the new
categories that you have planned for 2012?

We will just expand the existing categories since the
opportunities are quite large and we are already in most categories.

You have been a
strong critique for of cash-on-delivery (COD) as a payment option for
consumers. But you have COD in some of your products. How does that help?

We were the first company to offer cash on delivery in 2004.

Cash on delivery is a very inconvenient option for consumers
and merchants. Consumers go online to shop looking for selection, pricing and
convenience. Cash on delivery negates convenience because after placing an
order, the consumers have to wait for the courier to come, be available at home
or office to close the transaction, make sure proper change is handy, all of
which are irritants.

From a merchant point of view, the process allows customers
too much time to change their mind, which they do! Hence return rates for CoD
is as high as 45 per cent for most e-commerce companies who focus on this. For
Indiaplaza, we have kept CoD orders to below 5 per cent of our business. We
offer it because there is so much of talk about how CoD is driving e-commerce
in India and how we also need to do this.

Here is some interesting data. Over 80 per cent of
e-commerce in India is travel and almost 100 per cent of this is paid online.
So, there is no way CoD can drive e-commerce in India!

Here is more data. India has over  18 million credit cards and over 180 million
debit cards. Less than 7 million shop online so there is enough scope to expand
in this community itself for Indiaplaza, this is where we want to focus.

We also charge customers a fee for CoD orders below a
certain amount because there is an additional cost and there are no free
lunches!

Another trend in the
ecommerce industry is setting up your own logistics network. What are your
plans on this?

We are into online shopping and not into logistics. There
are logistics challenges especially last mile deliveries in India but I feel
that the courier companies must solve this. On the other hand, if they cannot
solve it with their experience and infrastructure, it will be harder for us to
address this problem by setting up our own logistics.

Even if we do so, it is not a scalable model given the size
of India!

Do you have any
acquisitions planned this year?

No.

Speaking about
ecommerce as a sector, how strong is the competition now?

Competition has always been very strong for Indiaplaza. We
have worked hard trying to get customers to shop from us instead of Landmark,
Crossword, Croma, Ezone, and Shoppers Stop. This has intensified recently but
it shows that we are in a growing market and that is great.

If FDI is allowed in
India and companies from abroad are permitted to step-in, will you be worried?

Certainly not. I have been a strong supporter of allowing
FDI in multi-brand retail. This will be good for India and what is good for
India cannot be bad for Indiaplaza!

What would be your
advice to a budding ecommerce entrepreneur in India?

Start the venture with a clear plan to grow in a sustainable
and profitable manner. It is easy to sell online, it is hard to sell online and
make money. Choose the harder path that is how you can stay ahead of others
because most people will always choose the easier path.

Show More

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Close