K Vaitheeswaran, Co-founder and COO, Indiaplaza.in

E-commerce portal Indiaplaza.in was originally launched as an online music store, called Fabmart.com, in September 1999 by a team of six experienced professionals led by V S Sudhakar. This month the company completes its 10 years of operations.

For almost a decade, K Vaitheeswaran, as a co-founder and chief operating officer of Indiaplaza, has been engaged in evangelizing the cause of e-commerce in India. Before joining the founding team of Indiaplaza, formerly known as Fabmart and then Fabmall, he was marketing manager at Wipro Infotech. In an email interview with AlooTechie, Vaitheeswaran talks about his experiences in operating Indiaplaza.in and his future plans for the company.

Could you please let us know why did you leave Wipro Infotech and decided to become an entrepreneur?

In 1999, I was in my tenth year at Wipro. While it was a great company to work for and I was doing reasonably well for myself, I was getting the feeling that I was not being challenged enough. Work was getting a bit easy and I was at a stage in my career where I did not want to take things easy. I tried changing assignments -- both within and outside the company -- but none of them seemed to be daunting. So, I decided that I must look for an opportunity to start something as soon as possible. The key idea behind my entrepreneurial journey was to build something from scratch, preferably in an area that held huge future potential but at that time must be a new concept, at least in India.

Sometime later in June 1999, I had a chance meeting with V S Sudhakar (ex-CEO of Planetasia.com) who was planning a startup with some common friends. One thing led to another and I signed up -- the challenge of selling stuff online to customers who I will never meet was really exciting.

You are a graduate in electronics engineering and have worked for offline companies. What made you decide to launch an internet startup?

Well, most entrepreneurs who started a dot.com company in the nineties were working for offline companies -- there was no other choice!

While working at Wipro, I was exposed to the web for the first time in 1996. I was simply amazed at this new world that unfolded in front of me just through some clicks on my computer. I was fascinated as I visited sites like Yahoo, Amazon and Microsoft and instinctively felt that a technology like the internet would have immense impact on people’s lives in future and I wanted to be a part of the change that was sure to occur.

I was actually inspired by the Amazon concept -- the idea that a person could be in one place and sell stuff to consumers worldwide through the computer was exhilarating.

You co-founded Fabmart and later Fabmall.com. Then, it was rebranded as Indiaplaza.in and then Fabmall acquired Indiaplaza.com? What is the exact story behind the launch of Indiaplaza?

While we were building Fabmall.com, the early growth rate in e-commerce was quite slow. To counter this, we launched the Fabmall chain of grocery stores in Bangalore. This became quite successful and subsequently was acquired by the Aditya Birla Group (later renamed as More).

Meanwhile, we had also raised investments into Fabmall.com from the Indigo Monsoon group who were also investors into Indiaplaza.com, the leading NRI portal based in Austin, Texas, US. We were excited about the concept of cross border gifting and we integrated the catalogue and local fulfilment of Fabmall.com in India with the Indiaplaza.com customers in US.

When the offline chain got acquired, we felt that it is a perfect time for us to invest all our energies into a brand that will be purely online. Indiaplaza was a lovely name -- the ‘plaza’ explained our business nicely and the ‘India’ provided an emotional connect with consumers in India or NRIs. Hence, we shifted to Indiaplaza.in for our India operations.

If you notice our logo, the word India appears in English, Hindi and the local Indian language of the state you are logging in from -- Kannada from Karnataka, Tamil from Tamil Nadu, Oriya from Orissa, Bengali from Bengal etc. This is an innovative marketing technique we have deployed to build the India emotional connect.

So, we acquired Indiaplaza.com and went in for a common brand worldwide.

Indiaplaza was launched at a time when the concept of online shopping and e-commerce was not so popular in India. What were the initial challenges that you had to face?

There were several challenges in the early years. The first was to create a website purely for e-commerce purposes. The only other website of repute at that time was Rediff.com and it was a broad-based portal. So, the entire concept and navigation for a pure play e-commerce site was new and we had to think it through from zero base.

The next challenge was to get merchandise. We started with an online store selling music cassettes and CDs. We approached all music labels requesting them for data on their titles along with jacket scans. The concept was so new that we had a hard time explaining what we needed from the music labels.

Data entry was another issue. We managed to get empty jackets but the data was not available in electronic form. I recall those days when we hired a team of young contract employees, put them in a large wedding mandap (hall), sat them on the floor and got them to read out thousands of titles, artiste names and song listings within 30 days and launched the store.

Strangely, we managed the challenge of getting an online payment and the issue of shipping and logistics reasonably well.

It is said that Indian customers love to have a touch and feel factor before making a purchase. How difficult was it to get customers initially?

Very tough, since the concept was new. Also, the few people who were using the web were concerned about using credit cards online. I remember that on the day we launched we got six orders -- four from the co-founders themselves. The next day, sales fell to just three orders. This year, we expect to ship out over a quarter of million consignments in India -- that’s how much things have changed as far as e-commerce is concerned.

Touch-and-feel is a myth. If you think hard enough, you will understand that there are very few items where touch and feel helps us to ship better. Women’s apparel is an example. But for most items, we just convince ourselves that we need to touch and feel it before we purchase. It is not true at all since most items across categories are shrink-wrapped anyway.

What did you do to survive the infamous dot.com bust of 2000? How difficult was the time and what made you stick to the business?

We have always run our company with a middle class mentality and I mean this in a complimentary sense. We are frugal, we don’t splurge, we do not advertise in mass media and we are very careful about spending money. This is the key factor that helped us survive the dot.com bust.

If you go back to the dot.com bust, most of the startups who folded up had no revenue model (future projections were based on advertising driven models) but they were spending money up front acquiring eyeballs. We had spending customers from day one and we were not spending too much money.

The 2001-2004 phase was really tough and there were periods when we were not sure if we will last out the next month. What kept us going was the fact that we were convinced there is a huge future potential and we cannot give up in between. Sometimes, the journey is the reward if the conviction is high.

How satisfying has been the performance of your e-commerce venture since its launch? Are there still drawbacks and challenges in the system that needs sorting out?

We complete ten years of e-commerce in September 2009. This is a very satisfying milestone. So many companies have started e-commerce operations in India but hardly anyone has lasted this long. This is because e-commerce is a hard and tough business and requires some unique skills and assets that we have built over time.

If I look back over the past decade, I have mixed feelings. I wish the internet in India had grown faster than it has but we cannot do much. We have to make do with whatever we have and in that sense I am happy.

E-commerce is still in its early days and the real tsunami will happen in the next ten years. We are best prepared to take advantage of this future growth due to our experience, but there are still lots of things that we need to do to improve and we are at it every day.

How the revenue has been growing for your company on a year-on-year basis?

Indiaplaza has been on a steady growth curve and over the past few years, we have seen tremendous surge in sales, margins and customers.

Indiaplaza has business alliances with several Indian media companies. How are these partnerships doing?

Our alliances and partnerships with The Hindu, Malayala Manorama, Business Standard, You Telecom, Businessworld and recently Sify.com are part of the unique assets we have built over time. These partnerships are a vindication that we are the best in the business and our partners prefer to use our expertise and deliver value to their readers and online browsers.

We assess these partnerships not just by sales (which are growing) but by the responsibility that we carry on our shoulders -- Indiaplaza must deliver consistent value to a partner’s customer and how we deal with this. Given that our list of partners is growing, I can say we have done a reasonably good job on this front.

Have you witnessed any sort of decline in business due to the recent RBI (Reserve Bank of India) mandate for assuring extra security to customers’ credit card details?

No, not really. Most banks have been urging their credit card members to sign up for an extra PIN (personal identification number) for quite some time now. Most leading e-commerce websites like Indiaplaza.in have been complying with Verified by Visa (VBV) / MasterCard SecureCode for quite a while now. So, customers have been used to this new system and thousands have already graduated to using PINs for credit card transactions. So, the RBI ruling, while mandatory, has not impacted sales as such.

How has the current economic slowdown affected your business?

There has been some impact. We are in the retail business and retail growth is driven by consumer confidence. If consumer confidence gets hit, they spend less and retailers face a problem. Thankfully, the worst seems to be over and things are beginning to look up. So, while 2009 will continue to be a challenge, 2010 should be a good growth year for us.

Actually, internet retail will benefit the most from such downturns. Websites like Indiaplaza offer huge deals and savings to customers and during tough times, consumers look for value.

Which of the product lines have been the dominant contributors to your revenue growth? How many items does your catalogue offer presently?

We offer over four million unique items on our catalogue, the largest by any company in India. The top contributors to our revenue are books, electronic gadgets and apparel.

We are especially proud of our online bookstore where we are seen not just as a dominant player online but we now compete effectively and successfully with offline book retailers with nationwide chain of stores. In recent years, for several books like the last Harry Potter book, Nandan Nilekani’s ‘Imagining India’, Subroto Bagchi’s ‘Go Kiss The World’, we are among the top three retailers of these titles including offline stores.

In fact, the Indiaplaza Golden Quill Book Awards is now seen as the most prestigious book award in the Indian publishing industry.

What is your customer base right now? From which part of the country most of your customers come? According to you, what sort of e-commerce potential do the tier II and tier III towns in India have?

We have served over one million unique customers so far. Most of our customers are from the top 10 cities but the percentage of customers coming in from tier II and tier III towns is increasing.

Actually, tier II and tier III towns have probably bigger potential for e-commerce. This is because large formal physical retailers are present in the top metros but for consumers in small towns, websites are the best place for them to get access to huge selection and pricing because the local stores are still small outlets with limited range and selection.

Mainstream retail companies like Future Group and Vishal Mart are now bullish on e-commerce. Does that worry you as they might have a deep pocket and huge cost structure for their support?

Here is something we are really proud of. Most startups get to start a company; we pioneered an industry that today is attracting attention of large industrial houses and groups. In other words, we visualised an opportunity much before others did in India.

We are happy that large players with deep pockets like Tata, Reliance, Future Group are all eyeing e-commerce. Thanks to their interest, they will be able to expand the industry and this is good for everyone.

Also, e-commerce is a tough proposition. One cannot succeed merely by investing large sums of money. It requires deep understanding of online consumer behaviour, insights into what works and what does not work over time backed by hard data and other specific assets that only Indiaplaza, thanks to a decade of work, has access to. We are confident that we will continue to maintain our leadership position in the industry we pioneered.

What is your pricing policy? Do you differ in your pricing strategy from your competitors?

Our pricing policy is simple -- offer customers the best value for money. All of our items are available at a discount. In at least 95 per cent of the four million items we retail online, we are the lowest priced seller. In specific cases like the upcoming launch of The Lost Symbol, Dan Brown’s next best-seller after Da Vinci Code, we are offering our customers savings up to 124 per cent, which is incredible.

Do you have plans to target overseas markets? Is that likely to be affected by the slowdown?

We have been servicing customers outside India for 10 years now. We have an office, warehouse and inventory in Austin, US and we ship orders locally from here. It is a growing business and we will focus on it.

A key part of this initiative is getting customers to send gifts to India on festivals and occasions. This is not likely to be impacted due to the slowdown. We just finished the Rakhi festival and actually grew by 20 per cent over last year.

Downturns will come and go; the bond between a brother and sister stays firm forever. Which brother will tell his sister that this year I am not sending you a Rakhi gift due to the global economic downturn? True love is recession proof!

Indiaplaza had received funding from Indigo Monsoon Group (IMG)? Are you looking for additional funding?

Thanks to our leadership position and uniqueness, we are constantly approached by potential investors wanting to be a part of the ‘Amazon.com of India’. As our business keeps scaling, we will keep re-evaluating our investment needs. I guess at the right time, we will raise more funds.

What, according to you, has been the biggest milestone of the company till now?

I am proud of two milestones that I have already mentioned earlier. First, most startups get to start a company; we pioneered an entire industry in India. Secondly, we completed ten years in e-commerce. So many companies worldwide started e-commerce websites in the past decade and not many exist today.

As a startup, what mistakes and course corrections did you make?

One of the problems of starting something completely new as a concept is that there is no one to learn from. Everything we did has been a result of our own innovations and ideas and many such initiatives failed to take off. Our mistakes are too many to list here but it is all part of the intellectual property that we posses today and this is part of what makes Indiaplaza the best e-commerce company in India today. We continue to error even now but the mistakes are far less and more importantly everything that does not work teaches us a new thing about consumers online.

Which are the media that you mostly use to advertise your product and what medium has been the most beneficial advertising platform for you?

We have been careful of advertising. The internet base is still too small to justify mass media spends and the little that we do spend is spent online. Finally, our customer needs to be online to shop with us so it is the most effective medium on a comparative basis. On an absolute basis, the returns are still modest even online.

Our partnerships and alliances with media companies and credit card issuers have been our biggest strength.

What are your views on internet as an advertising medium? Is brand building possible on internet?

There are two types of internet brands -- brands that can be built because of the web and offline brands that use the web to reinforce the brand message. The first is obviously possible and we have proof in brands like Yahoo, Amazon, eBay, Google globally and in India there are strong online brands like Rediff.com, Naukri.com, BharatMatrimony.com and Indiaplaza.in etc.

In case of the second situation, I continue to believe that offline companies are yet to master the intricacies of digital advertising. The myth is that the percentage spent online is too small by large advertisers but my view is that less is being spent due to discomfort with the medium. Once the medium intricacies are mastered, flows online will surge because the returns are quite attractive and will be so in future as well.

You have seen the evolution of internet in India. How far internet, according to you, has become popular in the country?

The internet has already had a significant impact in the lives of people. Pure connectivity in terms of convenience and speed through email, internet telephony for overseas calls saving costs, delivery of online education modules from leading institutions across the country and removing the need to be on campus, conveniently posting resumes and looking for jobs, searching for the right bride and bridegroom, instantly breaking news from across the world and more. Today, all this has become common habit for millions of people in India.

In a small way, we have also helped people shop better and save more.

What are the driving factors that will help e-commerce grow in the country?

There are quite a few factors that will drive e-commerce but the most important will be the growth of broadband homes. Here is some telling data. In the period 1999-2002, the number of broadband homes in US jumped from 1 million to 16 million. In the same period, e-commerce surged from $650 million to $6 billion. This is not a coincidence. In India, we are still around 3 to 4 million broadband homes. Once this number reaches 20 million, shopping online will become a mainstream activity.

How do you see the future of mobile as an e-commerce platform in India?

There is a lot of excitement about m-commerce but I feel these are very early days. M-commerce is where e-commerce was 10 years back -- lots of excitement but not much traction. I feel the excitement is coming through due to the fact that more people use the cell than use the web. But there is a lot of information and data transfer that is required which is a challenge for smaller phones and dropping screen sizes. Also 3G speeds will be needed.

Right now, it’s fine for digital delivery items like tickets and probably for simple items like flowers, specific titles of books and DVDs etc. But large number of transactions is still a while away. Having said this, there is potential that can be tapped.