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.
