5 Interesting Facts about Indian E-commerce industry in 2014

India’s entire e-commerce industry was worth only $11 billion in 2013. 

In a report on e-commerce, however, broking firm Motilal Oswal says that this is just the start of a multi-year growth for the e-commerce sector in India. Indian retailers, therefore, do not have to be too concerned as despite strong growth in USA and China, e-tailing is still only 5-6% of total retail sales there.

Here are five interesting insights from the Motilal Oswal report.

1. As of 2014 , India Lags Behind China in the E-commerce Space

India is almost 10 years behind China in the e-commerce space. China’s inflection point was reached in 2005 when its size was similar to India’s current market size. Thankfully for India the dynamics currently are similar to what existed in China then – growing broadband penetration, acceptance of online marketplaces, and lack of physical retail infrastructure in many places.

2.Bulk of E-commerce in India is Travel E-commerce

Travel is where the real money in India’s e-commerce is. Online travel accounts for nearly 71% of e-commerce business in India. This business has grown at a compounded annual growth rate (CAGR) of 32% over 2009-13. E-tailing, on the other hand, accounts for only 8.7% of organised retail and a minuscule 0.3% of total retail sales. Even within sales of physical goods, books are a mere 7% of total book sales, mobile phones are 2% of all handsets sold, and fashion goods sold online are just 1%. Online jewellery sales account for only 0.2 per cent of all jewellery sold. Motilal Oswal, however, expects e-tailing to pick up with a focus on fashion.

3. Customer Acquisition rather than profitability is the focus area for most of the players

Alibaba is an outlier when it comes to margins and making money in the e-commerce ecosystem. The Chinese company makes an operating profit of 40% compared to industry standard (US and China) of 8-10%. Travel sites typically make 2.3%. Amazon, the industry pioneer, is yet to achieve healthy profitability even after two decades of dominance. Indian players, the report points out, are not even thinking of profitability yet. It’s a game of market share and market penetration, causing all serious players to have a war chest ready for when the industry scales multiple times.

4. E-commerce companies are leading to growth of Companies offering support services

For every Rs 100 spent on e-tailing, Rs 35 is spent on supporting services like warehousing, payment gateways, and logistics, among others. Delivery costs a platform owner 8-10% implying significant burn. Though 50-60% of delivery logistics today are handled by large e-tailers themselves, this proportion may reduce going forward as the participation of lower tier cities picks up. Presently, aggressive pricing in India is leading to e-tailers making losses on every segment. For a Rs 100 sale of a book, the e-tailer incurs a loss of Rs 24, a loss of Rs 13 in mobiles, and Rs 8 in apparel. 

5. Tier 2 and Tier-3 will be growth drivers for E-commerce companies due to lack of organized Retail

Demand in India exists across 4,000-5,000 towns and cities, but there is no significant presence of physical retail in almost 95% of these. High real estate cost is one of the main reasons why organised retail is unable to expand at speeds expected earlier. Real estate as a percentage of sales is 14 times higher than in the US. For large retailers in India, it is 7% of sales as compared to 0.5% for Walmart. 

How colour impacts E-commerce Customer Behaviour?

The Psychology of Color

According to a study conducted by the Seoul International Color Expo, over 92% of people said that color plays an integral part when purchasing merchandise. Believe it or not, only 6% said that their sense of touch played a major role, whereas smell and hearing amounted to a tiny 1% of people’s votes - unless of course they were buying air freshener or music.

Further research carried out by the Institute for Color Research showed that shoppers subconsciously judge people, the environment, and the product within the first two minutes of the initial viewing. Crucially, 60% to 90% make an assessment that is solely based on color. Therefore, it goes without saying that catching the customer’s eye with an intelligent layout of colors is integral to ecommerce success. 

Here is a brief look at eleven widely used colors and the effect they have on online customers:

Brown

Brown is a strong and dependable color which is very reassuring to shoppers. It gives off an aura of confidence and, if used in the right amounts, can help convert a potential customer.

Orange

Orange radiates ambition and energetic warmth. It also represents passion, originality, and fresh beginnings. Orange paired with cool shades of blue can give off a positive and exciting vibe.

Yellow

Yellow is a cheerful and playful color that can really grab the customers’ attention. However, it should be used in moderation because an excessive use of yellow can turn customers off. 

Green

Green has a natural and organic aura, which is why it is considered to be very easy on the eye. When shoppers see green, they often relate the color to positivity, relaxation, safety, and harmony.

Pink

Even though pink is usually associated with femininity, it can appeal to males as well since it exudes kindheartedness, romance, and love.  Pink has a soothing effect so it can be used to offset more aggressive colors like black, orange and red.

Red 
Red taps into the deepest, most primal, emotions of shoppers. Since red is usually associated with love, life, and confidence, it can convert potential buyers into lifelong customers if used correctly. But beware, too much red on a webpage can be visually overwhelming.

White

White exudes purity, wholesomeness, and clarity, and it is essential to most web pages. It is recommended to  include empty white space around your content so that customers don’t feel boxed in.

Purple

Purple has long been associated with royalty, power, and affluence. Intelligent use of this color can help the customer into making a positive purchase.

Blue

Blue conveys feelings of trust, peace, and productivity. Although blue is one of the most common colors on the web, it should be avoided if your webpage is involved with the hospitality industry, especially with restaurants as blue is said to decrease appetite.

Grey

Grey is usually connected with seriousness and a conservative mindset. The right shades of grey can serve as a great backdrop for other more vibrant colors such as orange, red, and royal blue.

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Black

Black is associated with strength, power, and dominance. When used in ecommerce,it sends a confident message to potential customers. Excessive use can give off a bland and gloomy ambiance, so it should be used in moderation, along with other tranquil colors.

4 Trends Driving E-commerce in 2014

The e-commerce context is changing each moment and the Businesses have to anticipate strategies to manage these changes in their favor. In this context, sharing the 5 Ecommerce trends to watch out in 2014

1-    Growth of Mobile as a key Platform

Mobile has a high potential and is expected to be the key channel in times to come as Mobile makes shopping very convenient. With falling internet data prices, Users find it cheap and convenient to access Internet from any location be it Airports, Traffic Signals, Cafes or waiting in the line etc. This ease of Ordering through Mobile has further fuelled Impulse purchases. 

Businesses are investing more resources for optimization of their mobile sites to enable customers to have seamless shopping experience across platforms.

In first half of 2013, United States citizens spent $10 billion in mobile commerce and could exceed $25 billion by the end of the year, according to a recent study by comScore . IN BRIC countries like Brazil, Russia, India and China, mobile is expected to surpass Desktop and Tablet traffic by 2015. The Telecom Regulatory Authority of India (TRAI) in its recent report stated that mobile users were 89 percent of the total Internet subscriber base in Q2 2013.

2-   Personalization for Customer Engagement

Personalizing customer experience is a key customer engagement tool and is expected to drive e-commerce growth in 2014 .With increase trend towards online shopping , Brands are becoming more sophisticated in their ability to collect information about customers and using this data to deliver personalize recommendations , tailored offers and delivering differentiated experiences each time.

Retailers have realized the importance of personalization. According to recent Aberdeen Group research, 41 percent of surveyed retailers stated that personalization leads to higher levels of customer satisfaction, increased average order values and greater customer loyalty. Also, Cross-selling and up-selling tools benefited with 25 percent sales lift by presenting targeted offers based on both related products and similar products purchased from other.

3-   Big Data

The excitement surrounding Big Data has arguably been generated primarily from Web and E-commerce communities. Significant market transformations have been accomplished by leading e-commerce vendors such as Amazon and E-Bay through innovative and highly scalable e-commerce platforms and product recommender systems. Major internet firms such as Google , Amazon and Facebook continue to lead the development of web analytics ,cloud computing and social media platforms.

Tesco, for instance, is a good example of a retailer making the most of big data to innovatively increase sales. It uses weather records and detailed sales data to help predict demand for certain products based on weather forecasts.

4-   Social Networks as a Key Influencer Channel

In analyzing traffic and sales from nearly 800 retailers, IBM found that only 1 percent of visits to ecommerce sites came from social networks. (IBM’s measurements consisted of sales that could be directly attributed to traffic from social media — a “last click” from the social site to an ecommerce site)

An article from Google Think Insights points out that social media does, indeed, play a role, albeit a supplementary one. The article outlines four different segments where marketing channels fit along the customer path to purchase: Awareness, Consideration, Intent, and Decision

These findings are commensurate with a 2011 survey conducted by Practical Ecommerce, which revealed that 77 percent of responding merchants saw less than 5 percent of sales coming from social media.

Social Networks though not a direct Sales channel for Big Retailers, supports E-commerce in Promoting Brand Awareness, helping in overcoming customer reluctance to purchase, improving customer loyalty, providing marketing insights, supporting search engine optimization.

How Product Videos Help E-commerce Business

E-commerce with time has evolved from Catalog pictures to Gif Images and Product Videos. Retailers are looking for ways to Engage Customers in a bid to increase sales. In the last few years retailers have realized the importance of Product Videos. Capturing the ways, Product Videos help E-commerce.

Product Videos Increase conversion Ratio

The great thing about online video is that people vastly prefer watching over reading .It spans nearly every industry and demographic. Organizational housewares etailer StacksAndStacks.com reported that visitors were 144% more likely to purchase after seeing a product video than those who did not. The majority of respondents reported that they are more confident in their purchases

Treepodia ran multivariate testing for two of its clients’ sites and found that product videos increased conversion rates even when the shopper didn’t actually view the content.

For retailer A, the conversion rates were as follows:

·         Control group (i.e. those who didn’t see any videos): 1.04%

·         Users who could watch video but did not: 1.47%

·          Users who watched video: 4.06%

·         Increase when comparing the users who could watch video (whether watched or not) to control group: +46.22%

Retailer B saw similar results:

·         Control group (i.e. those who didn’t see any videos): 3.27%

·         Users who could watch video but did not: 4.06%

·         Users who watched video: 4.82%

·         Increase when comparing the users who could watch video (whether watched or not) to control group: +27.05%

Product Videos Help Improve SEO Campaigns 

Google algorithms look at countless factors when assessing a website’s credibility and relevance. Video can have a positive effect on SEO, making product pages with video rank higher than those without video. Here are three reasons videos impacts search results:

·         Time on site: The more time users spend the better for SEO. On average, consumers spend two minutes longer on retail sites with video.

·         Repeat users: When users come back to site, it shows search engines that site contains valuable information. Consumers are 45 percent more likely to return to websites with product videos.

·         Social sharing: Social sharing is important for SEO, and videos are more likely to get shared than text or images. In Invodo’s survey, 52 percent of consumers said they shared a product video within the last three months, and over 20 percent had shared 5 or more times.

Product Videos Reduce Return Rates

One reason for returned goods is that customers haven't been able to get a decent idea of the product before they place the order. Thus, when it arrives, and isn't as expected, it has to go back. 

Retailers can address this issue on product pages, by ensuring that customers get as much visual information as possible. 

Simply Group found that using 360 views and instructional videos of its ski products not only increased conversions, but also reduced returns rates, as customers were able to see exactly how each product worked. 

Common Misconceptions about Indian Internet User

The demographics of Indian use reveal some unexpected findings. Indian men are far more likely than women to be on the Internet (32 percent versus 12 percent) and more than three times as likely to be digitally influenced (14 percent versus 4 percent). 

Those with high income levels are well represented online, but even 18 percent of the lower-income “strugglers” (whose annual household income is less than $3,300) have Internet access, and 6 percent are engaged in commercial activity. 

Although users in India’s metropolitan areas are generally the most digitally connected (30 percent) and digitally influenced (13 percent), consumers in the smaller tier 1, tier 2, and tier 3 cities still report Internet access rates of just under 20 percent. However, their commercial activity is considerably below 10 percent.Overall, the Internet has the highest penetration among people 18 to 24 years old (48 percent) and the lowest among those older than 54 (6 percent)

Key Challenges in Online Retail Market - India

Summarizing the Key challenges in Online Retail market in India-

1- Lack of touch-and feel and a mental barrier for online shopping

Most Indian consumers prefer to sample a product before making a purchase. This applies across categories such as clothing, shoes, perfumes and accessories. Lack of touch-and-feel in online shopping could lead to issues such as wrong product sizes (in shoes and clothing). This creates a mental barrier for consumers to shop online

2- Increased competition with the entry of global players

The growth potential of the online retail segment in India is attracting leading international players. The entry of international players would increase competition in the segment. The advanced technology capabilities of global players in areas such as customer analytic and recommendation engines would pose a challenge for local companies. International players have larger financial resources than their Indian counterparts. This enables them to bear losses and restrict supplies to their competitors by buying out supplies from vendors. This could drive out smaller domestic players from the market.

    
3-Low margins prompting E-commerce players to look at new Business Models 

The majority of e-Commerce companies are price players due to the stiff competition they face and the race to acquire the maximum number of customers. This results in very low margins or none at all. E-Commerce players could look to adopt new business models to increase their margins. 

Cheers!

Always Positive

13th May

Impact of User Generated Reviews in E-commerce

Why do E-commerce Websites need User Generated Reviews?

User reviews are proven sales drivers, and something the majority of customers will want to see before deciding to make a purchase. The below factors indicate how user reviews increase sales-

1- User Generated Reviews increase Conversion Ratio

User Generated Reviews eliminate any doubts potential customers may have about a product, or can help product selection. Consumer reviews are significantly more trusted (nearly 12 times more) than descriptions that come from manufacturers

2- User Generated Reviews improve Search Engine Optimization (SEO)

Search engine spiders like unique content that is regularly updated, and user reviews are a great way to attract more content. 

When many e-commerce sites just use the same standard manufacturer descriptions and product specifications, user-generated content can differentiate a product page in the search results. This is important as it makes pages more useful to customers, and also increases the chance of ranking highly in the SERPs. 

3- User Generated Reviews increase Click Through Rates ( CTR)

User Generated Reviews help make more informed web browsing and purchase decisions while helping companies increase their potential for earning more qualified leads.

Summarizing the impact of User Generated Reviews in the Infographic below-

Cheers!
Always Positive 
11th May 2014