Internet not happening in India? Think Twice
A general sentiment about Indian Internet market is that owing to dismal Internet penetration, things just aren’t happening. The TAM (total addressable market) is too less to allow multiple business categories and of course, multiple players.
But then – here are two stories that questions the above sentiment-
IRCTC website sells 1/3rd of the total railway tickets sold in India
IRCTC, as we have been covering sells 34% of the total railway ticket sold in India. In 2008-09, of the 860,000 or so tickets sold everyday, around 200,000 ( above 25 per cent) were sold online (IRCTC accounted for 17% of the total passenger earnings of the Railways in 2008-09). As per July 2009 numbers, IRCTC sold 300,000 tickets every day (total number of tickets sold per day was 880,000).
Retail Investors Embracing Online Trading Platform
One out of three trades on the NSE and a fourth of the exchange’s average daily turnover today originates from retail Internet trading platforms. (source)
Apart from increased awareness/interest among the retail crowd and penetration across new user segment (youth), availability of Internet, broadband penetration and hassle-free trading have enabled customers to embrace the Internet platform.
Is Internet still not happening in India?
I keep meeting whole lot of people (startups/VCs) who have taken a stand that Internet is still not happening in India and given the lower penetration number, things do not look so rosy (especially from investment perspective).
While one can argue on either side, what’s clear is that Indian netizens need pain killer at this point in time – vitamins are for the MySpace generation (ref: Vitamins or Pain Killer? What exactly are you solving?) and can probably wait.
The basic premise here is that Internet businesses can be built targeting Indian netizens – as long as you keep the pain factor in mind.
So ‘happening’ or ‘not happening’, there are categories/companies which are minting money – so think of your business plan and see if you are really solving a pain.
What’s your opinion?
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Related posts:
- Mobile VAS Conference: IRCTC sold only 921 tickets over mobile
- e commerce in india: IRCTC still contributes 1/3rd – Something to worry about?
- News Bytes: TripAdvisor: IRCTC, IPL Theatre Rights
- Majority of Indian Internet users aren’t sure of Internet’s utility?
- Internet Penetration in India shows healthy signs [Akamai Report]
About the author - Ashish Sinha is a Startup Mentor/Product Strategy Coach, and the founder/chief editor of pluGGd.in.
He has launched/managed couple of products (consumer as well as enterprise) in US and India, and now consults with startups/small businesses on their product/media strategy. He can be reached at: ashish (at) pluGGd.in [+91 98452 06443]
Ashish,
Let’s send this link to all those who crib about why India can’t create GOOG, MS & APPLE
& why retail internet doesn’t work in India.
Mobile will drive the online services adoption sooner than later – I was surprised to see number of start ups building innovative solutions in this space during “Mobile Track” event in “Startup City”, Bangalore.
Coming to VC’s – thrash me but I am yet to come across one VC in India who can bet their nuts on startups working towards Internet markets (both local & global):), our guys are more of money lenders in villages than those risk taking valley VC’s we read everyday in TC – no blame game here on Indian VC’s
it’s their (investors) money let them invest in so called proven business models.
Ah, if I had a dime everytime I hear that internet is not happening in India, we won’t need funding
Of course, it is not true. As we see it, if a customer sees a definite, tangible value or service proposition to doing something via the internet as opposed to offline method, he or she will switch. Internet penetration is the only ceiling to the number of customers an online business model will have.
People saw that they could avoid lines and the trip to the station if they book at IRCTC. They saw that they can view hundreds more marriage profiles if they use Bharat matrimony or some such. Travel bookings for flight, hotel etc., online trading, online banking – all these provided a value or service proposition that offline providers could never match. And when that happens, customers WILL come to the platform.
On our platform (don’t want to do any explicit advertising), we see customers bending over backwards to accomodate some of the shortcomings of our service because our core proposition has tangible value – both in terms of cost (lower) and features (more and better) – compared to offline competitors. I’m not talking enormous volume here, but the acquisition cost is most definitely coming lower than our projections/estimates.
As far as VCs go (referring to Vijay’s comment above), two things:
1. Companies that provide such tangible, obvious value or service propositions are hard to come by. So they have few examples to go by to validate new ideas
2. It is far easier and less riskier to go with a widely proven model than a narrowly established one.
Hence their reticence is my guess.
Well I find this argument supporting that internet *is* happening in India pretty funny…kind of the same way that I find arguments in a lot of (generally) business books which can prove 2+2 = 5 by giving 2-3 examples supporting a particular thing and “forgetting” to mention 100’s of examples opposing their argument.
Anyways for starters we can look into what’s the hot amongst the VC circle in India – is it internet at all?
Go for examples or create your own business..i guess this article talks about the second part.
Pt. is there are enough businesses that are being created by ppl by using www as a channel – so while it’s fun to say internet isn’t a great business to start anymore (read: deap ubhi, burrp founder’s post?), the reality is that those who have to make money are eventually making money..
maybe pain killer is the way to go
Very true, Aayush. When a customer is deciding whether to do something online, they are definitely first checking the VC circle to see whether it is a hot thing to do…
There have been numerous internet investments in the Indian internet space – OTAs (online travel agents for flights, hotels and even buses), Matrimonial portals. At least 7 such internet companies have been funded in the country, so it is unfair to say that VCs have not been investing in internet businesses in India. Lifeblob, Rupeetalk, Myntra etc are other internet business that raised VC money!
There are very other few internet businesses that have been able to demonstrate any clear path to some scale (even on paper).
There have been numerous internet investments in the Indian internet space – OTAs (online travel agents for flights, hotels and even buses), Matrimonial portals. At least 7 such internet companies have been funded in the country, so it is unfair to say that VCs have not been investing in internet businesses in India. Lifeblob, Rupeetalk, Myntra etc are other internet business that raised VC money!
There are very other few internet businesses that have been able to demonstrate any clear path to some scale (even on paper).
Great Thoughts! I agree with the thoughtprocess here. Sometimes even i have had that exact feeling..why is internet not happening in India? And glad to see your answers. Its true that there are both types of consumers- who needs the pain killer and the one who is looking for multivitamins. And there is no harm building your business around both the lines – except the fact that where malnutrition exist, people first need a balanced diet before they go and buy multivitamins.
Hey Ashish,
I dont say that Indian Internet is not happening but both the data you presented is about standard products. Nothing about “touch and feel” products. Both the securities and rail tickets are standard products that need not be seen for buying. It can be done over phone and so it can be done over internet as well.
33% of rail tickets are booked online but are 33% of passengers booking this? NO. probably only 3.3% do it online by themselves. the truth is that even Travel agents use IRCTC website to book tickets for their clients, who order it on phone.
The total amount of stocks traded online s also negligible. The people who have lots of money are probably in 40’s or 50’s and are probably English illiterate. Youngsters who trade online are doing it on behalf of someone(i do it for my dad).
Internet will be happening in India when we see youngsters quitting newspapers and read online. People research for electronics online and buy online as well. People pay their utility bills online. Infact most utility services dont even provide facility to pay bills online.
This is a good argument. Looking at the internet (transaction) population as a whole helps nobody’s case. For IRCTC, the end product is a standard, and the alternatives are much more painful. Even so, intermediaries play a huge role!
Its not a black/white about there being or not being an internet story in India. As IRCTCs, and Citibanks (which launched online-only banking ages ago) demonstrates, there is a tool, and entrepreneurs need to figure out how it’ll work in a given context.
As a tool used by lots of end users directly, yes, its not that huge a market, but through intermediaries, or as a tool that enables distribution/dissemination through a hub-spoke model – well, all I can say is phase II of the effort and experimentation has barely started.
@naman very valid point u hv raised….no app has been turned from vitamin into a pain killer yet…. But times seem to be changing, Naman…
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Very good discussion. I dont quite agree with the article that eCom has really taken off in India. Like naman already mentioned, how many of the internet savvy people really buy a product on internet? I would guess that it would a very low number there.
We use internet mostly for services like paying utility bills or buying rail tickets that too mainly because we usually have LONG queues in both places and its lots of hassle.
Another area where I see internet doing well is online banking (again LONG queues, otherwise). Even here, most banks encourage online banking and there are no additional charges levied for online services (exception being ICICI Bank’s recent policy change for online transfers – http://bit.ly/IMybD )and thus the usage.
But, the internet is here to stay and it will only increase from what is there today – as the digital generation ages, the usage and the pattern of usage will start changing.
[...] (IRCTC) to take over the stalls, causing Rs 3 crore in losses to Southern Railway. … Internet not happening in India? Think TwiceIRCTC, as we have been covering sells 34% of the total railway ticket sold in India. In 2008-09, of [...]
have been trading online for quiet some time… some problems sometimes ..but otherwise relaince money trading has been working fine.
this is a great discussion. My two cents for Internet not happening much in India. For the IRCTC and online trading examples , I think what I have to say is :
1) IRCTC as a business is only selling – look at the large infrastructure ( the Indian railways ) and no competitor- a very unlike a real world scenario
2) Online trading: Although largely prevalent is still a loss making service .
Other than this I would also like to add , something I read on Alootechie, some gentleman who wrote an article on why in India its tough to do business ( let alone online ).
I have always believed in an economy like ours if we really want to build world class products we should be ready to pay top money. And with no money in the system – ( either for startups or for people joining) there seems to be a definite problem that needs to be addressed