[Abhaya Agarwal, co-founder of Pothi shares his perspective on future of book retailing in India. Do share your comment/opinion.]
It has been long since e-commerce made its debut in India but it is still to catch on in a major way. The absence of Amazon from Indian market is a major indication that it is not yet considered a lucrative enough market by big players. A lot has been said about it, tons of research papers written, lots of workshops/panels have probably discussed it to death. I have not read any of them and so pardon me if what I am going to say sounds very amateurish.
As somebody who is betting on a business model that has Internet distribution at its core, it is very important for me t
o understand why e-commerce has not caught on in India and what would it take? There is a first obvious bunch of reasons that comes to mind – lack of broadband penetration, lack of good online payment mechanisms ( which includes lack of widespread credit card use and absolutely pathetic state of Indian payment gateways), lack of good logistic providers ( some are way too costly while others are simply not reliable, you can read the horror stories all over web and then I can tell you some of my own experiences) and simply bad e-commerce websites (as put to me by one of the players in the space, pointing towards an old competitor). We all know and understand these and save for the last one, can hardly do anything about them other than pray.
But this post is about a different aspect. I was in US for 2 years and the overarching theme of retail sector there and economy in general seem to be a destruction of giant brick-n-mortar chains at the cost of more efficient online alternatives. Amazon is of course there, Zappos is there and the whole e-bay thing. The current recession has only amplified the vows of physical stores. In short – large scale organized retailers are incumbents in the new economy that is taking shape.
Turn to India and the picture couldn’t be different. The organized retail sector in India is just getting started. The last few years have actually seen the spread of the model from groceries to stationary, shoes, electronics and everything else you can think of. Deep pocket, large players are entering the space one after another in a mad rush. Again the current slowdown has brought down the expansion speed but the trend is not over by any stretch of imagination because the fruits of a more integrated supply chain managements are just beginning to be felt by the common masses.
Let’s talk specifically about books. Today we have several large format book store chains around – Landmark, Crossword, Depot, Timeout and others. And the customer experience is just so much better in them as compared to normal book shops – you no longer need to know the name of the book/author you are looking for, you can go and browse the books, read them, discover new authors right there in the book store – none of which is possible in an old format store. The choices available are much wider. The point is – the new format retail is a much bigger deal for books as compared to let’s say grocery. Most of the time you don’t have to explore and discovers new groceries. But in books – that is the name of the game. There is a value add besides simply the price.
On the other hand, this is also a fact that books are one of the best selling online items in India after ticket bookings (Air and train). In a especially price sensitive market like India, they have a clear advantage (although combined with the expensive shipping, that gets diluted). The large number of languages in India present a totally new challenge for distribution and creates many types of long tails (inherently smaller languages like Tulu, the groups of people living away from the main language area – Tamils in North) which are again ideally suited to digital solutions but none of the current players seem too keen on them. Increasing petrol prices are kind of ambivalent – they probably encourage users to avoid driving to retail stores but they also jack up the logistics costs in form of fuel surcharges.
The question I wonder about is – in this situation where these two models are seeing simultaneous evolution, how will they interact? Will we see a Indian Amazon emerge which will soon start kicking butts of big retail stores? Will the Indian retail chains adapt to Internet better and sooner then their US counterparts have managed (given that Indian companies have already seen how it can turn out)?
Will we short-circuit to the future that seems to be taking shape in US or will we reach some different equilibrium point? All these are interesting questions and those making right bets will emerge at the top.
But as we know from the Quantum Physics – “The very process of observation affects the results of observation.” Similarly these bets are also going to decide what future turns out to be.
Exciting times!
Image credit
“The very process of observation affects the results of observation.” – Well said.
Another Amazon- maybe not in style but possible in magnitude, India is such a market that Indianises almost everything; (e.g. MTV no where else is broadcasted in local language of an other country) so we probably will have our own desi amazon kinda format.
Can you share some resources that indicate current e-tail statistics (like books is only behind ticketing)?
Abhay, I think you nailed the issue in your analysis. As someone who has done quite a bit of book shopping in India, I prefer to visit the real store for the simple reason that it allows me to discover new books, authors and subjects.
This choice is something that Indian consumers are experiencing for the first time. It will take some time before the number of alternatives become so large that an online model of search and order starts making more sense. Plus you do need an Amazon type recommender/discovery system.
In my opinion, the real market for online books, right now, in India is textbooks. As everywhere, they are almost seen as a necessary evil. Plus its a concentrated market reducing delivery challenges. Leading to reduced prices sure to attract the most price sensitive and needy group in the market.
@Sriyansa, That is the similar to some of the other responses I have received. I am myself not very clear about textbooks market but one thing is very clear. In textbooks, there is another decision maker involved – either the prof in professional programs or the school administration in schools – that makes targeting a market decidedly trickier. More over I think the secondhand market of textbooks is quite strong and is usually localized – books prescribed in one university are usually different from another university – which is again a challenge.
But it will be surely interesting to see somebody try and crack in to this market.
Abhaya
@Abhaya Agarwal, Great points on the textbook & second hand markets. This with some of the other comments got me thinking if a pure aggregator model might not be a good way to crack the Indian market. that is, the e-tailer becomes purely a bridge between a range of suppliers and customers.
Positives, you don’t carry inventory, the entire process can be automated, is scalable – you can start small and add more nodes with delivery as the only marginal cost and most importantly adding new languages/publishers becomes a lot easier since you would be using existing relationships
Negatives, low barrier to entry, difficulty ensuring consistent quality of service, low margins. In addition any delivery charges might offset the cost advantage for users and trying to reduce them might just eat into your already low margins.
As an aside, IMO payment mechanisms are a relevant challenge today but will not determine the fate of this domain. We would see new payment mechanisms (mobiles anyone) that would be widespread and more amenable to Indian users
Hello,
This is new to me that Amazon doesn’t have an Indian market .
Regards
John McCall
http://www.net-ebooks.com
I think one of the most important reasons why Amazon has not looked into India is the size of the market. IMHO, Indian e-commerce market is around a couple of hundred million dollars which is a very small pie compared to the US market which is order of a few 10′s of billions of dollars. A few of X-Amazonians have gotten together to build infibeam the Amazon of India. Try it out!
Abhay,
Very good Insights. I have been tracking the e-retailing in India as well as globally. Yes, there is Amazon and Zappos, and although they may be selling goods slightly higher than costco.com or walmart.com or even the retail outlets of Walmart and CostCo which one can easily find in 10 miles radius, why both of them have been successful is because of their exceptionally good customer service. There is a lot of learning which e-retailers (read retailers as well) in India have to do and innovate not only in the business processes but also in the technology to crack the e-retailing market.
In my view, the e-retailing market would be ripe in next 1-2 years as the internet penetration grows in India but the time to create your brand is now. When the market gets ripe, then the big guys like Reliance, or Aditya Birla group with lot of money muscle power would enter. Look at the head start Big Bazaar got just because they entered in 1999 as compared to Reliance Retail which entered in 2005. Reliance retail is still trying to compete and had to tone down their aggressive plans.
We would see much more innovation in Indian e-retailing market which would come from pure e-retailing players rather than the brick and mortar retailers. At the same time, the e-retailing players would partner and often drive sales of offline retailers by collaborative selling.
@Vikas Banga, Doesn’t it sound like deja vu when we talk about e-tailing being ripe in 1-2 years?
even if the internet penetration grows, what I am thinking about is if there is sufficient value provided by e-tailing in India that customers would flock to it? We cannot just assume that this is the future and so it will happen, soon or later.
Abhaya
A lot things seem very favourable to online book stores (some of them have been discussed in the article):
i. Economy – Online Bookstore can afford to offer books at much cheaper prices
ii. Broadband Penetration – With the pace at which broadband users are growing, it is imperative that a good portion of it would transact online
iii. Credit Card usage – Sites like http://www.irctc.co.in have pushed users into using credit card that they were previously wary of and hence users are much more open to using credit cards online.
iv. And most importantly, the sheer population of a nation like India should make such a business a success.
ashish
add print version to articles as sometimes i want to download blogposts to read later on.
A very good analysis, but as Mr Prahalad had said entreprenuers do it, analysts tell you why not to do it!
We talk about all brands abroad, but we are forgeting our own guys, Capt Gopinath had some firsts in that region, no ticketing agents, only online booking.
IRCTC is another prime example which just gave an option but was simply walloped by masses.
My view is quite simply is is waiting to be taken up by someone with a big idea to take this really forward, with a good price we would be able to live with either poor delivery service which would enventually improve or the expensive service would get cheaper. The big courier companies had reduced the local delivery charge after facing the heat from the lower guys. Entreprenuers, customers are just waiting for you, get your model right, focus on customers and plunge in!
(Ashish this comment box leaves a lot to be desired, there is no spell check, cannot allow to make a line enter or i think so, please upgrade)
ya man concept is rocking even i was thinking for this business also….but i stucked at problem of shipping charges in india.how one can adjust shipping charges and his profits in price money in second hand online business market……
Consumption of items like books is so low in india; rember read in one of article few months back that book with sale of 10,000 copies is considered successful; now in a country of 1bn people 10,000 is such an small number.
Why consumption is low; Pricing is one of big hurdle. Country where majority of people earn 4000 – 10000 cannot afford to spend rs.300 onwards on book for reading; and then there are books which cost much more and we cannot expect too many indians to buy books.
For why no amazon from India yet; hardware and broadband prices have kept PC, internet penetration low; on top of this you have to fight Grey market which is far cost effective than any of online site. I have seen people who are so high in career rank and who have stayed in US/Europe for 10s of years prefer to buy gadgets in grey market. This is why much of so called organized retail is not taking up in India; local shops have beat this chains with deep pockets and n no of strategists reports to back there claims. Online shopping will really catch if internet penetration; low margin sale; better delivery channels (once i got my book delivered on 20th day from one of leading shopping portal) and customer care services.
Well written Abhaya.
I am one of the early adopters of online book stores in India. I bought a few books from sapnaonline around 5-6 year ago. I believe that online book stores stand a much bigger chance than other e-commerce stores, and the primary reason for that is “assurance of quality”.
In books, unlike electronics, you don’t have to worry about warranties and about what lies inside the box. For someone who just goes to book store to buy the books he has already decided on, its a great deal of convenience to just order online rather than going from store to store trying to find that “rare” book.
Probably the biggest challenges would be to figure out cost-effective shipping and logistics and once you have done that, its a world of opportunity waiting.
Nice article.
I wish to set-up books retail business in NCR Delhi.
Kindly advise about Book retailing – Distribution busness, how does it operates, commission structure etc., particularly for education related (schools,colleges)books.
Thanks & Regards
Pradeep
I wonder how do these retailing companies tie up with shops to build inventory, handle logistics etc ?
I am regular online shopper of books…. I do buy books from flipkart, sapnaonline, medicalbookseller…..these sites has made my life a breeze…now I don’t have to go one shop to another for my medical books…. till now I have atleast bought books worth Rs. 16k to 18k…and by god none of them cheated me….however price differs from site to site….choice is yours
Retailing in India is a challenge, because of varied expectations among users.
there a lot of players who have realized how big the books segment is. Initially there were a lot of players in the gifting market (NRI) market. I guess with internet penetration and the more wide use of internet to make small valued purchases many players have jumped into the race. Infact indiaplaza has revamped their website. infibeam has expanded their selection vastly and I guess have one of the largest collection in india today. I guess time will tell
I was searching internet to buy Used Original books and i came across this wonderful site
www. mumbaibookmart.com
Most of the books and novels at Rs.110 only.
The best thing about this website is that payment is cash on delivery.
i.e you pay after you get books in cash when they are delivered at your home.
Also there are no shipping charges
But shipping is only for India
No credit card needed so it was very safe
All i had to do was order books with only needed details as name, address and phone no.
I got order confirmation call and books were delivered
Also if a book is not available on website then just leave a post a request they respond within 24 hours.
Awesome website, must see for all book lovers in India
Granted all pros, granted all cons. The best part is, folks coming up and continually innovating in the market. I recently came across an online startup http://www.flipgraph.com
They seem to be doing all what I wished someone would provide some day. Get access to 1000s of used books, pretty much every title I searched I found it and at cheapest price 90% of times. They have a concept of flipping or swapping, I was able to swap 10 of my books with them and got 3 new items completely free of cost, delivered in 2 days.
I wish there are more such similar services that come up in other online retailing items. I am already a fan.
We all talk about technology support, internet penetration, credit card uses for online shopping but on my opinion online selling of books in India will not get success until support is organized e.g. the publisher and distributor (appointed by Publisher). Till now they are so unorganized that they themselves providing false information sometime. Further, they are not also investing to make it organize because of monopoly and with an attitude that if not today tomorrow you will come back to us if book required.