Three start-ups seek to remove hurdles online buyers face
Despite attracting growing number of visitors, online retailers suffer from low conversion rates. Three start-ups seek to remove the hurdles online buyers face.
Sabrina Francis runs a Hyderabad-based non-governmental organisation working for Dalits. For years, whenever she travelled abroad, she had to go through the formalities of transferring a large sum of money online from her bank account to that of her travel agent to pay for the tickets. She had never been comfortable doing so.
Trisha Anand, a 21-year-old student at the Birla Institute of Technology and Science, Pilani, ordered a microwave oven from a leading online shopping company, which promised delivery within five days. It took 17 exasperating days and innumerable calls to the customer care centre of the company, before she finally got it.
Francis and Anand's experiences exemplify two major problems online shoppers face: payment gateways are often inefficient, as are the courier companies entrusted with deliveries. A third problem, from the online retailer's viewpoint, is that of low conversion: many visit their sites, but very few place orders. However, with e-commerce revenues growing at 40 per cent annually, and the market expected to top Rs 46,500 crore by the end of 2011 - as estimated by the Internet and Mobile Association of India - a number of entrepreneurs have sprung up seeking to take care of such pain points.
For instance, Hyderabad's Gharpay offers a solution for customers reluctant to buy online because of reservations about payments. You merely confirm your order online; Gharpay collects the payment from your home. Working exclusively for portals, the service, which started in April this year, already has 15 clients, including the likes of Cleartrip.com, Redbus.com, Dealsandyou.com and Meraevents.com. Gharpay's network of agents makes collections from 550 postal pincodes across six cities: Hyderabad, Mumbai, Delhi, Chennai, Bangalore and Pune.
"We work like a last-mile logistics company. The only difference is that we handle cash, not goods," says Abhishek Nayak, founder. Among those who have welcomed Gharpay is Francis, who has since switched to buying her tickets from Cleartrip. com. As soon as a customer orders a ticket on Cleartrip.com, for instance, his or her name and invoice number are transmitted to the Gharpay portal.
In 24 hours, a cash collector reaches the customer's doorstep with a copy of the ticket and collects the payment. Gharpay charges the online company a commission on each transaction, just as a payment gateway does.
Collecting money is not an easy task, be it from online shoppers or elsewhere. Chances of fraud are ever present. But Shailesh Lakhani, Partner at venture capital firm Sequoia Capital, who has invested in Gharpay - the amount is confidential - is hopeful about its prospects. He believes the speed of delivery will be critical.
"People will be willing to opt for this mode of payment if Gharpay can deliver tickets and make cash collections within 60 to 90 minutes of a request being placed," he says. The problems online retailers had with deliveries have often been so acute that some like Flipkart.com have moved logistics management in-house relying on teams of delivery boys. For a regular logistics company, such retailers are low priority, comprising only a small part of its business.
But now Delhi-based Santa Claus Couriers has set up a service called Chhotu.in, catering solely to shopping portals. Started in May this year, restricted so far to the National Capital Region, Chhotu has a 55-member team handling 150 deliveries a day for customers of Myntra.com, Urbantouch.com, Zovi. com and Hushbabies.com. Chhotu prioritises customer convenience. "We even entertain special requests such as making delivery at a particular time, or delaying the delivery because the customer is not in town, which others will not," says founder Navneet Singh. In six months, it has already made a difference. "Our average return rate of deliveries in Delhi and Gurgaon, which used to be nine per cent, has come down drastically," says Lochan Mathur, Manager, Operations, Zovi.com, an online men's apparel seller. Various incentives offered by Chhotu also enable online retailers to save around 30 per cent on delivery costs.
Lately, online retailers have been advertising heavily. Millions now visits their sites every month, but how many actually buy? The conversion rate at one of the most frequently advertised sites, Yebhi.com, is 1.5 to two per cent. Trying hard to grow this figure is Trolly, an application created by the Bangalore's Adepto Solutions, started in early 2010 by two former Google employees - Kiran Kumar and Prem Pillai. It has formulated a complex system of reward points to attract online buyers.
If a customer buys a book from a bookseller linked to Trolly, for example, he gets a special discount - apart from the usual discount most online shopping sites provide - but only if he posts the news of his purchase on his Facebook page. The Trolly application through which this information is shared also quizzes the customer's Facebook friends and rewards them with a discount if they answer correctly. "More than 50 per cent of the people who win discount coupons visit the site concerned to redeem them," says Kumar.
Adepto charges clients 'per engagement' - every time a Facebook user interacts with a product using Trolly, it counts as an engagement. Leading online retailers like HomeShop18 and baby products seller BabyOye have begun using Trolly. Adepto even has two US-based clients - Shoeprivee and Music Power - doing trial runs with Trolly. "The opportunity for such companies is big if they have a global product with rapid scalability," says Karthik Reddy, Managing Partner at Blume Ventures, who has invested $3 million in Adepto.
There are others too seeking to smooth these bumps on the e-commerce road. Their challenges are similar. "For one, margins will be under pressure as e-commerce companies will not be willing to pay much," says Sequoia Capital's Lakhani. There is also the problem of some larger companies seeking to do everything themselves minimising reliance on external agencies.
Trisha Anand, a 21-year-old student at the Birla Institute of Technology and Science, Pilani, ordered a microwave oven from a leading online shopping company, which promised delivery within five days. It took 17 exasperating days and innumerable calls to the customer care centre of the company, before she finally got it.
Francis and Anand's experiences exemplify two major problems online shoppers face: payment gateways are often inefficient, as are the courier companies entrusted with deliveries. A third problem, from the online retailer's viewpoint, is that of low conversion: many visit their sites, but very few place orders. However, with e-commerce revenues growing at 40 per cent annually, and the market expected to top Rs 46,500 crore by the end of 2011 - as estimated by the Internet and Mobile Association of India - a number of entrepreneurs have sprung up seeking to take care of such pain points.
More than 50 per cent of the people who win discount coupons visit the site concerned to redeem them: Kiran Kumar
"We work like a last-mile logistics company. The only difference is that we handle cash, not goods," says Abhishek Nayak, founder. Among those who have welcomed Gharpay is Francis, who has since switched to buying her tickets from Cleartrip. com. As soon as a customer orders a ticket on Cleartrip.com, for instance, his or her name and invoice number are transmitted to the Gharpay portal.
In 24 hours, a cash collector reaches the customer's doorstep with a copy of the ticket and collects the payment. Gharpay charges the online company a commission on each transaction, just as a payment gateway does.
Collecting money is not an easy task, be it from online shoppers or elsewhere. Chances of fraud are ever present. But Shailesh Lakhani, Partner at venture capital firm Sequoia Capital, who has invested in Gharpay - the amount is confidential - is hopeful about its prospects. He believes the speed of delivery will be critical.
"People will be willing to opt for this mode of payment if Gharpay can deliver tickets and make cash collections within 60 to 90 minutes of a request being placed," he says. The problems online retailers had with deliveries have often been so acute that some like Flipkart.com have moved logistics management in-house relying on teams of delivery boys. For a regular logistics company, such retailers are low priority, comprising only a small part of its business.
Lately, online retailers have been advertising heavily. Millions now visits their sites every month, but how many actually buy? The conversion rate at one of the most frequently advertised sites, Yebhi.com, is 1.5 to two per cent. Trying hard to grow this figure is Trolly, an application created by the Bangalore's Adepto Solutions, started in early 2010 by two former Google employees - Kiran Kumar and Prem Pillai. It has formulated a complex system of reward points to attract online buyers.
If a customer buys a book from a bookseller linked to Trolly, for example, he gets a special discount - apart from the usual discount most online shopping sites provide - but only if he posts the news of his purchase on his Facebook page. The Trolly application through which this information is shared also quizzes the customer's Facebook friends and rewards them with a discount if they answer correctly. "More than 50 per cent of the people who win discount coupons visit the site concerned to redeem them," says Kumar.
Adepto charges clients 'per engagement' - every time a Facebook user interacts with a product using Trolly, it counts as an engagement. Leading online retailers like HomeShop18 and baby products seller BabyOye have begun using Trolly. Adepto even has two US-based clients - Shoeprivee and Music Power - doing trial runs with Trolly. "The opportunity for such companies is big if they have a global product with rapid scalability," says Karthik Reddy, Managing Partner at Blume Ventures, who has invested $3 million in Adepto.
There are others too seeking to smooth these bumps on the e-commerce road. Their challenges are similar. "For one, margins will be under pressure as e-commerce companies will not be willing to pay much," says Sequoia Capital's Lakhani. There is also the problem of some larger companies seeking to do everything themselves minimising reliance on external agencies.
