The Vernacular market in India

The growth of PC and Internet penetration in India has been impressive in the past few years. However, the bulk of this growth has mostly been in urban India thereby widening the gap between rural and urban India in terms of adoption of Information and Communication Technologies (ICT). Considering this divide, this writeup, which is primarily taken from an IMRB Survey done in 2007, examines aspects of localisation and regional content provided over the Internet. On a passing note to ratify the findings of the survey I would like to allude to another survey done by Euromonitor. The survey posited that Internet users generally prefer to read in local language had gone up from 59% in 2007 to 72% in the year 2008.(The data is a bit old)

The premise this report attempts to evaluate is that the traditional media (i.e. television) adoption rates increased once the content offered was more regional in nature, a similar spurt in usage can be expected once the digital media such as the Internet provides localized and regional content.In addition to taking key conclusions from the IMRB survey, I have added some of my views and inferences which I gathered while researching on this topic.

Upon conducting primary as well as secondary research, the IMRB report arrived at the following conclusions:

1. The characteristics and orientation of Indian populace towards consuming print, audio and visual communication is regional and localized in nature. They seem to be more amenable to communicate in the language they are more familiar with. English seems to be their less preferred choice of language.

2. Following the patterns in television and radio medium, the key to unlocking the doors to widespread adoption of ICT in India lies in achieving the mix of infrastructure, application and content.

3. There is a difference in the usage as well as demand of vernacular content among the Indian populace. While the urban population is predominantly occasional user of vernacular content and indulge in local language access and exchange on a cyclical basis, the rural population uses the vernacular content very infrequently. The reason for this difference is primarily because of the non-availability of infrastructure as well as content in vernacular language.This is where I feel the next round of organic growth would happen for ecommerce. Increase in the consumption of Indic languages would bring the so called marginalized population into the realm of internet in general and ecommerce/etailing in particular. Many companies, I know of are investing in transliteration product for the web and mobile.

4. For the digital localisation or vernacular industry to take-off in a big way, there is a need for digital content that is designed to serve daily and important informational needs of rural as well as urban population. For rural areas, as an example, an apt application would be providing medical information through public access computers. Research and development efforts are also needed to provide predictive translation initiatives such as context-specific literal translation as well as advanced solutions such as Optical Character Recognition (OCR) and Text-to-Speech. Given these initiatives by the public as well as private sector, we expect that India will catch up with the highly developed localized markets across the world.

Few forms of content delivery:

Disaster blogging is an interesting facet of this vernacular adoption phenomenon that came to the fore during the time of the Chennai tsunami, Mumbai flood/rains, Mumbai blasts and the like. In addition to above, almost all the major media houses such as NDTV, CNN-IBN and Business Standard, are trying out blogging to tap stories and comments from citizens. CNN-IBN has gone ahead and announced a citizen journalist award for posting best story.

Vortals

The current bouquet of Indian language offerings is mostly news. These vortals offer news in Indian language as follows:
• International news sites offering international news in Indian language.
• Websites of traditional newspapers and news channels offering news in Indian language. The web versions of their newspapers include Indian language papers like Dainik Jagran, Navbharat Times, LokTej, etc. Their USP is in providing not only local language interface but also news at local level in addition national and international level news.
• Portals collating news from various sources like international news from Reuters, national news from PTI and publishing them in Indian language.

Content, application and infrastructure would determine how easily vernacular content would penetrate the masses. Infrastructure comprises access points, such as kiosks, public access, mobile phones and enabling devices such as keyboards and peripheral devices. These sets of infrastructure need to be in the Indian language interface so that it is easier for the users to interact with the technology in the language they are comfortable to them. To ensure an end-to-end local language delivery, Applications as well as Content need to be provisioned in localized language. Exemplar applications in ICT include facilities such as messaging, web browsing and the like. Content are sets of information that could be exchanged and accessed through these applications. The content that is available today on the Internet is largely in English and is location independent. The task is to make this content available in the dialects spoken in India. However, given the diverse socio cultural background in India this is a complicated task. Mere literal translation of the content in local language might not ensure adoption. A context-aware translation, on the other hand, is needed to guarantee widespread acceptance of ICT. Once infrastructure, application and content is available in Indian language a bulk of the population which is not literate in English would be able to relish the benefits of technology.

Critical trends of the future

For any ecommerce company - to make it big in the next leg of growth – they should be aware of the critical trends of the future. An awareness of the critical trends of the future would give them a platform on which they could make their next generation offerings. According to me the 3 key trends of the future are as follows:

1. Web is becoming more personalized & social

a. Web 2.0 to Web 3.0 – Intention web

Web has moved from Web 1.0 to Web 2.0 and has since graduated to Web 3.0. Generation of Web 1.0 has seen the emergence of companies such as Amazon where the main focus was on ecommerce. In the era of web 2.0 we saw simultaneous upsurge of three factors – commerce, content and community – and companies such as Facebook and MySpace hold fort. Web 3.0 was all about personalization and socialization – A congruous mélange of Community, Content, Commerce, Context, Personalization and Vertical Search. The next 2 years would witness companies in Web 3.0 space.

Jeremiah Owyang, the founder of the word “Intention web” has some soothsaying thought in mind when he coined the term. According to him World Wide Web as it stands now is not fast enough. Web has, in my words, graduated from Asynchronous to Real time to Intention web. Search, which is the facilitator of getting information from web, is based on past data. It does not capture the real time intention of consumers. That is why, these days we see twitter results being part of SERPs. To read more about this click here

b. Mobile Social, Social Media, Search Marketing, SEO

I can write pages on this, but that would be digging an already dug ditch, though in a positive sense on a Keynesian note. There is so much that’s happening in this area that I would not be able to do justice in few words. All said and done, mobile social, social media, search marketing and SEO have done wonders in the area of digital marketing. I would write separate articles on these topics later.

c. Collaboration ( Wikis, IM, Blogs, Microblogs etc )

I cannot stress on the fact that Collaboration is the next big thing. What we see now is just tip of the iceberg. With money being poured in technology advancements such as Captology, Mobile Persuasion, Semantic Search, Netnography, and Augmented Reality collaborative solutions would chart a new growth phase.


2. With 500 + million mobile subscribers consumer internet is heading the mobile way.

a. Advent of 3G

We would see a paradigm shift in the market place when 3G comes of age. I personally believe that the demand for content and to be more precise, rich content would be generated from the rural and SEC D&E town and cities. With the less clogging of 3G spectrum, content providers can push rich content via mobile to these hungry users. Opportunities such as mobile episodes (mobisodes) and Video on Demand service would grow leaps and bounds. The rural market has the ability to consume humongous amount of entertainment content – be it in the form of Akbar-Birbal stories or small snack entertainment cartoons or even infomercials. A huge untapped opportunity lies here.

b. Evolved ecosystem : m-payment companies

Everything is not hunky dory in the mobile commerce space. We already discussed that 70% of the profit margin is taken away by the mobile service provider. Even more so, the m-payment ecosystem is not so streamlined. We have to build a more evolved ecosystem where the service providers would no more fleece the m-payment companies.

Standardization across mobile applications again sticks out like sore thumb. Some service providers use symbian as operating system where as some use android. Consolidation or standardization is a must in this space to enhance user experience. If that does not happen users would be pissed off downloading apps which do not run on their mobile operating system.

3. An engaged experience (Shift from text to visuals)

a. Product images & videos are important in etailing

We have seen a tremendous thrust at least in electronic retailing on product videos. In case of images also, much more stress is being given on clarity, 360 degree views, multiple views etc.

The clarity of the above mentioned pictures makes all the difference between a comfortable and satisfied online shopping and a frustrating one. The clarity of the pictures, unambiguity of the price, a provision to use videos adds to the whole shopping experience. In the pictures one knows about the product details to a very granular level. The length, breadth, height and even diagonal of the product offering has been mentioned. As if, it is supplanting offline experience. The consumer purchasing the product has a fair idea about the offering - she can actually visualize that her blackberry is more or less as the same size as her ipod or credit card.

The more we can bridge the chasm between online and offline shopping the better for the etailing community per se. And, good images as well as videos play an integral part in making it happen. We would also realize the power of videos when I talk about Augmented reality in my subsequent blog posts. In a nutshell, mobile has changed the way content is delivered and online retailing on mobile is not far away.

Some may argue that I missed out vernacular growth as one of the key trends. I believe it is essential but not essential as the 3 trends I mentioned. I would talk about vernacular growth in my next blog post.

A parallel that I can draw from the US mcommerce market

No doubt, there is a huge potential for mCommerce for two key reasons. First, electronic transaction markets or e-payment markets are expected to grow at 70% over the next 2 years. Second, there are a lot of basic services such as bill payments for water, power, telephone and other services that are still not conveniently accessible in India. Without any hassles, most of the transactions that are taking place through e-commerce today can be implemented through mCommerce. However, there is still a lot of skepticism in the industry as far as ubiquity of retail transactions via mCommerce is concerned.

My skepticism on the mobile commerce hype is borne out of the following facts.

1. A comparison with USA mobile internet usage.


The following charts depict the

a. USA mobile internet user profile.
b. How often an average American uses the internet over the mobile phone?
c. Mobile commerce scenario in USA.

The US mobile Internet audience (over the age of 13) is about evenly split between those over the age of 35 (48 percent) and those under the age of 35 (52 percent). Additionally, there are approximately as many teenagers using the mobile Internet as there are persons over the age of 55(5.1 million persons age 13–17 and 4.4 million persons 55 and older).

Though it would be unfair to compare the mCommerce scenario in USA and India, we can definitely highlight a few noteworthy points here. The observations are based on the scenarios which exist at this point.

1. In a country such as USA, where technology adoption is much better, (than India) the mobile commerce usage - as far as purchase of retail products is concerned - is not encouraging. In the last histogram, it has been clearly depicted that only 9% of mobile commerce has been actual purchase of products and services. Out of this 9% product purchase we don’t know what percentage is actual product purchase from electronic retailers (Discounting the ticket purchase). We can safely assume that the figure would not be more than 4%.

In fact, a pedagogical deduction can be achieved taking USA as a benchmark. After so many years of the advent of mobile commerce, if in a country like USA – where people just lap up any new technological innovations – where retail product purchase over mobile is so abysmal, in a developing country like India it would definitely take some time (or a considerable number of years)before it becomes a force to reckon with.

2. Many retail goods are high involved purchase. Especially in an Indian context, many retail goods are high involved purchase. Goods such as books, music CDs and non-perishable grocery products are not high involved purchase, whereas apparels, perishable groceries, jewelries, automobiles and electronic items are. In India, mCommerce could be a successful proposition for all the low involved purchases.

3. Smartphone prices still expensive in India. In USA, the iPhone has increased mobile internet consumption by a factor of 13 times. In India, though data plans are available for many types of handsets, but a comfortable and enjoyable internet access over the mobile could only be through an IPhone, BlackBerry or some Nokia handsets. Unfortunately these handsets are still expensive in India and beyond the reach of a common man.

The government is aiding the growth by m-commerce in terms of releasing guidelines on mobile banking transactions. However, the adoption of m-commerce (especially retail product purchase) is abysmally low in India and the deterrent is the consumer purchase behaviour. By weeding out skepticisms and by educating the customers on the potential benefits, we can ensure mobile commerce to be a runaway hit.

To be successful in India

1. Separate thought process and design is warranted for m-commerce user interface. Seamless translation of the website to mobile would not have the same impact. A well designed and usable interface is critical. For example, properly designed mobile GUI would ensure that users can find information that they are looking for, perform transactions, spend time at the site, and return again.

2. Incorporate mobile persuasive tactics (the study of captology) to hook the customers, increase sales and signups and also increase traffic. ( Would pen down my thoughts on captology later)

Just a note here - Content delivery on mobile is going to go through the roof in years to come. Whether consumers would pay for those content - that's something we need to fathom; I personally believe people would. I would write a separate piece on the same.

Empowering the hinterland

mCommerce players believe that rural deployment of mCommerce is more important than its deployment in urban areas because of more opportunities.

1. Users in the metros are already equipped with card-based payments and online payment system.

2. According to statistics, around 50% of new mobile subscriptions every month come from rural areas in India.

3. The rural market in India holds a huge potential for deployment of m-commerce services and the subscriber base is expected to grow at a CAGR of 85% in the following years.

4. In India alone, two-thirds of the population is unbanked and has no access to formal bank accounts or financial services. So there is a large rural m-commerce market. The mobile channel provides a rare opportunity for India to leapfrog years of poor infrastructure development and actually bring the benefits of technology, low cost/mass market goods and services, and financial systems to the rural poor and lower working class.

5. There are many consumers in tier-2, -3 and -4 cities who have a lot of disposable cash but have limited access to physical retail outlets. For them, m-commerce will be a huge value-add.

Key barriers of mcommerce

Awareness: mCommerce services are at a very nascent stage in India, and the awareness among the people about various services being offered over the mobile platform is very low. The onus is on the industry participants to educate the consumers about the availability of various services and the benefits offered by each of them. CRISIL Research believes that educating the consumers and inducing them to try the services will be the greatest challenge for the mCommerce industry.

Security concerns: The average Indian consumer is still sceptical to carry out transactions involving money over the mobile phone due to security concerns. This is where the role of industry regulators such as the RBI is clear. The regulators need to ensure that the services offered over the mobile platform are offered through a secure and safe channel, and the risk of fraud or money laundering is limited. The industry participants need to develop applications that enable the transactions to be carried out in a secure manner; the consumers also need to be educated about the security levels embedded in the mCommerce services.

m-Payment experience:
(1) High burden on the user – A user who might want to do five transactions perfectly designed for the mobile medium – (a) paying their mobile bill, (b) Paying their Credit Card Bill, (c) Viewing their Bank Balance, (d) Checking Flight Schedules, and (e) Booking a movie ticket – would have to learn, register, interact with, or download five different m-payment solutions.
(2) SMS platform is costly in large volume and doesn’t always provide best performance. Every transaction adds incremental, uncapped cost for the user. (A purchase may require 3-5 SMS sent by the user).

In terms of utility per single transaction, current m-payment solutions are great. In terms of utility for multiple, transactions, they need to evolve.

Heterogeneous mobile platforms: Different mobile handsets are based on different mobile operating systems or platforms; this makes designing applications for mobile phones that much more difficult. The applications have to be designed to work on maximum handsets and need to be tested on various handsets for compatibility issues. Currently, most of the mobile applications are java-based as these can be used on a majority of the handsets that are GPRS capable (Most of the handsets that are GPRS capable are also java enabled irrespective of their operating system).

Low penetration of credit cards: India is primarily a cash economy and the low penetration of credit cards in our country acts as a barrier to the growth of mCommerce services.

Perceived and Practical Value: mCommerce in India is at an embryonic stage and only a small percentage of the mobile users are even aware of availability of such services. Among consumers, though mCommerce has a low perceived value, its practical value has the highest potential among all MVAS. Subjective norms, perceived usefulness, perceived ease of use and behavioral control are strong determinants of intention to adopt mobile commerce. Studies have revealed that subjective norms and perceived behavioral control impact perceived ease of use and intention to adopt mobile commerce.

Key growth drivers of mcommerce

Convenience factor: Mobile, as a personal device, is always with the customer. Paying utility bills, transferring money, buying movie tickets or doing similar other transactions through a mobile phone is much more convenient.

Reach factor: Mobile phones, due to the unprecedented growth over the past 5 years, have achieved penetrations levels that are much higher than other channels such as wireline phones, Internet, PCs, cable television, bank accounts, etc. Mobile networks have penetrated into rural areas, where you don't have bank branches or Internet connections. This has opened up the possibility of offering services to the rural consumers over their mobile phones.

Additional channel: With increasing competition, businesses all over the world are finding out new and innovative ways to reach their customers. After evolving from traditional ‘brick and mortar' stores to virtual online stores that can be accessed over the Internet, retail companies are now offering mobile based shopping facilities to their customers.

3G services: With 3G networks expected to be rolled out in India over the course of next few months or so, the user experience for the use of data services over mobile phones is expected to improve significantly.

Data capable handsets: If we look at the pricing and availability of mobile handsets that are GPRS-enabled, then around 2-3 years ago, these would cost Rs 8,000 -10,000. Today, even low-end handsets that cost around Rs 2,500 are GPRS capable. The availability of data capable handsets at lower prices has enabled a wider user base to access data services on their mobile phones.

The potential for mCommerce is undisputed and many businesses are focusing on the mobile to bridge the gap with their customers. However, the growth has been slow to take off and we are yet to see mass adoption of mCommerce services.

Mobile Commerce - An Indian fairytale

Globally, mobile phones have seen unabated growth over the past few years. In India, the number of mobile subscribers crossed the 300 million mark in August 2008 from just 14 million at the end of March 2003; and 8-9 million subscribers continue to be added every month. Over the next 5 years, it is expected that the mobile subscriber base to more than double and reach 638 million in March 2013.

Mobile phone users in India outnumber credit/debit cards and internet users 2.5 to one. The convergence of data and voice on the mobile platform has enabled the mobile phone to emerge as a convenient and secure channel for the conduct of commercial transactions. The m-commerce sector is poised for growth in the Indian market owing to its intrinsic link to the booming mobile telephony sector in the region. TRAI reported that the number of Indians who accessed the Internet or use high-end data services over the mobile increased by 8 million from Q1 ‘07 (38 million) to Q2 ‘07 (46 million). This compared to only 9.3 million total PC internet connections across India in 2007(Could not gather data for 2009). However, the use of the mobile channel for electronic transactions is still disproportionately lower than it should be, given the penetration numbers above.

The Current Mobile VAS (Value-Added Services) industry (mCommerce is a part of it) was Rs. 9760 crores by end June 2009 and is estimated to grow steadily at 70% to touch Rs.16520 crores by end June 2010. The current MVAS market size and contribution of each of the services (that make up the MVAS domain) is given below.

Currently, users of m-commerce perform a wide variety of transactions via mobile from paying of utility bills and purchase of movie tickets to shopping and holidays. While the uptake of mobile payments is still gathering pace, services that are more accessible and easier to use are finding favour.

With the RBI’s support for m-banking and the release of its guidelines on mobile banking transactions (Sept-Oct 2008), banks have sped up their roll out of m-payment products with banks such as Standard Chartered, SBI and IDBI Bank launching their services in the early part of the year. A research done by The “Nielsen Company” shows 64 percent of m-payment users surveyed had registered for an m-commerce service within the prior six months. This points to a spike in consumer confidence in m-commerce since the RBI issued its guidelines in Sept-Oct 2008.


VAS/Internet Usage over Mobile

1. Searching for information and checking email are the main reasons why Indians use Internet on their mobile phones.

2. Google and Yahoo continue their dominance of the Indian mobile screen.

VAS/mCommerce

mCommerce is at a very nascent stage in India and the bouquet of services is yet to evolve. Currently, services such as purchase of movie tickets, information on bank account, transfer of funds, bill payments and merchant payments are the key offerings through the mobile platform. The financial services sector has been one of the early adopters of mCommerce due to the standardised and undifferentiated nature of products. Most of the large banks in India have started using the mobile phone as a channel to offer services to their customers. Retail is another sector that offers mCommerce services by allowing the customers to place orders and purchase products on-the-move.
Recharging pre-paid card or paying monthly phone bill is the most popular m-commerce activity undertaken by urban Indians.


Internet (on mobile) and mCommerce usage clearly shows that very few Indians have purchased retail items on the internet.

How to bridge the chasm between online and offline shopping experience?

In a country like India, online experiences are still looked up as complex and uncomfortable. This is evident when one sees that online buying in India is popular only among the select urban youth (though rural/non metro consumers are coming into the scene fast). There are evolving customer expectations, fears and inhibitions. Amidst such a scenario, the seller would have to devise strategies that are based on sound consumer behavioral research. By and large, studies (including the 2 mentioned in this report) find that convenience, online store environment, shopping enjoyment, customer service, and trust are vital in influencing consumer behavior towards willingness to buy and patronage of online retail stores. It is observed that customer service and trust levels (though it is changing now) are low and there is an urgent need to address these concerns. Some of the suggestions this report proposes for the fledgling e-tailing industry in India are as follows:

1. E-tailing in India can be a success if the eTailers change their business models and understand the “Determinants of Shopper Behavior in E-tailing”- E-tailers should create economic value for the Indian customers rather than a curiosity value.

2. Lack of trust and privacy concerns prevent a lot of consumers from making online purchases. For the metro users who are more educated and knowledgeable, data insecurity is not that much of a concern. However, it is a major concern for the not so educated non-metro/semi rural users. Therefore it is the need of the hour for e-tailers to adopt security measures and inculcate a sense of trust among online shoppers that data provided during online transactions will not be misused.

3. Adequate attention needs to be paid towards customer service, distribution, and logistics and these should be integrated seamlessly not only with the company’s existing website, but also with the company’s entire operations, online and offline. Importance should be paid on “Post-transaction” elements such as delivery schedules, warranty services, return and exchange policies, post-sales services and related technical support. Other service features such as free return shipping, alerting customers of their order status through email and recommending other products that they may genuinely be interested in (cross-selling and up-selling) are the means to customers’ delight and loyalty.

4. Online retail stores do not have standardized designs in comparison to the physical retail stores and product catalogues. Therefore, different user behaviors (navigation schemes) need to be understood by eTailers in order to avoid navigation hiccups.

5. Since shopping is still a ‘touch-feel-hear experience’, e-tailers need to create such environment as it is in a physical store by creating novel web designs and portals, sophisticated web atmospherics, e-mail updates, and live interactions over the Internet. Website design elements and aesthetics, as well as customization have an impact on consumer psychographics and consumer interest in buying online and the e-retailer needs to pay attention to this.

Attitudes and Preferences towards online shopping - non metro towns

A recent study (2008) was conducted in the state of Punjab in order to understand the attitudes and preferences towards e-shopping for Indians located in the non-metro towns and cities. This study (Factor Analysis-Eigen Value approach) used random sampling technique with a sample size of 900 respondents comprising businessmen, academicians and students. The following were the key findings.

1. Product Information and Reliability emerged as the most important factor of the research. The major elements which constitute this factor include: awareness of the media, whether the web provides more information than other media, and the detailed product information. The results depict that there is a general preference of people for using internet as compared to the traditional media. The quantity, relevance and authenticity of information provided by the retailer are important factors that affect the building of positive attitudes in consumers, to buy online. Consumer purchases are often based on the web appearances and information of the product or service offering. The marketer needs to customize the information about products and services to meet the customer’s needs and wants.

2. Audience attitude towards e-shopping - Website design and nature: Few factors such as responsiveness of the websites, Positive outcomes, Influencing power, data security and good information provider emerged to be of great importance to the consumers located in the non metro cities and towns.

3. Attitude towards E-shopping is influenced by many factors but two factors, namely product information and reliability, and website design and nature were considered more important for the non-metro consumers.

This analysis points out that, in the non metro towns and also in general there is a growing awareness of getting more information through websites. There is an increasing trend of using Internet for booking tickets, buying books and music but the scene has not transformed dramatically in case of India. A slow transition is visible in the younger age group (21-35 years) where the responsiveness and interactive web sites provide them more opportunities for customized products.

Though a majority of Internet users look for information on various product categories online, a relatively smaller portion of them actually buy online. In this study, only 11.87% of the respondents prefer to use the web for shopping purpose. However, a slight change in attitude is visible as the respondents have given higher rank to websites providing product information and the next rank has been assigned to website design and nature. E-marketers have to target the young age group and convert them into potential buyers. Interactive responsive websites can play an important role here. Interactive tools lead to easier access for the consumers, facilitate two-way communication and thus have favorable effects on the overall consumer purchase decisions.

Indian consumer psychology

Consumer behavior is affected by consumer demographic traits, psychological characteristics and situational factors. A consumer’s online shopping behavior like traditional buying behavior is influenced by psychological factors such as motivation, perception, learning and beliefs, and attitude. Age, gender, education, and income along with personality styles have significant effects on attitude formation in the context of online retailing. Consumer motivational patterns (in terms of needs and involvement), learning patterns (previous experiences with online shopping), perceptual processes and opinions, social and group influences, lifestyles and cultural issues—all have an effect on the consumers’ attitude to shop online.

Today, it is necessary to identify the elements affecting the online consumer’s behavior so that marketers can focus on such elements while formulating their strategies, and to give the online consumer a total ‘web experience’ which includes stages of information search, product comparison, evaluation and selection, as well as the interaction and transaction that occurs between a buyer and a seller.

The following table provides the ranking of the factors which affect Indian online purchase behavior. (Survey taken end of FY2008)

Key Findings from the survey

• Most consumers perceive online shopping as a time saving convenient option. An online buyer saves time, effort and money when buying online as compared to buying from physical stores.
• Few of them are of the opinion that availability is an important benefit derived by an online consumer.
• Quite a few believe that easy navigation of the site and attractive designing is the key to ensuring repeat customer visits. Excitement and joy associated with shopping online because of attractive layouts and designs lay emphasis on the hedonic pleasures of a consumer which an etailer should cash on.
• Only half of them believe that the product features and their display determine the number of visits/purchases done from a portal.
• Most felt that lack of tangibility is one of the main reasons for non popularity of online shopping and online shopping does not provide enough variety to the consumers. Inability to try a product (Touch-Feel-Try Experience) before buying acts as a barrier for some internet users. In addition, often the product or the service delivered differs from the standards displayed on the website. The customer is not sure of the quality of the product unless it is delivered to him and post delivery of the product, it is sometimes a lengthy process to get a faulty or an unsuitable product changed. Thus, unless the deliverables are as per the customers’ expectations, it is hard to infuse more credibility in the e-Tailing market.
• Most are of the opinion that On-line shopping does not have scope in India and is not secure and reliable.
• About 60% of the respondents agreed that attractive offers (deals/discounts) force a consumer to purchase online. What attracts customer attention to online stores is the ‘great deals’ ‘best prices’ and ‘better bargains’.
• Few believed that delivery time and mode offered are the topmost factors in deciding on a particular online service provider.
• Surprisingly 60% of respondents felt that data insecurity is no more a concern for online consumers. The faster this fear is dispelled, the better it is for the online retailers.
• Quite a few corroborated that Repeat purchase & Impulse purchase are important features of online purchase behavior. To that end, website design plays an important role in hooking a customer. Better interactivity and aesthetics, ease of use/search, sufficient product information, and intuitive product comparison charts – all play critical role in the complete “Web Experience”.
• Surprisingly for most of the respondents, Online shopping experience is similar to the usual shopping experience. eTailers should incorporate innovative ideas in the website to replicate the actual physical shopping experience.
• All agreed that not mentioning any clear cost break-up of the products/services available online discourages a consumer to shop online.
• There has been a significant change in the attitude of an average Internet user. He is ready to experiment to suit his convenience. Truly, an average user is buying a variety of products online. These may vary from low-end items like books to high-end items like laptops; less involving items like flowers to high involvement items like jewelry. However, consumers will display a bias for brands that they know well and have had a good experience in the past. Thus products of brands with a favorable bias will score over the products of less popular brands.

Top 5 barriers of Internet usage

We all know that the barriers of ecommerce adoption is India are primarily - unavailability of affordable broadband, only 10 million unique credit card users and absence of triggers for the growth of Indic languages. Today in one of the IAMAI reports I found an interesting bit of information regarding the barriers of internet usage.

The major barriers leading to measured growth of the Internet in India have been relatively low awareness and higher cost of accessing the Internet. With the continued technological innovations in the area of Internet, cost of accessing the Internet is expected to go down in the coming future with greater speed of access. Innovative content delivery and provision of need-based applications like Online bill payment, Online ticket booking etc. will help in creating awareness among Internet non-users and will act as a driver for Internet usage.

Purchase behaviour and Indian consumer demography

In the consumer e-commerce market, there is a clear preference for a wide variety of different online applications across demographic segments. Over the years young generation has been the target for content providers. I-Cube 2008 summary reports that email is the most popular application among the most of the demographic segments followed by information search.

As far as e-commerce is concerned different demographic profiles exhibit different behavior. The histogram summarizes the trend (Beveled portion is the ecommerce portion)

Growth of PC Owners - A trigger

There is an increase in the number of claimed internet users over the years across all towns. Increase in the number of claimed internet users in the SEC D&E shows that internet has started to reach the bottom of the pyramid. This rise in the subscriber base can primarily be attributed to the decrease in the prices of PC and the higher literacy levels.

There has been 36% growth in PC Owners in the year 2008 over the year 2007. This could be due to fall in PC prices and increase in the awareness of benefits in using a PC. An increase of 25% in the number of Internet subscribers over the year 2008 has also been observed. This increase is in part due to penetration of the Internet in the less affluent classes of the society and smaller towns.

Credit Card Ownership among the online Indians

Its not surprising that the 10 million unique Credit card users pose a great deterrent to the ecommerce growth in India. A few key facts mentioned below would ratify the belief.

1. Though almost 68% of regular internet users are employed and 51% of them work as ‘salaried’ employees in the corporate world, only 25% of them own a credit card. The credit card ownership among regular internet users stood at 34% in the year 2007-208. This noticeable fall in the proportion of credit card owners can be attributed to the significant increase in the proportion of the relatively ‘younger’ age group internet users.
2. Among the credit card owning internet users, almost 1 in 3 own ‘multiple’ credit cards.

Is internet acting as a medium for "Window Shopping"?

In the last few years, the belief that building Internet retail sites will automatically trigger customer patronage has been questioned and considered more a myth. This new medium of commerce has its own drawbacks such as reduced opportunities for sensory shopping, social shopping, face-to-face interactions with sales personnel, and the postponement of the consumption or enjoyment of tangible goods. The inherent limitations of the Internet have been compounded by poorly designed online storefronts, limited product selection, poor customer service, tedious checkout procedures, botched orders, tardy deliveries, security lapses, and privacy invasions.

Even though the popularity of broadband Internet connections is on the rise, the majority of Indian households use slower dial-up connections, which could detract from a satisfying online shopping experience. Given these problems, which are not atypical of innovations, it is becoming increasingly clear that online shopping may not hold the same attraction for all consumers, and its diffusion may follow the same bell-shaped curve as that of other innovations rather than the radical adoption rates that were optimistically forecasted in the late 1990s. Consumer demand for the Internet, thus, is a key factor that may ultimately drive widespread adoption of online shopping in India. Provided below are the few notable points of online shopping adoption by the Indian consumers.

• 4 out of 5 online Indians (80%) either search or buy products online, making the base of ‘online shoppers’ in India as large as 28 million. Of these online shoppers only 28% or 8 million are online ‘buyers’ currently. The rest 72% are just online ‘window shoppers’. Effectively, this means that almost 1 in 4 online ‘shopper’ is actually an online ‘buyer. On the overall regular internet user base, the proportion of online buyers and window shoppers work out to be 23% and 57% respectively.
• A substantial 92% of all active online buyers have bought a travel product online (up 8% points over the year 2007) and 51% have bought a non-travel product online (down 5% points over the year 2007).
• Compared to 2007, when the count of then currently ‘active online buyers’ was 6.16 million, the base of active buyers has grown by 1.81 million to reach 7.97 million. This indicates a 29% growth in the base of active online buyers since 2007. As the growth in internet user base during the same period has been 33%, the growth rate of online buyers in the year 2007-2008 can only be described as ‘average’. This ‘average’ growth in the online buyer base is also indicated by the fact that the base of online buyers among the regular internet users who have bought online ‘ever’ has just grown from 10.78 million in 2007 to 11.23 million in 2008 (a meager addition of 0.45 million ‘new’ online buyers during the year 2008).
• Long-term experience with Internet surfing is significantly associated with Internet shopping. Long-term Internet users are also the ones who have actually experienced Internet shopping.
• Internet usage is significantly associated with Internet shopping trial. Internet surfers with high usage of Internet in terms of number of hours surfed in a week, are actual Internet shoppers. Therefore Internet sellers should try to motivate surfers to surf more per sitting. This can be done through competitive pricing for long-hours surfing, bundling surfing with entertainment and recreation, developing real time eye-catching websites, promoting home based, high-speed, affordable Internet schemes, training people in the use of computers and the Internet and by providing further knowledge about the benefits of the Internet to actual and potential surfers and Internet shoppers.
• Intention of internet shopping is also an important criterion. The high intention group had previous experience of Internet shopping, had done significantly more time Internet shopping in the past year and had spent considerably higher amounts on Internet shopping than those who showed low intention of future Internet shopping. In terms of demographic characteristics high intention surfers had higher education, higher income and were unmarried, but the differences were not significant. This indicates that while demographic characteristics would definitely play a role in the future success of Internet shopping their importance will be secondary while actual Internet shopping experience would be pivotal in further acceptance of it. Therefore shoppers should be motivated to experience actual online shopping. If the first experience of Internet shopping creates a positive image in the minds of shoppers, it would result in a repeat of Internet shopping among these initial shoppers who would act as innovators and opinion leaders for the diffusion of Internet shopping.
• Contrary to expectations, a recent study revealed that there were no significant associations between the shopping segments and demographic variables. Therefore, there is a need to profile the online shopper using more sophisticated psychographic measures such as shopping orientations, rather than relying solely on demographics.Thus, if more of people can be motivated to surf the net consistently, it would result in more instances of actual Internet shopping.
  

Consumer Demography

Let me start with some key facts on the consumer demography in India.

Online user base touching 50 million in India, 1 in 5 users coming from rural areas.

The total base of internet users in India stands at 49.4 million currently (late 2008).

82% of online Indians come from the urban areas and 18% from the rural areas. At these levels, the penetration of internet stands at 4.5% of the total population of India. The penetration levels within the urban and rural population stands at 12% and 1.1% respectively. Compared to 2007, in 2008, the penetration in urban areas has gone up noticeably, from 9% to 12%.

Within the total base of online Indians, 71% are ‘regular’ internet users (defined as those internet users who use the internet at least once a month). The balance 14.31 million online Indians, or 29% of them are ‘occasional’ users of the net (defined as those internet users who use the internet less than once a month).Within the base of 40.34 million urban online Indians, 30.03 million, or 74% of them are ‘regular’ internet users. In contrast, the number of ‘regular’ internet users in rural India stands at 5.06 million, implying that only 56% of rural online Indians qualify as ‘regular’ net users. From a practical point of view, 28.2 million internet users (57% of online Indians) are on the net daily.

A year of ‘healthy’ growth in urban user base.

The overall internet using population in urban India grew by 33% during April 2007 – April 2008 (as compared to 28% in the previous year). More importantly, the added new users are as many ‘regular’ internet users as the ‘occasional’ ones (4.86 million & 5.16 million respectively). The growth percentage and number of urban users from April 2008 is unavailable at this point.

The bulk of regular internet users come from the non-metro towns.

After inclusion of the ‘rural’ internet users, only 30% of all regular internet users came from the top 8 metro cities. The tier 3 & 4 towns, non-metros and rural areas account for the bulk 52% of the regular online Indian population. Yet, almost 70% of the regular internet users continue to constitute what is perceived as the ‘urban consuming class’ (SEC ‘A’, ‘B’ and ‘C’).In terms of socio-economic classification (SEC), 56% of regular internet users came from SEC ‘A’ and ‘B’ groups in the year 2007, whereas in 2008 their share went down to 50%. SEC ‘C’ accounts for 19%, while SEC ‘D’ and ‘E’ put together account for 16%. The balance 15% come from the rural SEC groups - with R1, R2 and R3 combine accounting for 10% and R4 and R5 for approx 5%. (R1, R2, R3, R4 and R5 are rural classifications)

Internet user base is increasingly skewing towards the ‘younger’ India.

The proportion of ‘Under 25’ years age group net users have grown into the ‘majority’ now, accounting for 52% of the total internet user base in Indian. At 44% the 19-24 year age band emerges as the ‘single largest’ age group of regular internet users in the year 2008.

Social interactivity and entertainment related content are the most popular online

On an average an online Indian undertakes over 15 activities online. Communication and social interactivity activities (emailing, instant messaging/chatting, dating/friendship and matrimonial search) and entertainment activities (news, sports, movies/music, and cricket) stand out as the most popular online activities.

The emergence of the ‘local language website’ users

Almost 1 in 3 online Indians (34%) is already using local language websites (up from just 12% in 2007). Further, the proportion of internet users who generally prefer to read in local language has also gone up from 59% in 2007 to 72% in the year 2008.

Consumer Internet Usage

In my previous post I talked about the general etailing market and the market size. In this post, I would zero in on the factors which triggered ecommerce in India.

Internet Penetration played a cardinal role in pushing the ecommerce story of India.Internet usage in India has shown a healthy growth in the last few years. More importantly, it is showing clear signs of evolving and becoming the ‘dominant medium’ of interacting with the world for a good proportion of the regular online Indians. However, online buying has not really picked up as expected, making internet more of a ‘window shop’ rather than an ‘online market’ in any true sense of the word (except for the travel products). The fact that the bulk of Indian consumer mass comes from the vernacular Indian world, the increasing usage of local language websites is one of the most important elements of internet usage to watch out for in the future. Availability of relevant and meaningful local language content and applications on the net, together with affordable access, may become the biggest enabler (or the biggest limiting factor) in the future growth of Internet usage in India.

Consumer Internet Usage

Seasonality

Internet usage in general and eTailing Market in particular face seasonal fluctuations. During the peak season, occasions that drive the sales are Diwali, Rakhi, Valentine Day, New Year, Christmas, Mother’s Day, and Friendship Day. On these occasions younger generations prefers buying and sending gifts online.

Access Points

Internet is accessed the most from ‘place of work’, though ‘home’ emerges as the most preferred place of access.

1. Almost half of the regular internet users (46%) access the net from more than one place of access. The per capita ‘places of access’ averages at 1.7. On multiple access basis, place of work (office, school, colleges, etc.) still continues to be the single largest place for accessing internet at 60%.

2. Usage from home follows at 55%, and then from cyber cafes at 47%.

3. In terms of exclusive usage, while 1 in 5 internet users still accesses internet only from home (at 21%), another 1 in 5 also accesses it only from place of work (at 20%).

4. About 1 in 8 regular internet users (13%) accesses the net exclusively from a cyber café.

This still indicates that the relevance of cyber cafés is only ‘secondary’ in nature as of now. This low exclusive access of internet from cyber cafes could be one of the biggest barriers in the rapid growth of internet usage in India, as in a country like India the large-scale (mass) accessibility and affordability of computer at self-ownership level may still be a long way away.

eTailing market in India

The total market size of B2C and C2C E-Commerce industry in India was around Rs. 7080 crores at the end of 2006-07. It rose to Rs. 9210 crores by the end of 2007-08. Within E-Commerce industry, the size of eTailing Market for the year 2006-07 was computed to be Rs. 850 crores. eTailing contributed around 12% to the total E-Commerce Market size in the year 2006-07 and in the year 2007-2008.

The electronic retail growth of Indian market as estimated by Euro-monitor report stands close to 48% CAGR and in value term it is going to touch INR 27 billion(Rs 2700 crores) by 2010 from INR 4 billion in 2005. The report also predicts that the contribution of internet retailing to non-store retailing is likely to be 46% by 2010. (Value of 2008-2009 not available)

Consumers’ decision-making process has considerably changed with the introduction of the Internet as an alternative channel for shopping. The new wave of consumerism coupled with increasing urbanization and burgeoning middle class with paradigm shifts in their demographic and psychographic dynamics have driven consumers frequently to use retail websites to search for product information and/or make a purchase of products. Since electronic retailing is becoming an ever increasing channel for shoppers, in my next article I would examine the factors which encourage or hinder etailing adoption among the Indian consumers.