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In early 2009, a major event passed without a whimper when Hypercity-Argos, an operation between Shoppers Stop and Argos, shut shop for good. It had decided to discontinue its online catalogue operations. In short, India’s largest online retailer, backed by its biggest retail group, came up a cropper against India’s fickle consumer base. So what does that tell you about retail businesses in India? Well, for one, it is quite tough to crack the Indian market. And two, its even tougher if you are running an online business.

Still, over the last few years, there are many multi-brand online retailers that have entered the market with moderate achievements in terms of traffic as well as orders. These would include eBay, HomeShop18, Rediff Shopping, Indiatimes Shopping, Future Bazaar, and our hot startup this month, FlipKart.

As you would have probably noticed, save the last one, all others aforementioned are backed by major business houses. Suffice to say that this means that a new entrant in the sector has higher entry barriers, at least in terms of competition, size, logistics and inventory, and any market penetration would have a high turnabout time. Playing with the big boys on their turf is a recipe for disaster.

But then, why not create your own niche turf, like Mumbai resident and former filmmaker Derek Affonso has with his startup Smart Art? This is an online store that sells the likes of cult movie posters, pop culture prints and reprints of high-end art pieces.

Create your own turf
Online businesses have an advantage over businesses in the real world—they all have the same 13 inch monitors as our windows to the customer. It is a level playing field; one where an entrepreneur can keep some turf for him.

Affonso is one such entrepreneur. Back in 2008, he and his wife were looking for some prints to do up their daughter’s room. After a bout of constant searching, Affonso realized that there was really no one-stop shop for buying such pieces.

And like every entrepreneurial story, the lacunae gave birth to an idea. “The idea was to create an online store where one could shop for popular posters, art and the like without having to visit a hundred real world stores,” he says. “It was also important that the pieces offered were of high quality, given that the target audience for such products would be the upper middle class and above.”

Today, smartart.in stocks over 15,000 pieces of movie posters, sports memorabilia prints, reprints of major art works and other major pop culture pieces. The prices for these pieces range from Rs.600 to around Rs.50,000, depending on the quality of paper, size, and cultural value, of course. The most important thing to note here is that Affonso’s company is the only one doing this in India. Outside of India, there are the ‘All Posters’ and other companies, but they do not cater to the Indian market. If you want a Monet for your living room or a classic Andy Warhol print for the study, you can only go to Smart Art for it.

Affonso tells us that the exhaustive inventory covering everything from movies to sports to abstracts to photography allows him to offer people the ability to do up entire spaces and not just walls. “So, a customer coming to the online store can, at one go, choose prints for the living room, the bedrooms, the study and the kids’ room.”

Though he does not speak numbers to us, Affonso tells us that the biggest indicator of his success is that a good chunk of his business comes from tier II and tier III towns. “Only an online store could have allowed a niche offering like mine to reach these places,” he says. “Now someone in Jamnagar can get a Gustav Klimt print sitting at home and not by scouting at a hundred stores in the metros.”

Affonso also tells us that he has not spent anything on advertising beyond a little on Facebook and the launch releases. Most of his marketing is via word-of-mouth, he tells us. Much like Pearl Uppal’s fashionandyou.com, an online invitation-only sales portal that does flash sales of high-end brands like Gucci, Prada and the like.

There is nothing like a good discount
Be it shopping in the real world or virtual, customers love their discounts and sales. Nothing gets the women of India going like a good sale, does it? However, many online stores tend to price their products higher than in the real world, trying to accommodate back-end and logistics costs within the margin.
So is there a place for heavy discounts in the world of online retail? Uppal seems to think so. Formerly in the business and operations units of internet giants like Yahoo and Rediff, Uppal began her entrepreneurial journey setting up Fashion and You with co-founder and serial entrepreneur Harish Shah in August 2009.

The portal follows a private sales model that has been previously implemented successfully in Europe and North America. Here, customers get access to private flash sales, lasting upto a maximum of 24 hours, of private brands such as Louis Vuitton and D&G at hugely discounted prices, sometimes knocked down by 80 percent. Uppal explains that this allows premium brands to make use of perishable inventory without diluting the brand itself. “High fashion is a perishable commodity. What is hot now will not be hot three months later,” she tells us. “At the same time, it is also an aspirational commodity for the growing Indian upper middle class.”

Making the two converge at the platform of affordability is what Uppal and her team accomplish with Fashion and You. “The supplier is also sure of what audience he is reaching out to because to be able to shop at the store you need to be able to bank online and also have high bandwidth internet access and that is typically a luxury afforded only by the upper middle class in urban towns.”

Fashion and You’s recommendation model also makes a future case for what can be termed as social shopping. It already has 250,000 users, according to Uppal, and most of them are on by referrals. This means that typically there can be a set of people, known to each other in the real world, shopping together online.

“This would allow us to offer deals to closed user groups. This is like deals within deals, making the experience of shopping on sales akin to the real world where you would typically shop with your regular shopping partners.”

That makes it easy to understand why the maximum investment for the company goes into shooting the clothes, shoes and accessories in a professional studio to get the closest-to-real feel for the customer. Shopping is a visual experience and there cannot be any shortchanging there. Experience is what Delhi-based Exciting Lives is also selling to its patrons in what can be called a do-it-yourself model.

The customer’s choice
To sell what the customer wants is taken to another level by the founders of Exciting Lives, Rohit Saxena and Nisheeth Srivastava. A few years ago, the founders were looking about for gifts when they realized that not much was on offer but the ubiquitous and boring. In 2007, the duo formed excitinglives.com, which stepped away from the traditional e-commerce models in online gift stores to offer experiential gifting services. “Experiences include hot air balloon rides and golfing trips,” Saxena tells us. Some have even been wilder—like the Combat Flight experience.

“Apart from offering our own customized experiences, we offer what the customer wants in terms of an experience,” he adds. The company works in partnership with different agencies and individuals to create these experiences as wells as products. It also creates experiences completely on its own. As both are sold online, a lot of customers come in from recommendations from previous customers, according to Saxena. And that is always a good sign for an online business.

The experiences are currently available to customers from urban towns, given their high need of quality and consistency, according to Saxena, though their products go to tier II towns as well. Saxena tells us that customers love the fact that they can ask for experiences themselves rather than buy what is available off the shelf. “They can get really wacky,” he says. “The wackiest one would not be fit to print.”

There is still room for you
New entrepreneurs in the online space must take heart and knowledge from the aforementioned three, Justin Tok, an online business consultant with Singapore-based Dassler Business Intelligence tells us. Tok explains that the three have differentiated themselves from the regular e-commerce models by the way of space, sales models and deliverables respectively. “Too often, online entrepreneurs go looking to be the next Jeff Bezos (founder of Amazon),” he says. “What most don’t realize is that he first created a space for himself selling books and everything followed later.”

Tok further emphasizes that the Indian online retail sector is bound to grow and there is space for more entrepreneurs provided they come with a differentiator to their model. “First, you must understand that Indians do not buy online—that is their nature,” he says. “India’s e-commerce figure stands somewhere close to Rs.23 billion against the entire retailing industry’s Rs.18,473 billion. So to be able to tap something out of this market, you must not be an imitator but an innovator.”

Further, Tok explains, entrepreneurs must be able to demonstrate that they are serious about their business. Transaction security must be of the highest standards and the website should be user-friendly rather than impressive in design. “An effort must be made to sway customers from the offline models to the online model—and that is a function of targeted marketing,” he adds. India, Tok tells us, will have the world’s third highest number of internet users by 2015 and to be able to tap that number, entrepreneurs will have to begin now than wait for the ride to begin.

©Entrepreneur July 2010

Tags:
Derek Affonso, E-Commerce, Exciting Lives, Fashion and You, Harish Shah, Nisheeth Srivastava, online, Pearl Uppal, portal, retail, Rohit Saxena, sales, Smart Art