Allowing foreign investment into e-commerce can't come soon enough. The main reason the e-commerce space in India has not picked up fast enough is this.

Allowing foreign investment is a minor problem in ecommerce space. Flipkart has foreign investment via VCs for quite some time.

There are a lot more fundamental issues in ecommerce space.

(1) Low penetration of credit cards - Banks have slowed down considerably their efforts to market credit cards. RBI regulations don't help either. Besides both of these, people have a negative feeling towards credit cards. So credit card usage is low. Cash is king and debit cards and direct bank transfers are next.

(2) Payment is a pain. Paying via credit card, debit card or bank account goes through a two step authentication process which is fraught with failures. There are multiple sites through which payment is routed => Seller site -> Payment gateway intermediary -> Bank site -> (enter password to authenticate payment) -> Back to intermediary -> Back to seller site. This long chain is breaks more often than not. And when it breaks, it becomes a pain to get your money back. Buying something online, especially for some one new is a heart-in-your-mouth experience. Again, RBI guidelines prevent any change in the payment process. It is easier to use Cash on Delivery (CoD).

(3) Two and three means that most customers prefer CoD. But CoD is a pain for merchants. There is no guarantee that customers would end up completing the sale. Most purchases are impulse purchases. But in case of CoD, you receive the product after 2-3 days, long after the impulse is gone. So the rejection rate for CoD sales is high compared to Credit/debit card sales.

(4) Logistics is another nightmare. The companies do not have scale and are quite expensive compared to the cost of goods sold. They are also not reliable. Delivery management and providing customer support for late/missing shipments forms the bulk of support cost. So any medium/large ecommerce company starts its own courier service. Suddenly these companies are not just ecommerce companies, they are also managing a completely new and different business.

(5) Low internet penetration and usage.

(6) Wafer thin margins. The margins are already thin. It is spread even thinner by offering free shipping. Shipping used to be free for any product of any cost. Its only now that companies have started charging for shipping. These thin margins mean companies won't be breaking even any time soon. Its a long haul game and its going to leave quite a few dead companies in its midst.

>Flipkart has foreign investment via VCs for quite some time.

Because of this they had to separate Flipkart.com and their frontend operations (WS Retail).

The VC money is now invested in Flipkart.com which is a marketplace similar to Amazon India. But they are pretty well integrated with one of their sellers (WS Retail).

Why do you feel that foreign investment into e-commerce is the solution?

There are many reasons. Biggest is competition works wonders for consumers.

Secondly, It creates an environment where a lot can be learn't from others.

The current environment for start ups in India is in large part due to inspiration, effect and to an extent competition from the silicon valley.

a solution? I don't think there is a problem to solve. I do think allowing FDI in e-commerce can only help the Indian consumer (not to mention the economy, because it will result in more hiring, more exit options for e-commerce startups etc)

I think FDI in e-commerce and retail sectors is something that will come to pass in India.

Its inevitable.

It will. But when, nobody knows.

And hence the need for deep pockets, and patience. Both of which Amazon has, in spades.

Btw, a lot of the big names in the Indian e-commerce space are also using the marketplace model instead of the inventory model. And they are doing this out of their own volition, as it reduces costs and increases diversity. Eg. Snapdeal, PepperFry, and Shopclues. Even Flipkart recently opened a marketplace, which will complement its inventory model.

Here's an article quoting Snapdeal CEO as saying that inventory model is dead in India: http://www.livemint.com/Industry/D2Xufph6zu7w9ZYg8Ze0dM/Snap...

So out of interest; what's it like in India at the moment, buying online?

For example; with Amazon in the UK and can order before about 5pm (often later) and have it arrive tomorrow. That even works for some marketplace sellers.

Is there comparable service from Indian retailers?

(I ask out of genuine interest to see how the markets compare!)

The most interesting thing about Indian e-commerce shipping to me (someone who lived 28 years in the USA and the last 1 year in India) is that there is no concept of choosing delivery speed. There is only standard shipping. You need the product tomorrow? Well you're out of luck. It'll be there in a couple days if you're in a metro, which definitely isn't bad for standard shipping. But you don't get to control the shipping speed.

(Note #1: I have gotten some items the next day, but it was out of luck. If you live in Mumbai, New Delhi, or Bangalore, this will happen occasionally that the warehouse on the outskirts of the city will have the product and you'll get it the next day. But it's just not close to guaranteed.)

(Note #2: I heard or read something that Flipkart, often known as "India's Amazon", will soon be offering expedited shipping for an additional fee).

Well, to be frank, sites like Saholic are trying to improve stuff.... Saholic offers 'x' days delivery (generally 1-2 days) and then fines itself (giving out gift vouchers for every day that the shipment is delayed)

>>You need the product tomorrow?

If you are in a metro then you get the item shipped next day. I've shopped with Flipkart, Myntra etc and this has always been the norm and when usually it becomes 2-3 days it's because your stuff is being sent from a warehouse in another metro. As I live in B'lore Myntra has almost always done 1-day shipping or 2 at most.

You want your items to be shipped to a small town? There's a problem. You want to ship it to your parents in a very small town or rural area? Forget it!

There are other services like eBay India, which has recently, started 3-4 day shipping. Earlier for them it was 7-8 minimum as standard. Deal sites like SnapDeal etc follow the same minimum 7-8 days golden rule.

Sites like IndiaPlaza are plague. You get your stuff in months or fortnights and then you congratulate yourself.

The thing is there are so many options in India, even on smaller scales, for online shopping and people actively use them where they best deals. In USA when I try to buy sth, to get it via a friend who is coming form USA, I have more or less one option - Amazon!

Hey Fakeer,

Do you have an idea (or know someone who does) as to

1. How is the Shipping Label (with tracking# if that's feasible) generated?

2. Which are the major couriers picking up the packages from the small ecommerce shop locations and delivering them?

3. Is the Indian Post Office a major player at all (in the US, the USPS is the largest ecommerce delivery company...bigger than UPS, FedEx and DHL combined)

It isn't a major player at all. Indian Post Office is mostly used for sending documents and stuff and people prefer it because it's cheaper and available in most destinations ranging from metro cities to small villages. Most ecommerce players use private logistics companies like BlueDart, DTDC, etc. They use Indian Postal Service only for rural orders where BlueDart and the like don't service.

My dad happens to lead the e-commerce division at a logistics company and from what I've heard, Indian Post Office is not a major player at all. A large of e-commerce companies/startups are using Bluedart (now merged with DHL) as their primary logistics provider and tracking is provided as a service to the customers. Flipkart, I believe, runs their own logistics service.

Flipkart, Myntra etc run their own logistics unit Bangalore only and maybe other metros too, but when it's about tier 2 cities and blow the traditional courier firms handled it.

>>Is the Indian Post Office a major player at all

I don't think Indian Post Office is good option for courier stuff like a mobile phone, or a book.

But they are pretty good if you want to send a money order, letter or a registered post.

Flipkart does not _guarantee_ two day shipping, though. Or at least it didn't when I last used it. Amazon says they'll do it and that's worth more than some vague idea that it will probably make it.

Well there is Flipkart (http://www.flipkart.com/). They usually take about 2-3 days to deliver. Again that depends where you are located and the product you are ordering. But they do have a huge collection of stuff.

Such bureaucratic B.S.

looks like a negative commission right now.