Bal Krishn Birla, the CEO and co-founder of online grocery retailer Zopnow, is a bit of an outlier. The kinds who have the biggest impact on the mean. You’d rarely find him dressed in formals. He is as passionate about old songs of Kishore and Rafi as he is about his 15 month old startup. He has run a restaurant for a few years, worked at Infosys for many years and digs e-commerce. Last week, we caught up with him to understand his views on the evolving e-commerce space in India. “While e-commerce companies are considered online businesses, they are offline as well…profitability and logistics are two of the biggest challenges for the industry,” he says. Edited excerpts from the interview:
What’s the most challenging problem for e-commerce in India?
One challenge is getting the logistics right. It is the most important part for e-commerce companies today. Timely delivery. The e-commerce industry is heading in the direction of building strong logistics capabilities because its as much an offline industry as it is an online industry. We promise 3 hour deliveries these days. Thats how much logistics has changed. Technology can optimise your operations but at the end of the day its the delivery staff who are on the field who matter, not so much the website. Challenges of reaching Tier 2 & Tier 3 cities include payment collection, generic infrastructure issues, longer cash on delivery cycles and people issues.
What is the other challenge?
The problem is with profitability. You can’t go on giving crazy discounts. Users will flirt with you as long as the offer lasts and go away. Thats not a sustainable way to do business. Each time a customer returns to a site, there is a high probability that they buy more than before. In our case, 70-75 % customers buy more. We have about 7000 SKUs now.
You can’t build a company on the culture of non profitability. This has to be in the DNA of the company. Suddenly you can’t turn up and say show me profits. In e-commerce, there are goods with low margins and goods with high margins. High margin goods used to sustain the company and low margins sales. But competition has become so aggressive that companies have started deeply cutting costs on high margin goods and hurting the company altogether.
Are we still the weekend buyers we used to be?
On weekdays, brick and mortar retail outlets are mostly empty. They see a spike on weekends. Similarly, e-commerce also sees a spike on weekends. That will change as online shopping becomes part of daily routine. If you can shop on the mobile, tablet etc, you can shop while you wait. You can finish buying grocery while you are on your way home.
There is a genuine case of convenience in India. This is more relevant in India than anywhere else in the world. Say you have to go to Koramangala to buy vegetables, its a big pain to find parking. Driving to the market and coming back takes time and effort. There are high real estate costs that makes it difficult for retailers. Categories and repeat purchases are harder to estimate.
How has customer behavior changed?
People visit travel sites about 3-4 times a year. In our case, its 3-4 times a month. It is now becoming a part of day today life. The number of different items that we stock are very high compared to other sectors. The challenge is not customer adoption.
What is changing consumer behavior?
The communication channels have become uniform. The guy from a tier 2 city is seeing the same stuff on Facebook that a guy from Bangalore or Mumbai sees. Television plays a big role. The internet and mobile have created higher aspirations for more number of people.