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E-commerce Players Have To Take A Larger Ownership Of Logistics – Gautam Sinha, Indiatimes E-Commerce

With change in the e-commerce market in India being pushed by (relatively) new ventures like Flipkart, Infibeam, LetsBuy, among several others, how are the incumbents responding? Indiatimes Shopping, the eleven year old e-commerce venture from the Times of India group is revamping its platform, changing its model from a marketplace business to more of a hybrid business – partly a marketplace, partly taking title of inventory, and looking to gradually take ownership of the customer experience and delivery. In part 1 of this two part interview series, Gautam Sinha, CTO and Head (E-Commerce) at Indiatimes speaks with MediaNama about the changes that the company is making, why it’s making them, why now, and the pricing of products online:

MediaNama: What are your plans for Indiatimes Shopping?
Gautam Sinha: The plans are working on the fundamentals, customer experience, not just how the call center handles the call, but what kind of products we sell, how the website treats the customer, how the packaging is done, to how fast we can deliver the product. Product satisfaction, delivery satisfaction, keeping the customer in the loop at every point of contact, and giving the customer an A+ experience.

MediaNama: This is different from what you were doing earlier – which was acting as a connect between the vendor and the consumer. You weren’t packaging things earlier.
Gautam Sinha: That’s absolutely right. We started 10-11 years ago, and the model we started was the marketplace, which was a connect of demand aggregation and then passing it on to suppliers, and then doing the fulfillment. What happens in India is that it has basic challenges, especially around the maturity of suppliers.

You have so many brands, but as you go down to SMEs, there is a certain way they act and behave. The logistics has not matured to the level where you can predict the delivery and track it to the satisfaction of the supplier and customer.

MediaNama: But this is something you could have told me five years ago as well. So why now?
Gautam Sinha: There is no doubt that a marketplace model is better model from a demand aggregation point of view, but it needs the infrastructure of a mature economy. There are 4-5 courier companies in the last 5 years, and we thought that RMX or TNT or AFL with partnership with FedEx should be able to resolve the logistics problem, and that doesn’t have to be resolved by e-commerce players, which is how it works in the advanced economy. But, in a country like ours, the e-commerce players have to take a larger ownership for building the logistics supply chain, which is what you’re seeing as a current trend.

Everyone is getting into a touch-and-feel and trying to own more of the process, so they can control the experience. It is simply that when E-commerce is picking in terms of volume, and the courier companies are unable to deliver, more and more vendors will have to take control of the process value chain, in terms of fulfilment. It’s a gradual change in thinking. We’ve started taking control of the customer experience, and we’ve reached a certain point, and we’ll continue now.

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MediaNama: My question was that there was an issue with the delivery even three, four and five years ago – and there were issues of goods delivered which weren’t according to the specifications on the sites, whether on Indiatimes, Sify or Rediff. The marketplace model has always had complaints.
Gautam Sinha: Any player would like partners to solve a particular part of the value chain, and with the introduction of all the courier companies, you were hoping that they would solve it. There weren’t enough transactions for the e-commerce players to solve.

MediaNama: So it’s a function of demand. Is it also a function of competition?
Gautam Sinha: All companies are reasonably well capitalized, and it is good for the industry. Everyone is focusing on customer experience, and that will become the hygiene for E-commerce in India. I don’t think it will be a differentiator a year from now. I agree with you – it’s competitive pressure, and customers expectations have changed. They would like to be treated well.

MediaNama: Are you taking title of the goods or are you becoming a logistics company?
Gautam Sinha: We are not becoming a logistics company – we aren’t taking title of the goods the entire way. We are doing back to back procurement, where the invoicing is done by the seller itself, and we use our transit warehouse to manage the fulfillment.

MediaNama: In that sense, you’re still keeping the marketplace model, because as long as you’re not taking title of the goods, you’re still a marketplace.

Gautam Sinha: In certain categories, we are. It’s a mix. In apparels, we will warehouse them ourselves. In certain other categories like Fashion we will warehouse ourselves. Electronics, we are able to do, except with some vendors.

MediaNama: Would the shift in model have been possible while Sequoia Capital was an investor in Indiatimes, since it was a foreign investor holding?
Gautam Sinha: I think there was reasonable execution freedom. I can’t comment on it, because the exact regulations about foreign investment is unclear to me, but my guess is that it would not have had much of an impact as an e-commerce player. As a model, we were still not taking hold of the inventory and not invoicing products.

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MediaNama: The costs in each of these models is different. How does it impact your pricing?
Gautam Sinha: Where we have a root level partnership, where I would say we are partnered with the brand themselves, we do get good margins on those products. If we are able to project our demand in those categories, we further get better margins than you would get in a buy-sell/marketplace model. That is the margin we use to defray some of the cost, in building the fulfilment experience for the customer.

MediaNama: But at the same time, isn’t there pressure from the suppliers that you shouldn’t play around with the Market Operating Price?
Gautam Sinha: The Market Operating Price (MOP) is something we will adhere to. While we have the best prices in mobile among competitors, we are not below MOP.

MediaNama: How do you entice customers to the platform – the perception is that e-commerce should be priced lower than retail because of larger margins
Gautam Sinha: Because of the efficiency of the model – no cost of real estate and headcount, and the scalability. That is absolutely true.

MediaNama: But you said you won’t play around with the MOP
Gautam Sinha: MOP is for branded goods. For non branded goods, there is no MOP. The commission in branded products would range between 5-10%, and MOP is strictly managed by the brands themselves.

MediaNama: How does the shift in model impact the number of suppliers you have on board?
Gautam Sinha: We had over 1000 suppliers last year, and we are trying to bring it down to half, where we are controlling the quality of the suppliers themselves.

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