Ronnie05's Blog

Amazon – Future of digital distribution? (Part I)

Posted in e-commerce, Revenues and Monetization by Manas Ganguly on September 7, 2012

This is the first of two post series on Amazon

Amazon killed it … or very nearly did. Amazon’s device and service announcements in the 6th September event have just gone to show Amazon a few notches above Google, Nokia and Microsoft put together.

Post the launch of Kindle Fire tablets last year and a record sales in the holiday season, Amazon spent a lot of time understanding their customers and how the customers use digital media. In the course they have managed subverting the long held notions of device pricing – and managing the margins without any device contributions. After all, when you make your money through services, device margins are obliterated. That is going to put a awful lot of pressure on the earlier generation of device makers – Samsung, Nokia, HTC and the works. What that means is that Amazon is willing to make the Kindle and the Kindle Fire a loss leader to lure shoppers inside its virtual store. This principle is where disruption @ Amazon begins.

People don’t want gadgets anymore; they want services, and the new ranges of Amazon devices have a clear perspective- to provide a dedicated sales channel for Amazon’s digital storefront with an end-to-end set of services. By taking off the device bit, Amazon signals that it is ecosystems not devices that will drive consumer purchases. As Bezos puts it- “We want to make money when people use our devices, not when they buy our devices.” When business isn’t built on HW margins, the larger ecosystem and services you can do a lot of things competitors can’t – that’s an innovation principle that Apple and Amazon would hold as the key.

Amazon is stepping up ecosystem efforts but is focussing on its own features, services. Third-party apps still seem like an afterthought. Similar is principle to the Apple “Walled Garden”. Given Apple’s iOS app selection & large ecosystem of it’s own, I don’t think iPad is under major threat. But Apple cannot afford to be complacent.

The 6th September event was an act of declaration of war and the whole eco-system and market just got a whole lot more interesting in the course rebuilding the DNA of Amazon. The only other company who is thinking of business in the manner that Jeff Bezos is thinking about it, is Apple! As per Bezos – “We have our own patents, our own hardware, can afford to subsidize, and we’re going after Apple”. That’s setting the perspective.

In short, this is all about Amazon positioning itself as the future in digital distribution

Continued…

E-Commerce – The Intent would need to change from Valuations to Sustainability

Posted in Internet and Search, Revenues and Monetization by Manas Ganguly on August 16, 2012

While Flipkart and Snapdeal have soared as Consumer Internet mega-brands – there is something systematically wrong about the e-Commerce market in India. It is working on Valuations rather than Sustainability and thats not the one for long term.

Flipkart, Snapdeal, Yebhi, Myntra, Infibeam, eBay, Homeshop18 – the list of e-commerce companies in India has come fast much too fast and too many. The category is still only in its infancy stages with enough and more action waiting to happen. The 1st round of e-commerce action in India is in prime action. Most of these e-commerce portals are in the funding phase. What is concerning is the fact that all these portals seem to be promising the 3 same things – range, price and service. Heavily discounted prices , management of extensive product categories and extensive customer service could lead to a cash burn. If consumers buy only for cheaper prices, free delivery, soft trials/ no-questions asked returns and Cash on Delivery … then the question is, will anyone ever make money? I don’t think anyone has a good answer to that.

The key to the e-commerce objective is logistics management both inward and outward. Logictics in e-commerce fulfillment is the tail that wags the dog. And then there is inventory management. For a great customer service experience, an end to end integration is most advisable which means building up of infrastructure and adding headcount/overheads. (On the contrary, an outsourced supply chain will spoil the service delivery experience for the e-commerce portals. All Infrastructure/overheads would mean quantum leap in annual sales for break even. Incremental sales is one thing, Incremental profits in a heavily discounted category in a crowded market place is a chimera. The intent is to become the Amazon of India. Amazon relied on the funds from its 1997 initial public offering (IPO) to tide through the aftermath of the dotcom crash that took out most of its rivals. Without competition, it could afford to lose money on building infrastructure. It would take $2.8 billion in losses over six years before it declared its first quarterly profit in January 2002.

Unfortunately, the e-commerce market in India is heavily crowded – this doesnot offer the (pseudo)arbitrage opportunities that Amazon had in its time. Thus, the whole proposition of consumer delight only ends up burning cash and capital. As all industries there is consolidation waiting to happen even while most of the portals are trying to aggressively build up the valuations. Self sustaining business is taking a back seat in the game of valuations and investors really need to identify the horses for the long run. Else, this is one crash that is waiting to happen.

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M-Commerce & E-Commerce: Trends and Developments

Posted in The Technology Ecosystem by Manas Ganguly on July 5, 2009

Trends and developments taking place in the worldwide m-commerce and c-commerce sectors (www.researchandmarkets.com)

– By 2012 it is expected that more than 1 trillion will be spent online by B2C consumers. B2B spending will exceed this considerably.

– E-payment solutions are an important part of e-commerce transactions; however security issues continue to tarnish the industry.

– Asia Pacific leads the world in terms of using mobile phones for m-payments, accounting for around 85% of customers worldwide.

– BuddeComm estimates revenue from mobile content and services (excluding SMS), accounts for around 7-10% of total mobile revenues worldwide. SMS remains popular and accounts for a further 10% of total mobile data revenues..

– Online advertising growth is set to continue for the next few years, but will slow slightly in the wake of the US financial crisis. It is expected that online advertising will eventually account for around 20% of all advertising spend in some markets.

– Search services are central to almost everything that users do online, and this places leading search companies such as Google and Yahoo at an advantage. In the emerging Chinese market, Baidu and Alibaba also have a good foothold.

– Google is still the most popular website property worldwide; however individual countries and regions show unique differences with many local sites remaining popular. Other web properties proving popular across multiple markets include Yahoo, Microsoft and Wikipedia sites, Apple Inc, eBay and Amazon.

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e-Commerce: Gaining traction in India

Posted in Value added services and applications by Manas Ganguly on May 12, 2009

e-Commerce was a non starter in India in the early days. That was before IRCTC stepped in with its online booking. I remember the long painful queues in front of the railway booking counters before the online booking system of IRCTC stepped in. A railway ticket in those days could be booked only by an agent or else, the whole activity of booking a train ticket used to be a half day ordeal in itself. All that changed with the advent of IRCTC train ticket reservation. How easy it was booking a ticket by simply clickinginto the website and doing the needful. The long sweaty queues were now relegated to history.

Led by train and flight reservations online ticketing has been the most successful force in online E-commerce industry. This also supplemented by the fact that today online travel industry constitutes 78% of the total E-commerce industry in India. IRCTC contributes to 1/3rd of the total e-Commerce revenues in India.

The e-Commerce revenues are slated at Rs. 9000 crores and IRCTC contributes Rs.3400 crores in that. 45 million tickets were sold in FY 2008 and it has seen a jump of 100% YOY. However the potential for IRCTC is still higher and it can yet add more revenues to itself. A few steps to increase the online ticketing activity:

1. Reduce additional charges for i-tickets and e-tickets to increase penetration and induce more people into a internet based ticket purchase. This helps since the service is mostly used by agents who charge additional commission apart from charges levied by IRCTC from their customers this again limits the penetration level and if the users are given more payment avenues it could propel many to go for direct transactions.

2. Allow booking of rail cargos and other railway services on a large scale then it can definitely garner more traction in terms of higher transaction size and remove bottlenecks at the same time attracting SME to the fold.

3.Association with commercial banks may help in getting more traction especially if rail cargos and other services are introduced through IRCTC.

The growth today is good, but it could get much better if these simple steps are also taken up. For Railways, it would reduce process costs of maintaining a bulky ticketing department.

The other large player which can simply multiply its value add by online transactions is India Post. It currently delivers 1,575 crore mails every year linking every nook and corner of the country through a network of 1,54,149 post offices and 5,64,701 letter boxes. The government owned services like India post if implements E-commerce in a serious way then India could definitely remove the barriers of E-commerce industry.

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