The power of the Internet as a medium is that it can really change the way people across the world (and therefore India as well) live, work and play. The first killer application on the Internet was email – today this single application has resulted in millions taking to the Net and using it.

Over time, these emailers start getting comfortable using the Internet and graduate to incorporating many other applications, where the Internet offers compelling advantages. A typical Internet browser’s usage of the medium is shown in Figure I, where email is a primary driver and e-commerce transactions are at the apex of the pyramid.

This is the primary reason, why the number of people transacting online (including shopping, banking, paying bills, buying and selling shares etc.) is still a small percentage of the actual number of browsers. Add to this other concerns that customers have regarding online transactions and it will become obvious why it will take some more time before the online transacting population will reach a threshold base. In the rest of this article, online transactions are restricted to the area of online shopping or e-tailing.

All of us, including you and me, are used to shopping in physical stores. It’s a habit and part of our life-styles. And we all know how tough it is for us to change habits built over years. It is therefore impor-tant for e-tailers to think hard and see if there are any compelling value propositions they can offer to consumers on a sustained basis, so that they can consider shifting part of their shopping online.
The good news is that web stores come with many advantages over physical stores. Let’s look at a few of them and see if they make sense to you as a shopper.
When was the last time you walked into a bookstore, which had on display, say, a few hundred thousand books? Chances are never – and unlikely you will be able to do so in future as well. But you can easily enter online bookstores like amazon.com, which has over four million books and counting! Physical stores, including large retail outlets will always have limited shelf space and in time will run out of it, whereas for web stores, you just need to keep adding SKUs (Stock Keeping Units) to a database without limits. Such incredible range and selection makes online shopping a real pleasure. At Fabmart, we offer a book catalogue touching 2.5 Million titles! And if you still do not find a product of your choice, you can always move to another store at the click of the mouse!

Information is another big plus for online shoppers. The Internet is best suited to deliver all the information that a consumer may require before making a buying decision. Notwithstanding all the brochures, catalogues and collateral that can be made available along with trained sales persons, it is impossible for a physical store to provide all the information in a convenient manner, such that prospective shoppers can make a better and informed choice.

I recently met a lady in Mumbai who had an interesting experience to narrate. On her way back from work in the evening, she dropped by her favourite music store to pick up the latest Hindi film album. As she reached the store, she found the employees closing up for the day and pulling down the shutters outside at the entrance. Despite her pleas, the store politely yet firmly refused to allow her to come in and pick up the title she wanted to buy. That night, in a peeved mood, this lady ordered the same CD at a popular online music store – today she’s an enthusiastic online shopper and a big evangelist amongst her circle of friends for online stores, which remain open 24 hours a day for 7 days a week. And as moving around in congested roads through bumper-to-bumper traffic in polluted environments and a paucity of parking lots become the rule rather than the exception in most Indian cities and towns, the convenience of choosing your own time and place to shop and in complete privacy will start becoming more and more attractive.

All of us like a good deal. And the best place to get good deals and bargains is the Net. Most web stores have some promotion or other running almost always and if you check out a few stores for the product of your interest, you should be able to find something attractive. Price is a good reason to start shopping online, although you will probably continue to shop on the web for reasons other than just price.

Sending gifts is a very satisfying experience but all of us at some time or other must have decided against sending a gift to someone residing in some other place, just because it is not very convenient to do so. The Internet is a great option to send gifts simply because it removes most of the hassles in the process of gifting. We have observed that many customers have tried Fabmart first for gifting music, books and jewellery to their friends in other cities – over time, it has become their default web store for all purchases.

On the other hand, there are some obvious concerns that shoppers have before they complete their first online purchase, notably security and touch-and-feel!
Today, web stores offer 128-bit SSL (Secure Socket Layer) encryption technology, which converts sensitive data like credit card details and personal information into junk while it is in transit over the web, till it reaches the server where it gets decrypted back. This means that third parties cannot access such data as it travels over the Internet. In addition, customers submit credit card information directly on the web sites of banks while making payments over secure online gateways and merchants do not get access to card details in many cases. This further builds customer comfort (remember, in a physical outlet you always leave your credit card details behind when you sign a charge slip!).

What about the issue of touch-and-feel? Customers certainly prefer to see a product physically and maybe touch-and-feel the item before buying. There is of course no way that the web can offer touch and feel (not yet anyway!) although I do believe it is a myth that physical touch and feel always means a better shopping experience.
Sometime back, I saw a housewife shopping for shampoo in a large departmental store. She was faced with several shampoo brands and almost all of them offered various types of shampoos. Some were for natural hair, some for sticky or moist hair, some for dry hair and so on. This consumer was at a loss to pick the right shampoo since she was not too clear about her type of hair in the first place.
Now imagine the same housewife buying shampoo on the Net. The amount of information that can be presented on the types of hair, how to determine ones own hair type, which shampoo to select and why different hair types need different shampoo types for best results will help her make an informed choice. A clear case where physical touch-and-feel is not able to help a consumer make a superior and informed choice as compared to on-line shopping. Many such examples are available if we think about it.

This is not to reduce the importance of touch and feel. It will be tough to make the same housewife buy (say) salwar-kameez over the web. She will most likely want to touch and feel the texture and also the actual color on the garments before she buys the item.

The point is that some product categories require touch and feel and some don’t. It is important for e-tailers to replicate physical shopping as much as possible and in some areas go beyond what is available in brick-and-mortar stores, to compensate for the lack of touch-and-feel aspect. If e-tailers can create such overwhelming value, it will help consumers shop regularly on the Net.

We have observed that unless consumers complete several online transactions successfully, they do not become loyal online shoppers. This is the reason why our focus has always been on making our customers regular shoppers, rather than getting fresh customers, although this is obviously very important.

Since, the time taken for customers to order stuff like books and music several times would take many months, some of the smarter online stores are offering customers two types of products – impulse-based and need-based. A good example of selling need-based items on the net is the online grocery store. Need based items will help build a habit of shopping online much quicker.

This does not mean that customers will be willing to buy everything on the Internet. There are products where customers would prefer to see and touch and feel the item before buying.

Shoes for example. While we all know our shoe sizes, every time we buy a new pair, we prefer going to a store, wearing the new pair and do the customary walk across the showroom before we tell the sales person to pack it.

There are also items where the Internet can play a key role in disseminating information before a purchase can happen, like consumer durables and cars. With so many models to choose from, a website can offer customers detailed data on each model along with customer reviews, comparision with other models etc. This will help them zero in on a model suited to their needs after which they can go to a dealer and test drive specific cars or check out specific 29” color TVs. This saves time for the buyer and reduces the sales cycle for the dealer as well.
Figure II gives a break up of the types of items and how they are positioned as far as purchase online is concerned.

Webstores need to keep an important parameter in mind while designing online stores – there are no online shoppers in that sense out there. There are only shoppers, who largely shop at physical stores. Web stores will need to build value propositions, which are relevant to that category and also unique as compared to what is offered by physical stores retailing the same items.

For example, our online grocery store offers features like ordering from shopping lists because customers largely buy the same items month after month. However, a feature like this will be useless for buying books and music and hence we don’t offer it. Many websites unfortunately create a single format store and add items to it across various categories. This may not work for a simple reason:

In the physical world, bookstores, music stores, pharmacies, grocery stores, toy stores have completely different feel and ambiences since they target different customers who are in different moods while shopping at such outlets. While ambience is important in book and music stores, we certainly don’t want to buy medicines in similar environments while listening to background music! So, why should the same online storefront work equally well for all items?

What is also becoming clear worldwide is that consumers are becoming quite demanding. They want to have the power to decide how and where they will shop. It is for retailers to offer their services and products across multiple mediums – and allow customers to order from catalogues, walk in to stores, call up on the phone and order or just log on to a website. In other words, successful retailers will need to integrate all mediums including the Internet also as a medium of doing business. Depending on the product range being sold, they will need to use the Internet either as a transaction medium or an information center.

The Internet also allows itself to be used as a great customer service tool including running targeted and personalized promotions at low costs.