US retail e-commerce growth is beginning to slow down

May 30, 2007

According to the latest data just in from eMarketer – US online retail is maturing rapidly. One result of that is, for the first time, e-commerce sales growth will drop below 20% next year. But more than ever, consumers are using the Web as a product research tool, regardless of whether a purchase takes place on a Web site or in a store. Apparel, home furnishings and major appliances are heavily researched online, although the majority of the sales are made offline.

Retailers who effectively build bridges between their stores and Web sites stand to be the big winners in the research-online/buy-in-store era, according to eMarketer’s report “US Retail E-Commerce: Entering the Multi-Channel Era.”

This maturing Internet sales channel, coupled with an anticipated slowdown in the US economy, is expected to produce lower year-over-year e-commerce sales gains. Rising consumer debt, high fuel prices and a cooling housing market are expected to dampen total retail spending this year.

eMarketer expects online retail sales to grow 21% to $131 billion this year. Over the next four years, sales will increase at a 17% compound annual growth rate.  

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Increased spending by existing online buyers, rather than new buyers coming online, is now the main driver of retail e-commerce sales growth. This year, 117 million people, or two-thirds of Internet users, will make at least one purchase online, with the average buyer spending $1,123.

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A maturing e-commerce channel means retailers must make the most of the customers they already have–that is, convert more shoppers into buyers.

Why is VAS necessary in India?

May 12, 2007

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 Hi. Like your mobile phone? Can’t live without it? Do you feel it’s the most personalizable accessory you own? Congratulations – you are not alone! Millions of fellow Indians feel the way you do.

However,  ‘the times, they are a changin’ – today you use the phone quite differently from the way you did in the mid ’90s when due to very high tariffs (remember Rs. 14 per minute?) you made the occassional quick call, and hurriedly switched it off.  In those days, the cell phone was an object of desire, but not of much utility. Consequently, the top two applications then were – SMS and voice – in that order.

Cut to today and the picture is quite different. Let’s see some major trends:

1. Today the market is growing at a furious pace and India is the 5th market to cross the 100 million subscriber mark. That’s a heck of a lot of people connecting with each other! The adoption of mobile telephony remains unparalled in scale, as people from all walks of live choose to connect with each other.

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The user base crossed the 100 million mark in Nov 2006 to reach 121 million in March 2007 (Source: Cellular Operators Association Of India). The success of the market can be gauged from the fact that the mobile user base has surpassed the PC user base in India and hopefully soon the Indian market will have more mobile users than TV viewers!

2. An small but emerging segment of customers want more from their cellphone. They use their cellular phones to take snaps, play games, read news headlines, surf the Internet, and listen to music.

3. From the cellular operator’s perspective – voice has become commoditised, average revenue per user has been heading southward and there is considerable pressure to explore alternative revenue avenues like data, which today contributes 10 – 15% of some cellular operators revenue (Source: IAMAI)

From a high of 44 cellular service providers (regulation required a minimum of 2 in each circle in the mid 90′s), to a current 4 – 5 national level players, there has been a lot of consolidation and intensified competition.

The growing intensity of competition has led to more services for the end user at lower prices. This has had an effect of stimulating demand and thus increasing the category adoption rate.

The growing subscriber base has also augured well for industry revenues, which have risen consistently over the last four quarters. However the other side to this growth is that ARPU’s (Average Revenue per User) have been correspondingly declining quarter on quarter. This is also a function of the structure of the Indian mobility market. At 80%, the pre-paid segment completely dominates this Indian mobility market.

4. Pre-paid v/s Post paid

Pre-paid has been a good platform on which the market had grown very fast. Operators have had a strong focus on the pre-paid segment as the cost of customer acquisition is very low compared to the post-paid segment.

However the flip side is that, customer retention has become very difficult. Loyalties in the prepaid segment are low due to the low switching costs and it is not uncommon for user to routinely change their numbers and service providers. Pre-paid subscribes are also low usage subscribers who contribute only 25-30% ARPU’s as compared to the post-paid segment. 

To my mind, cellular service providers in India face two clear challenges:

(i) Regulate churn, esp. in the pre-paid market.

(ii) To develop alternative revenue streams as voice has become commoditized

It is my submission that Value Added Services will be necessary if not vital for telcos to create brand differentiation, and address the challenges mentioned above.

The No.1 reason why most businesses fail on the Internet

May 5, 2007

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 Alright! So you have this HOT product or service idea to make your millions on the Net. Not only is the product great (it’s something you love), but you also design an incredible site, have excellent customer care, solid logistic partners, and the whole kaboodle required to launch your business on the Net.

And then you sit back and wait for the virtual cash registers to start ringing. Nothing happens. Google Analytics or any of the stats tracking software available to track hits on your site tell you that infact, nobody is coming to your site. What happened?

Trying to sell what you consider is a hot product, is the number one reason so many people fail on the web. Sounds contradictory? Let me explain.

Say you find the cure for common cold. Now, isn’t that a great new product? You bet! You could probably make millions selling it through a worldwide brick and mortar distribution pharma chain – but you would be hardpressed to build an online business out of it. And that’s because people do not congregate online looking for a solution to the common cold.

According to Derek Gehl at the Internet Marketing Centre – to build a successful online business you should:

1. Look for an existing market / group of people with a common problem they are trying to solve.

2. Look for a market that has something in common with you and your interests. You MUST be able to relate to your audience.

3. Focus, focus, focus that market till you have a very defined niche that your business can cater too. Large markets are extremely cluttered with competition.

I was reading this piece by Derek and I thought about the Dotcom boom and subsequent bust of the late ’90s. Too many entrepreneurs rushed online with ideas they had fallen in love with confident that customers would lap them up as well, once launched online. Also based on the ‘eyeball’ strategy linked to an advertising revenue model, their online fortunes were linked to driving traffic on their sites.

But nothing of that sort happened – at that point in time users were just getting used to the web, and were hesistant to buy online. Many online ventures went belly-up whilst  some of the largest ones just managed to stay afloat.

The Internet resurgence today is quieter, and more well reseached in terms of consumer marketing, product design and development and robust business plans. Venture capitalists reject more than 95% of cases presented to them on the basis of the above points, before selecting one to fund, thus drastically improving its chances of long term success.

 To wrap up this post – look for a niche market to target; not a hot product to sell. Later this week, we look at what are online niche markets, and how do you select them.

Podcasting – A HOT new tool to WOW your audience

April 29, 2007

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 The urge to communicate, is innate in humans – from elementary drawings in caves by early nomads to writing on parchment paper, to the development of printing technology, to electronic transmission and now to wirefree telecommunication – the aim remains the same – to communicate.

On the Net too, there are numerous ways to communicate – email, blogs, messenger services, VOIP (Voice Over Internet Protocol), video transmission, podcasting and videocasting. Today I’d like to share simple concepts about podcasting; a nascent tool not yet adopted by mainstram Net users, but a technology with immense commercial potential.

Audio blogs have been around for a while, but it was RSS (Really Simple Syndication) that increased their popularity since it allowed audio content to be delivered directly to people’s Ipods and portable digital music players through this new technology called ‘podcasting’. Later podcasting became so popular that it was selected as the Word of the Year in 2005 by the New Oxford American Dictionary on the basis of its rise from relative obscurity to become one of the biggest trends in media.

What is podcasting?

It is the delivery of audio files – typically MP3 audio files – to the Internet. Listeners can access the files using reader software which lets them easily and automatically transfer the files to a digital MP3 player. The process has become known as podcasting because the most popular MP3 player on the market is the Apple IPod. But please note that podcasting does NOT necessarily require an IPod. Listeners can easily play the downloaded files on their home computer.

What makes podcasting a unique marketing and communications tool is that it allows individuals and businesses to publish audio content that interested listeners can subscribe to via RSS ‘feeds’.  Before podcasting you could of course record speech or music and put it on your website or blog. Now your listeners can automiatically receive your audio broadcasts without having to go to your website or blog – the podcast is automatically delivered to their computer through RSS technology.

 For a live demo of  podcasts at work go to top podcast directories. All you have to do is type the word podcast directories in Google Search and you are on your way. Some good Indian podcasts sites are:

www.podmasti.com

www.theindicast.com

www.podioindia.com

For more detailed analysis of podcasting trends, pl click on the following URL:

 http://www.podcastingnews.com/2007/03/22/podcasting-audience-up-18-since-last-year/ 

 Cheers!

Two major developments on the Internet this week

April 26, 2007

This week has been interesting for the Internet community for two reasons. One from a global perspective. The other from a closer at home Indian perspective. Let’s begin with the first one first. The following is an excerpt from a press release from Millward Brown – a leading market research firm (www.millwardbrown.com) :

LONDON, UK, 23rd April 2007 — The second annual BRANDZ™ Top 100 Most Powerful Brands ranking published in cooperation with the Financial Times was announced today by leading global market research and consulting firm Millward Brown. Google has risen to the top of this year’s ranking, taking the number one spot with a brand value of $66,434 million. This was followed by General Electric ($61,880 million), Microsoft ($54,951 million) and Coca-Cola ($44,134 million)

So Google beats GE, Microsoft and Coke for top honors. How’s that for a paradigm shift in customer’s appreciation of what drives brand value? Google shows a whopping 77% jump in brand value and moves up from 7th position just a year ago. To me this is testimony to the HUGE power of the Internet and equally importantly the power of word of mouth advertising which is largely responsible in making Google the front runner in search engine adoption.

The other big news took place today with AOL launching its India centric portal (www.aol.in). Offering a comlpete suite of services including free web-based mail, and messenger, the portal will compete with its global competitors Yahoo, MSN, Google, and Indian brand such as Rediff, Indiatimes, and Sify.

To make up for its late entry, I think AOL will be forced to offer better than market services to encourage switching by existing competitor customers and adoption by first timer users.  

 


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