"Even though offering Cash-On-Delivery (COD) has become the flavour of the day to persuade tentative customers to shop online, we believe that it is essentially loss making"
RA: When you say eBay is an online market place what does that include? How are you different from Amazon?
MK: eBay is a platform for sellers and buyers. It is like an online Mall. We create the infrastructure and promote the address to attract customers. We essentially put supply in touch with demand. By doing this we enable 1000s of entrepreneurs to reach a national audience. On eBay anyone can trade practically anything (The most expensive item sold on eBay to date is a private business jet for $4.9 million!). Amazon on the other hand is a retailer. It operates like a store. They take ownership of inventory and delivery.
Having said that, eBay actually started in 1995 as an auction site. The notion was that markets are imperfect and inefficient and that demand is disaggregated specially in the case of Collectibles e.g. old posters, memorabilia and used products. Since Collectibles and used products dont have a price, auction was seen as the best way to realise true value and therefore the concept of people bidding online. Over time, in response to customer interest the focus moved to new seasons products which is how you see eBay today a destination for great deals on latest products in a secure shopping environment.
Some quick eBay facts for your interest:
eBay Inc. has a presence in 39 markets, including the U.S. and has more than 108 million active users worldwide.
eBay users worldwide trade $2,094 (Rs 1 lakh approx.) worth of goods on the site every SECOND!
In Q3 2012, gross merchandise volume (GMV), the total value of all successfully closed items on eBay Inc.s trading platforms, was $16 billion (Rs 80,000 crore approx.)
eBay India (a 100% subsidiary of eBay Inc.) has over 4 million registered users.
At any given time, there are over 7 million live listings on eBay India across 2,000 categories of products in Electronics, Lifestyle, Collectibles & Media verticals.
Approximately 30,000 sellers sell on eBay India annually.
eBays business model is based on taking a percentage of sales revenue from its online vendors.
On an average day on eBay India:
A mobile accessory sells every 1 minutes
A health or beauty product sells every 1 minute
A portable storage device sells every 2 minutes
A coin or a note sells every 2 minutes
A mobile handset sells every 2 minutes
A piece of home d้cor sells every 2 minutes
A car or bike accessory sells every 3 minutes
A piece of apparel sells every 3 minutes
A stamp sells every 4 minutes
A piece of jewelry sells every 3 minutes
A watch sells every 5 minutes
A book or magazine sells every 6 minutes
A fitness & sports item sells every 7 minutes
A toy sells every 8 minutes
A tablet sells every 11 minutes
A home appliance sells every 11 minutes
A piece of office supplies sells every 17 minutes
A pair of footwear sells every 20 minutes
A digital camera sells every 20 minutes
A laptop sells every 23 minutes
A baby care product sells every 34 minutes
A pair of sunglasses sells every 37 minutes
A MP3 player sells every 37 minutes
A TV sells every 43 minutes
RA: Why should customers trust the offer made by the sellers on eBay. Does e-bay stand guarantee for its community of sellers?
MK: At eBay we offer equal opportunity for all sellers. Anyone can come and set up shop with us. We even organise seller seminars to help vendors learn how to grow their business. At the same time, we have put in place multiple layers of checks and balances to ensure customer satisfaction. Let me share a few of the measures both proactive and reactive that are in place.
The first is risk modelling. Given our experience across the globe we have a fairly robust system of vendor profiling that helps us weed out the risky vendors. We also have a verification process where the bank account details of the vendors are kept on record. And we exercise zero tolerance when it comes to stolen or counterfeit goods.
Then there is Paisa Pay, our proprietary payment system, which ensures that the sellers get paid only after the customer receives the item and is satisfied. So the money is held in a kind of escrow account for a while.
Last but not the least is the eBay feedback system, where every buyer gets to rate the seller positive or negative on a 5 point scale. Since this rating is public and can be viewed by prospective buyers it works at keeping the sellers honest.
And when all else fails there is the eBay guarantee our Buyer protection program which offers the buyer refund/ replacement within 20 days if not satisfied.
RA: Who is the eBay customer?
MK: The eBay customer profile mirrors that of internet customers. Two thirds are in the 18-35 age bracket and live in the top 25 cities. The buyer is essentially male, though over a period of time the presence of women has increased. Presently our best selling category is Electronics followed by Jewelry and Apparel.
We reach out to customers through data bank relationship marketing, digital marketing, social media, mass media (TV/ Radio) et al. Separately we have set up Destination Properties like Deal of the Week or Best Deal on Electronic Products which attracts its own traffic.
Currently the trigger of online shopping is value and therefore the eBay proposition of Fantastic deals and widest variety of products. Over time, in western markets, customer behaviour is being driven by convenience and selection (search for more variety). It is only a matter of time before Indian shopping behaviour move in that direction.
RA: Challenges faced by eBay?
MK: Logistics, Logistics, Logistics! We have outsourced logistics to the top 20- 25 courier companies with who we have specially negotiated rates and server to server integration to track the status of goods. We encourage sellers to use this infrastructure. The challenge is rural India. The reality is that logistics companies have not penetrated the hinterland. Only Indian post have a network of branches that can take you to the small towns and villages, but Indian post does not offer a facility where you can trace the package, so it is not possible to keep customers informed of the transit status of their goods.
Also, even though offering Cash-On-Delivery (COD) has become the flavour of the day to persuade tentative customers to shop online, we believe that it is essentially loss making. We prefer internet banking or debit cards. Did you know for instance that there are 18 million credit cards and 228 million debit cards in circulation? It is this second group that we target.
RA: Are there any seasonal patterns that you have observed ? What are the online trends that you have noticed in recent times.
MK: These are early years yet. We have not yet noticed any seasonal pattern to sales, though Diwali did see a definite spike last year. As far as trends goes, I believe internet shopping provides an early glimpse of the changing times. Some quick observations :
Tablets have started selling more than laptops on eBay (Tablets grew more than 3 times in the July- Sept 2012 quarter as against the Jan- Mar quarter in the same year !)
Presence of small town users is increasing significantly. According to the eBay India Census 2011, an annual analysis of all transactions on eBay India 1 out of every 10 purchases is from rural India as well as 1 out of every 20 sales is from rural India. Metros contribute to 51% of transactions while Tier 2&3 cities contribute about 41% of transactions & Rural India contribute to 9% of transactions on eBay India.
The presence of women is increasing, driven by lifestyle products.
More and more brands are setting up a significant online offer.
And last but perhaps the most significant the growing use of mobile phones to shop. The challenge of mobile shopping is that it is not yet a good experience, and the mobile payment segment is yet to pick up, but that will change as we see the development of more mobile based applications and then everyone can go around with a store in their pocket !