How You Can Get In On A Piece Of India's Massive Digital Market

Indian office workers

Photo: fakepunju via Flickr

Last month I had visited DLD in Munich, Europe’s leading technology conference. They had invited me as a speaker on a panel about “Digital India.”I was pretty pleased that India was getting its own panel at a major international tech conference.

Though, what happened at DLD shook me up – completely. For the first time in my life, I realised the sheer momentum of interest in India.

It seemed like this whole new world has been discovered somewhere, and through fables and folklore, word has spread about this fast growing, buzzing country, that everyone wants to learn more about, wants a piece of. It is fascinating to see how even the most opinionated people become great listeners when it is a conversation about India.

So, the question now is that there are so many people – potential entrepreneurs, investors, professionals, service providers, among others that are just thinking of one thing vis-à-vis India: “I want in on the ride.”

While the below won’t necessarily achieve that objective for someone, it may just help as one plans an India strategy. These are derivatives of some of the most common conversations I have with people outside India or visitors from abroad.

How large is the Indian internet industry?

There is no doubt that in India we are currently at the same stage as the US internet industry of 1998. We have about 70 Million internet users and about 100 Million mobile internet users (out of 600 Million total mobile subscribers), which is growing at a mind-numbing pace.

In our view this is quite a significant base to work off. In our business, Snapdeal, which is the largest group buying site in India, we are adding a new subscriber every 4 seconds. From adding 4500 subs in June 2010, just 6 months later, we added 600,000 new subs in January 2011, which demonstrates the velocity of growth that is now possible in India through the internet.

Are companies making money?

Depends on the definition of ‘making’ money. Revenues, yes. Profits, not really (with notable exceptions). But that is ok, given as mentioned above, we are in the investment mode as an industry. There are serious investments being made in consumer education, payments infrastructure, logistics and supply chain, brand building for virtual properties, people training, and in learning from lots and lots of mistakes being made everyday.

That said, the learning curves are steeper in India, as companies have the benefit of hindsight of the growth trajectory and associated challenges in the US.

Is e-commerce working?

Most definitely – and honestly, to the surprise of many. The reason for the surprise is that there were just too many holes in the system to make e-commerce work in India. However, thanks to waves of investments that have been happening in India, the stage is set for exponential growth. In 2004-2007, we saw the rise of Online Travel Agencies (OTAs) in India.

Backed by a gazillion dollars, the OTAs and state owned railway booking site, led the way in creating awareness among the common man in India about the possibility of transacting over the internet, a phenomenon so new to people, that I am told, consumers used to always call the travel portal customer care right after successfully completing a transaction, to make sure the “money went through”.

The e-ticket played a key role in setting up this industry for success given its ability to gratify the customer instantly.The next wave of e-commerce is one we are witnessing today, seeds of which were sown in 2007-08. These are companies that were doing traditional e-commerce, selling books, DVDs, and other standardized media.

Building on the foundations set by the OTAs in India in creating awareness of virtual commerce, these companies held consumers by their hands and guided them to take the leap of faith in ordering physical goods over the web. There had been companies since 2000 in India that were involved in physical product e-commerce, but the surge that we witnessed in India post 2007-08, overshadowed all that had been witnessed till then.The most recent wave of e-commerce, thanks to the global explosion of novel e-commerce models such as group buying, is one which is relatively abstract in nature for the Indian e-commerce buyer.

However, as Snapdeal, post the first 6 months of gestation, we have witnessed exponential growth and a widespread adoption of a seemingly non-intuitive model for a typical Indian consumer (“why should I buy a restaurant voucher online for offline use, when I could just go and bargain at the store?”). To our surprise, we zoomed to the top 30 sites of India in terms of traffic within the first 12 months of launch and very quickly were driving hundreds of customers to individual small merchants.

Why have many US internet companies not succeeded in India?

The way to answer this question is to split the companies into two buckets: companies that don’t necessarily need localisation to survive and companies that are completely dependent on it. Many companies that have made it big in India in the recent past, as logic would suggest, fall in the first bucket – Google, Facebook (believe India is their fastest growing market), Twitter, Linkedin.

The other day, I was listening in to a talk by Reid Hoffman about when they decided to put a dedicated team in India and his answer was simple – “We just waited for Linkedin India to get large enough on its own first.”The more interesting companies are the ones that fall into the second bucket – for whom localisation is the oxygen. For the record, the number of companies in this category that have become market leaders in India = ZERO. Seriously, ZERO. Let’s pick all the key internet verticals:

Jobs: An Indian company is the standout #1. The largest job portal in India has 1600 employees, out of which 1200 are in offline corporate sales (give or take a few). Which company in the US has the understanding of a sales process to manage such a large on-ground sales team?

Match-making: Dating sites don’t work in India – they are taboo (eventhough many would privately disagree with this social notion). So, all match making sites are essentially matrimonial sites. Now, there are hundreds of castes, sub-castes, communities, languages, reservations, cultural sensitivities that have to be taken into consideration.

Matrimonial sites in India have physical stores aka “Matrimonial Lounges” to help families with the process. Parents upload profiles of children – not the individual in question himself/herself. It’s mind boggling as to how different things are out here.

Travel: Online travel, outside of flights, has such a significant offline component, when it comes to booking hotels, vacation packages, etc, for a number of reasons. The technology platforms (GDSs) don’t exist in most cases for hotels, resorts, etc. People love to speak with someone before they make the most expensive discretionary purchase of the year. Which means these businesses become call centre operations.

Group buying: In India, this is a pure offline marketing business with a website – there, I said it. A typical merchant is a 55 year old reasonably to very wealthy gentleman, who has limited interest in the spa or saloon or restaurant that he runs, because he is simply using it as a vehicle to make some money at the end of the month, with no real passion for serving great cuisine or making people look great (though the business may accomplish that by having a good, experienced staff).

You cannot get him to sign a deal with you on the phone, and that too to give a 50% off + commission. Just won’t work. We have had to build a 300 person team with operations in 50 cities, and deep relationships with over 50,000 retailers. Retailers in India like to see and shake the hand of the guy they are signing the deal with.

What does one need to do to get a share of the Indian consumer’s wallet?

Understanding the Indian consumers’ psychology is key (it’s a ‘duh’ comment, but important nonetheless). Sometimes the biggest barrier to create in a business (especially ours in group buying which has seemingly low starting up barriers) in India is to create the stand-out, top-of-mind recall so that when people think deals, they should think Snapdeal.

We have learnt that our business is more about providing access to aspiration and good stuff for cheaper prices, rather than providing cheap stuff, because consumers don’t want that. I often say that Indian consumers are all about ABCD – Astrology Bollywood Cricket and Discounts, and as long as you are doing one of these, you are in pretty good shape 

But I am XYZ (US/European company with big pockets) and can hire the best talent and take care of all this easily?

Scale is the only strategic asset in India. It becomes very tough to go against companies that have scale in India. It’s the mid and junior level team members that add majority of value, given the offline nature of internet businesses in India (pardon the oxymoron).

Those guys need a tremendous amount of hope and inspiration, on a very regular basis. Money doesn’t buy inspiration when we are talking about team members that make $600/month, because there will always be another company out there that will happily pay $700/month. The ability of local entrepreneurs to imbibe a sense of ownership and mission in their team, in addition to the deep understanding of the market and its texture, is such a powerful combination in an offline centric internet business in India, that it is very hard to replicate with hired guns.

Indian offline, tech-enabled models require a lot of hands on innovation, local knowledge and being nimble on the feet, and throwing money on it usually doesn’t solve the problem.

I am an investor – where do I start?

Visit India. Meet fellow investors – they are a very open minded group (at least the ones I know!) and realise that there is a lot they could also learn, given we are still in v1.0 of VC investing in India. Meet entrepreneurs – spend time at startup/investor events – for good or bad, there are enough of them every month now.

That said, speaking purely from an entrepreneur’s perspective, I can imagine that any international investor would need to put a strong person on the ground in India to be really effective in their investment decisions.

I am an entrepreneur with a good business in the US and want to expand to India – where do I start?

Visit India. Entrepreneurs in India are super open-minded and willing to work with international companies. There is so much we could learn from companies smaller or larger than the ones we run, that all it would take is an email from an interested company to the entrepreneur in India, for the latter to get on a call and begin discussions. The new breed of young, passionate entrepreneurs in India realises the value of strategic partnerships, and how in today’s environment, they often begin with a cold call or email from another part of the world.

I am a professional and want to create an orbital shift in my career by riding the India wave – where do I start?

Research the company you are interested in, and then drop them a mail. Young Indian companies are (almost desperately) looking for people with strong international experiences.

However, their initial reaction may be (1) This person would be too expensive (2) Why would he want to work at our company – we are tiny, and we are in India!?In case you conviction is strong, push the founders at the company you are interested in to not consider the monetary and seniority aspects to an extent that it creates elimination.

Once you are past that initial alignment, you would witness great openness of most young companies in India to welcome people with strong international experiences on board.  

In summary, India is totally getting its mojo back and those getting in early i.e. now, are going to have the ride of their lives.  

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