Poor sales derail IRCTC's e-commerce tie-up with Yehbhi

The e-commerce initiative of the Indian Railways Catering and Tourism Corporation (IRCTC) has come to a halt, with private partner Yebhi.com not extending its contract. The two had entered into a revenue sharing partnership about a year ago, with Yebhi's products sold under the IRCTC brand name.

IRCTC had plans to draw people who bought tickets on its site to shop online for products, including clothes and accessories, through its tie-up with Yebhi.

"The partnership was based on the assumption that Yebhi will benefit from the huge traffic on the IRCTC site, especially from small towns. Though we were successful in getting some traffic, we didn't get the expected conversion rates," said Manmohan Agarwal, chief executive of Yebhi.

IRCTC dismisses this as a routine exercise. "Yebhi's contract was just for a year and we will float a tender in a couple of months for another player to come in," said an IRCTC spokesperson who did not wish to be named.

The public sector undertaking for the Indian Railways gets close to 1.2 million visits a day on its site, generating 180 million transactions every year, the largest for any travel or e-commerce website in India.

IRCTC and Yebhi's partnership was based on a revenue sharing model where Yebhi held inventory for IRCTC and shared about 2-10 per cent of the revenue. Electronics, clothes and home furnishing were sold on the IRCTC website. IRCTC was to promote online shopping through banners on the main landing page with a separate tab with links to the shopping portal.

Space meant for promoting Yebhi's products was given to other advertisers, a key reason for trouble between the two parties, said an industry source who did not wish to be named. The e-store for IRCTC is not functional any longer, though the contract expires at the end of August.

But IRCTC has not given up. "There are many options on the table. We could consider a marketplace where many e-commerce players could be listed on the IRCTC portal," said a person close to the development.

Beyond e-commerce, IRCTC has diversified its revenue to non-railway catering and tourism. Tour packages, hotel bookings and railway station retiring room bookings are other facilities it offers on its website.

IRCTC is among the few railway PSUs slated for disinvestment this year. Its total income stood at Rs 720 crore in 2012-13.

With e-commerce and internet based companies getting increasingly high valuations, experts said IRCTC needed to build a strong brand known for quality and services. "Just high traffic does not make a successful e-commerce website. The buyer needs to have confidence in the quality of service with the right image of brand in mind," said Mohit Bahl, head of retail, KPMG India.