Hitesh Dhingra, co-founder and CEO, Letsbuy.com, is a serial entrepreneur who also co-founded India’s first contextual online advertising network. Amanpreet Bajaj, co-founder and COO, has been a web entrepreneur since he was in college, founding a youth portal in 1999 while pursuing an undergraduate degree in Information Technology from Delhi University. They spoke to Alokananda Chakraborty about the direction in which e-commerce in India and Letsbuy.com are headed. Excerpts.
Q. How does Letsbuy.com’s business model stand out from the internet crowd?
Hitesh Dhingra (HD): With more than 300 brands and 12,000 products, Letsbuy.com is focused on offering the widest selection of electronics. We follow the stock and sell model; this ensures that our customer gets the right product at the right time. With the expansion of our warehouse and carry and forward location network, we hope to achieve 24 hour or even same day delivery anywhere in India.
Letsbuy.com operates on three Cs — computers, communication and consumer electronics. This is a game of relationships and scale. We have been in the arena long enough and have established good relationships with the brands and their tier I distributors. Letsbuy.com has been able to get good deals from them as they are confident that we will deliver volumes.
We sell only those products that offer at least one year manufacturer warranty. No-questions-asked return of products in 45 days and extended warranty have further boosted their confidence. The cash-on-delivery and no interest EMIs have also catalysed sales. Environment-friendly initiatives that encourage users to responsibly recycle their old gadgets has been very well received.
Q. Why is having a broad array of products so important to your business model? This approach entails having relationships with a number of manufacturers. Is that difficult?
Amanpreet Bajaj (AB): There are four critical factors that draw the consumers to buy online — selection, deals, accessibility and convenience. E-commerce offers indefinite shelf space to list the widest selection of products as compared to restricted and expensive physical retail space. This approach requires a lot of effort in terms of establishing association with manufacturers, building their catalogue and inventory planning. It also provides brands an opportunity to reach out to mass audience across 1,200 cities and 4,000 pin codes without investing in a physical distribution model. Thus, brands/manufacturers are willing to support this model. It was difficult in the early stages but now brands understand the opportunity and approach us to sell their products.
Q. But tell me why would a manufacturer sell through you rather than direct over the internet?
AB: E-commerce is not just about creating an online catalogue. The mechanics of an e-commerce business is the same as any traditional retail business except that orders are booked online. It is a highly capital intensive business and requires strong technology, infrastructure, customer service and expertise. Most of the sales for electronics and IT products initiate with a research online and customers want to evaluate all the options — brands, price comparison, payment options, ease of buying, service levels etc before actual buying. As e-commerce is our core business, our understanding of the online customer enables us to do a better job in convincing him to buy on Letsbuy.com. Brands also want to leverage our platform as we get more than 3 million visitors on our website every month, which is more than any large format retail store selling electronics in India.
Q. Are you troubled by the fact that PC penetration stands at just around 38/40 per cent in India?
HD: Even with limited internet penetration, India is among the top 3 connected nations. The increase in the sales of smartphones and internet on mobile should fuel the growth of e-commerce further. We have started seeing 3-5 per cent of our sales coming from our mobile site, which is an encouraging sign.
Q. Can you tell us about some interesting trends with respect to the consumer profile online?
HD: At Letsbuy.com, we get 50 per cent of our sales from tier II and III cities where brand accessibility is a major issue. About 70 per cent of our sales for high end products like laptops, LCD TVs, gaming consoles, ACs come from these cities. We have now decided to take our distribution centres to the regional level, which will enable us to service these cities better. Another interesting fact is the change in the consumption behaviour for electronics. The shelf life of most gadgets has gone down drastically over the last three years. On an average, people change their mobile phones every year, laptop every two years, television every three years and they are willing to invest an additional 20-25 per cent on accessories for their favourite gadget.
Q. What is your view on the spurt of investments in the last 12 months in the online businesses in India? What are the reasons for such faith from investors?
AB: I think most internet entrepreneurs are investing their time, effort and resources in building a robust infrastructure-technology, warehouses, customer services etc which is a long-term approach as compared to the earlier internet businesses that were built on ‘pageviews’. Second, online retail caters to the explosive demand in tier II and III cities that physical retail couldn’t. Even leading electronic goods brands are realising that the growth is in non-metro towns, and e-commerce provides them direct access without any additional investments.
Q. Will the investment momentum in e-commerce continue? Are these start-ups growing enough to sustain themselves?
AB: E-commerce is a highly capital-intensive business and we believe that investments in companies with sound fundamentals and good traction will continue. It may take any good e-commerce company three to four years to break even and be profitable as investment in infrastructure and customer acquisition will be huge in the initial years. I am confident that the companies that have invested in their backend operations, customer service and developing strong relationships with brands will be the winners.
Q. What do you foresee being the hot topics in e-commerce over the next two/three years?
HD: There will be a lot of consolidation in next 12 months and clear domain leaders will emerge in two-three years. Applications and social commerce are yet to take off in India. We have started working aggressively towards them.
Q. How will Letsbuy.com evolve, and what are some of the possibilities for expansion?
AB: We will go deeper into existing categories. To expand the product portfolio we looking at other related categories such as watches, battery-operated toys and office supplies.
Q. And finally, what is the future of e-commerce in India?
HD: We believe that e-commerce would leapfrog traditional retail in the next five years in categories like electronics, IT, books and media. Currently, e-commerce is just 0.3 per cent of overall retail in India as compared to the global level of 7-8 per cent. The sector offers a huge opportunity and that’s what is driving entrepreneurs and investors towards e-commerce in India.
