What Works, And What Doesn't, On The Net

ETAILING

By K. Vaitheeswaran, Vice President (Marketing) Fabmart Pvt Ltd

In June 1999, when we sat down to conceptualise Fabmart, there was one strategic issue that needed sorting out. Having decided to focus only on online shopping and nothing else, we needed to be clear what we could sell online.

Conventional logic, inputs from friends and well-wishers and a quick look at most other web stores, including some within India, suggested that we needed to add as many items as we could before starting off. We observed that most web stores approached online merchandising in a very simplistic manner "� put some CDs, add a few books, throw in a couple of teddy bears, get a florist to offer flowers and then launch a web store with categories such as Books, Music, Toys and Gifts! On the face of it, the logic was sound, but for us it just did not jell.

We, therefore, spent a few days watching customers buy stuff like music and books in prominent retail outlets and also chatted with several of them. A key insight we gained from this exercise gave a very different slant to our business. Customers were quite clear that while they had their own favourite music stores and bookshops, they had no qualms about buying from another store if they got better deals or access to merchandise not available with their favourite stores. In other words, they were willing to shift business elsewhere if there was a reason to do so.

However, they were not so willing to buy books and music from an online store just because they got a higher discount. The accompanying concerns like security, product quality and the return of defective items were clear inhibitors.

That's when we realised that we were not in the business of online shopping. Our challenge was completely different "� we were thrown into the role of changing habits and buyer behaviour. And we all know how tough changing habits can be.

Customers are comfortable shopping in physical stores. That's what they have been doing for years. For them to change their behaviour and start shopping online, web stores needed to offer a strong and unique value proposition. Which begs the question: Why should someone really shop online?

The first reason is time and place. Instead of customers aligning their shopping time to the working hours of stores, they could now choose to shop at a time and place of their choice. They could shop mornings, afternoons, evenings, late nights or whenever, and from the comfort of their homes, offices or cyber cafes. Web stores are always open for business. Not to mention the facility of getting items delivered at home.

Range and selection is another key benefit. The largest physical bookstores in India will showcase around 30,000 to 40,000 titles. Fabmart, on the other hand, showcases over 2.5 million books. Just look at the difference in magnitude.

Gifting is a competitive advantage on the internet. I firmly believe that many people in India want to send gifts across to their friends and relatives in different cities, but the process of doing so in the physical mode can be so cumbersome that they just don't do it often enough. But on the web, it is so simple to send gifts that for many customers gifting is often their first online transaction.

So, coming back to where we started, we saw the need to build online stores with strong depth in merchandising and content so that when customers compared Fabmart with their favourite physical retailers, we would not be found lacking. This would make it easier for them to shift their business online. We, therefore, felt that instead of setting up an online store with many items, we would build one store at a time, but each of them would have great depth and detail. Hence, our first two stores were for music and books.

Our next store was an online jewellery store and this decision did lead to a lot of debate. Would people (read: women largely) buy jewellery online? Is not touch-and-feel important? Maybe they will buy branded jewellery like Carbon or Gili, but there's no way customers will order 22k gold jewellery. Six months later, the data we had was very revealing.

Around 70 per cent of the orders were placed by men (gifts to wives, girlfriends, fiancées, etc.) and 60 per cent of the orders were for unbranded 22k gold items. A year later, there has been no change in the statistics. Clearly, customers will buy most things online if the web store can offer something different and unique. In this case our aggregation of jewellery brands across India, our insistence that we will only retail Hallmarked gold items, a detailed Buyer's Guide along with information on each item and the advantage of using Fabmart for gifts is working.

Trust is an important issue for web stores to succeed. Many of our customers have used us to buy books and music initially but once they get comfortable and know that the medium really works, they are willing to experiment with other categories and with higher items. Recently, one of our oldest customers from Allahabad (he had bought only books and music from us) got engaged. His fiancée is in Orissa and he wanted to surprise her with a gold pendant-cum-chain. Based on his earlier experiences with us, Fabmart was his first and only choice to do this.

We have observed two clear trends in the habits of online shoppers. The first is that till they shop online for around six to eight times, they do not become loyal online shoppers. The second is that as they keep ordering again and again, their order values start increasing. Hundreds of loyal Fabmart customers have graduated to buying watches, computers, laptops and jewellery after the first few trials with low-value music and books.

We have also focused on making our customers regular shoppers. Obviously, for customers to order just books and music six to eight times takes almost a year. So we decided that our stores must offer customers two types of products "� impulse-based and need-based. This was the reason why we launched our online grocery store. Such need-based items will help build a habit of shopping online much quicker.

Grocery again was a controversial decision. As a model, it had just not worked anywhere else and the closure of high-profile online grocery stores like HomeGrocer.com, Peapod.com and Webvan was fresh in everyone's minds. But 18 months later, grocery is our highest revenue grosser and the model has really succeeded. So much so that we now believe that it is the biggest opportunity for us going forward.

At Fabmart, we are convinced that almost anything can be sold on the web. This is especially true for items that are standard, packaged and branded. This does not mean that customers will be willing to buy everything on the internet. There are products where customers would prefer to see, touch and feel the item before buying.

Apparel, for example. It is possible to sell branded shirts and trousers on the web, and even lingerie, but for (say) a salwar-kameez, women would prefer to feel the material and texture before buying. The key is to, therefore, pick items where the internet can be leveraged to answer most pre-purchase queries well before a shopper can buy them. There are also items where the internet can play a key role in disseminating information before a purchase can happen - like cars.

With so many models to choose from, a website can offer customers detailed data on each model along with customer reviews, comparisons with other models, etc. This will help them zero in on a model suited to their needs after which they can go to a dealer and test drive only these specific models. This saves time for the buyer and reduces the sales cycle for the dealer as well. Both gain because of the web.

Since the fall of dotcoms, it is now becoming evident that pure-play electronic retailers will require some sort of bricks-and-mortar integration or collaboration to build sufficient consumer assurance. This holds true even for brands like Amazon which are working closely with retail chains like Toys 'R' Us and Target. Even at Fabmart, we have started establishing a physical retail chain for groceries. We will use these outlets to drive consumers to our online store by combined promotions and kiosks for placing orders displayed prominently at the outlets.

Customers shopping online take some time before they become comfortable with the medium. A key reason is that they are forced to transact virtually over this medium. Webstores can tackle this by backing up the online operations with live chats online or by using call centres. This allows customers to interact with people and builds reassurance. Once they know that there are people on the other side, it becomes easier for them to go ahead and complete transactions.

In conclusion, it is evident that shopping online is a bit different from shopping at physical stores. On the other hand, the fundamental reason for building customer loyalty remains the same. Customers will try low-value purchases to start with but will definitely increase the frequency of purchases if they are happy with the service. Once they start trusting a specific web store, they will graduate to higher value purchases and also increase the frequency of buying. This is when they actually transcend into converted e-shoppers.

(This article was published in the July 2002 issue of Indian Management magazine)