Cover Story

THE ONLINE REVOLUTION E-commerce has taken off in an unexpectedly big way in , especially in the travel and tourism segment. Millions of Indians prefer booking airline and railway tickets online. The state- owned Indian Railway Catering and Tourism Corporation Ltd (IRCTC) has emerged as one of the largest online sites and dozens of new online travel sites are being set up, write Aarti Gupta and Shivkamal.

-COMMERCE transactions, consultancy, recently released a report on particularly in the business-to- India’s e-commerce potential. According consumer (B2C) domain, are to ‘Internet in India (I-Cube)’, the report on an upswing in India, as both focussing on the Indian e-commerce businessesE and consumers realise the market in 2008, there are several verti- benefit of online transactions. Growing cals: Internet (especially broadband) connec- * Travel, comprising travel aggregators, tivity is fuelling growth for online services. tour operators, hotels and railways The roll-out of broadband services by many * E-tailing, comprising online retailers telecommunication service providers in and online auctions hundreds of cities and towns across India * Classifieds, comprising jobs, matri- has given a big boost to e-commerce. mony, property, automobiles and the At the other end of the value chain, general category public and private sector banks in the * Paid content subscription, comprising country today offer online banking facili- research, articles and exclusive ties to their customers, along with a videos clutch of other services including settling * Digital downloads, from Internet to of utility bills, taxes, third-party payments mobile phones and other transactions. “Based on our discussions with The relative ease of online payments various stakeholders, the size of B2C – through credit cards or through Internet e-commerce industry for the year 2006-07 banking facilities – has enabled rapid was computed to be around US$1.5 growth in e-commerce transactions. billion,” says the report. It predicted a The huge investments made by banks in 30 per cent year-on-year growth for the ensuring secure online transactions have following year, with revenues of about added to the comfort level of consumers. US$2 billion. There are about 7.9 million As portals and Internet sites adopt active online buyers in India, of which 80 enhanced security features, e-commerce per cent buy travel products. transactions are on the rise. The online travel industry is the largest The International Market Research contributor to the B2C e-commerce Bureau (IMRB), a leading market research segment, estimated to be around US$1.5

8 9 Cover Story

billion by the end of 2007-08. The entry million tickets online during 2007-08, more of low-cost carriers has given a boost to than doubled the figure the following year. online travel portals. These airlines sell their The estimated gross sales for 2008-09 tickets online to consumers, by-passing With structured were at US$730 million, making IRCTC intermediaries to cut commission costs. funding available, the largest contributor to e-commerce in E-commerce witnessed exponential the country. growth in India in 2008, particularly in we can also foray The entry of travel portals such as online ticket transactions. Today millions , Ezeego1 and into the of consumers are buying air, train, bus and into hotel, train tickets booking business has given movie tickets over the Internet. customers more options. Although travel The largest player in e-commerce today rail and bus portals together account for a minus- is the Indian Railway Catering and Tourism cule chunk of the overall e-bookings of Corporation (IRCTC), a public sector bookings. the railways, they are popular with the undertaking fully owned by the Ministry relatively affluent travellers. For instance, of Railways. Its online ticket booking Vinay Gupta, both Cleartrip and Yatra have an AC to facility is a mega hit with passengers, ceo, Viaworld.in non-AC bookings ratio of 70:30, while for even with those who do not have Internet IRCTC, the ratio is the opposite. connections at home. For this segment, In the airline sector, travel portals such or those who do not have access to credit as Makemytrip.com (one of the oldest), cards or online bank accounts, IRCTC has online travel portals entering the business, Cleartrip, Yatra, Travelguru, Arzoo (started appointed agents across the country to the share of tickets sold online in the total by Hotmail co-founder Sabeer Bhatia), facilitate online bookings. revenues of Indian Railways doubled to Ezeegoo1 and , among others, With the IRCTC pushing electronic nearly 30 per cent in 2008-09. are the preferred medium for many to booking of train tickets and scores of The corporation, which sold 18.9 book tickets.

10 Cover Story

The growing business of travel portals search for fare details and ticketing on all continues to attract funding from venture airlines and reservation kiosks. We started funds. Bangalore-based Viaworld.in, a The success of travel sites has full-service travel company, which was spawned a whole new range of portals FlipKart.com founded by a team of engineers in 2006, with e-commerce as their business model: recently raised US$5 million from NEA FlipKart.com (online book purchase), because Indo US Ventures, a venture capital firm. Asklaila.com (information search) and “With structured funding available, we redbus.in (bus ticket booking) have been we felt the need can make investments and also foray into launched by entrepreneurs from India’s for a good online hotel, rail and bus bookings,” says Vinay IT hub – Bangalore, all of whom have Gupta, ceo, Viaworld.in. been successful in securing funding from book store. Its travel network is spread across 290 private equity firms. cities and it issues 5,000 tickets a day. Falling under the category of e-tailing With over 3,000 agents registered with (an online form of retailing) these portals Binny Bansal, it, the company has one of the widest are witnessing robust growth. According co-founder, FlipKart.com networks in India today. The company was to the IMRB report, it grew from US$180 also the first to introduce mobile-based million in 2006-07 to US$230 million a

‘The scope to grow is huge’ Indian Railway Catering and Tourism Corporation (IRCTC), a state-owned enterprise, is today one of the largest e-commerce players in the country, raking in about US$730 million – of a total e-commerce market estimated to be between US$1.5 billion and US$2 billion in 2008-09 – through online booking of train tickets. This was a remarkable growth of over 120 per cent over the previous year’s revenues of US$355 million. As many as 1,60,000 e-tickets are booked on the IRCTC site on an average every day, translating into a traffic load of 3,00,000 passengers a day. Nalin Shinghal, director, tourism and marketing, IRCTC, in an interview with Aarti Gupta. How has IRCTC grown over the include petrol pump owners, cyber-café for-money segment – these are typically last few years? or PCO operators, or even those who are people who like to travel in the sleeper We have been steadily adding features part of a state government e-governance class and stay in hotels in the sub-US$20 to our online booking service. When we project. category. Because of the range of offer- started in 2002, one could just do the There are about 50,000 agents who ings, our portal last year won the national booking and get an i-ticket, while the phys- book tickets for passengers for a minimal tourism award. In a short time, the portal ical ticket was delivered through a courier. fee of Rs. 10 (or about 20 US cents) a did business worth almost US$6 million In 2005, we started the system of e-ticket ticket, for those who do not have access last year. We are hopeful of soon doubling – booking online and taking a print-out; to a computer or a credit card. This chan- or tripling that figure. this can be done just three hours before a nel is already giving us 30 per cent of our We attempt to offer an entire assort- train’s scheduled departure. business. And we are in the process of ment of products. In addition to the com- Then, in May 2008, we started e-tick- expanding that reach. plete range of chartered hill packages ets even for the wait-listed category. Traf- over five regions – Darjeeling Himalayan, fic, as a result, is growing by leaps and What kind of e-commerce opportu- Nilgiri Mountain, Kangra Valley, Kalka- bounds year-on-year. Last year, IRCTC re- nities are there for IRCTC? Shimla and Matheran – we launched a ported a 160 per cent increase in through- The potential is huge. An estimated 17 fortnightly special train service, called the put (an e-commerce term to measure the million people undertake travel in India Mahaparinirvana, between October and amount of data transferred) and this year every day, of which the reserved travel March (the peak tourist season) last year. there has been a 120 per cent increase. market is about a million-strong. We are There are about 400 million Buddhists the currently tapping only about a fourth of world over and India is amongst the few How has IRCTC managed that kind the total reserved rail traffic travel; so the destinations of interest for them. Instead of growth, considering PC and In- scope to grow is huge. of going on back-breaking road rides to Bi- ternet penetration is still low in We are expanding our product offer- har and eastern UP, where many areas of the country? ings. We launched our travel portal, rail- Buddhist interest lie, the overseas travel- We realise that the largest volumes are in tourismindia.com, about two years ago, ler would prefer to use a good train ser- the sleeper class, but most of these pas- to position IRCTC as a one-stop travel vice. The trail is picking up and we have sengers do not have access to a PC or a shop. The portal offers tour packages, cab had bookings being done from as far as credit card. So what we have done is to rentals and hotel reservations. Unlike oth- the US, Chile, Argentina, Japan and Ka- appoint agents across the country. These er travel sites, our focus is on the value- zakhstan.

11 Cover Story

A one-stop online travel shop Since its launch in January 2006, Yatra.com, a leading travel portal, has carved out a niche for itself as a one-stop online travel shop, one of the fastest growing in the industry. The total value of ticket transactions recorded by it shot up to US$250 million in 2008, from US$100 million a year earlier. When co-founder and ceo Dhruv Shringi (who has grown the company from three members to 700 at present), decided to ‘take that leap into the unknown’ over three years ago, he decided to do things a little differently from other online companies such as Cleartrip and travelguru, which started operations around the same time. Instead of relying solely on venture capital funding – Norwest Venture Partners and Intel Capital are among its investors – Yatra brought on board strategic partners such as Reliance Capital and the TV 18 group to establish the credibility of the brand. Shringi spoke to Aarti Gupta about where the online travel business is headed in India, and whether the slowdown is adversely impacting the industry.

Do you think e-commerce has es- ket. Though it is still a predominantly of- tablished itself in India? What kind fline sector, growth has been an impres- of growth do you foresee for travel sive 25 to 30 per cent annually from a e-commerce in the coming years? negligible base in 2005, when it was an Travel e-commerce is the single-largest extremely fragmented industry. category, accounting for 70 per cent of all We have just seen an ‘S’ curve growth e-commerce. At US$1 billion of business with a kink in the middle and the other grossed last year, online travel accounted ‘S’ curve should kick in by 2010 with in- Dhruv Shringi for 6 to 7 per cent of the total travel mar- creasing PC and Internet penetration,

‘We see huge potential and rapid growth in e-commerce over the next decade’ AskLaila.com, a Bangalore-based local information search engine service, E-commerce in was founded by Kiran Konduri and Shriram Adukoorie in December 2006. The company secured funding of US$12 million from Matrix Partners India, India and China LightSpeed Venture Partners and SVB India Capital Partners Fund in two rounds of funding. An interview with Adukoorie. will grow as people What kind of growth has your the AskLaila-powered ‘Airtel city search’ want to use the company witnessed over the last reaches more than 30 million users two years? across six cities. Internet to cut We established AskLaila to bridge the The Airtel-AskLaila service is avail- gap in the availability of timely and accu- able across three screens – the mobile costs. rate local information and to allow users (Airtel’s mobile service), the PC (Airtel’s to search, discover and evaluate local broadband service) and TV (Airtel DTH). services and businesses on convenient Every day we receive responses Jack Ma, and easy-to-use mediums. from consumers and local businesses founder, Alibaba.com We have expanded to Mumbai, Del- on the quality of our service or improve- hi, Chennai, Hyderabad and Kolkata. We ments they seek in the form of data have also introduced AskLaila for mobile enhancements. We welcome feedback phone users. Recently, we entered into sincerely as it tells us the audience is a strategic partnership with Airtel to seeking local information and trust us to power all its city search services. Today, deliver that well.

12 Cover Story

and explosion of broadband. By 2015, we Are e-retailers enhancing their in- cal importance in e-commerce. should be about 20 per cent of the total vestments in new technology to travel market. boost efficiency, speed and secu- How has the slowdown impacted E-commerce should take off in a big rity? business for online travel compa- way in India, because of limited physical Today’s users are the early adopters of e- nies like yours? infrastructure. There are issues, though, commerce and for the industry to thrive, My view is that consumers have finan- of poor last-mile connectivity here. the buying experience has to change. Ho- cially not taken as bad a hit as consumer tels are a bespoke product unlike booking confidence has. Holidays are moving, for What kind of growth has your com- for flights. What we have done, as a result, example, from Europe to the Far-East; pany seen over the last two years? is to make online buying easier. We were so ticket size is down from US$2,000 to We have grown two-and-a-half times in the first ones to shoot videos of more about US$950. Passenger numbers are the last two years, the fastest in the in- than 1,000 budget hotels, plotting these holding up but not revenue. dustry. Calendar year 2007 was our first on maps and co-relating these to points of Last year, 100 million people made 400 complete year of operations and our to- tourist interest and to get feedback from million trips on the domestic circuit, and tal transactions were worth US$100 mil- actual users. while that may not change significantly, in- lion. In 2008, our transactions were worth Another ‘first’ we have introduced is to bound traffic has definitely slowed down. US$250 million. have tied up with hotels to allow custom- What we are trying to do is to migrate ers to pay later at the hotels; they need to How much of Yatra’s business the customer, who may be a first-time pay only 10 per cent of the deposit while comes from overseas? flyer or credit-card user, to more value- booking online. All these e-features in- We still derive almost 80 per cent of busi- added products. Our ticket-size is increas- volve investments in technology. We have ness from domestic travellers, but the ing as a result. So we try to get a domestic UK-based CyberSource, a leading pro- overseas business, until the slowdown, flight user – which is the mainstay of the vider of secure online payment and risk was growing 10 to 15 per cent month-on- business – to graduate to bookings for ho- management solutions, looking into our month. We should be able to see that seg- tels and holidays within the country and Internet security mechanisms. Execution ment contribute about one-fourth of the abroad. technology and user interface are of criti- business by September 2010.

Do you see e-commerce establish Are consumers confident about the itself in India? Will there be rapid security of these transactions? growth over the coming years? Consumers today are much more confi- India is perhaps in the initial wave of e- dent and comfortable with security issues commerce as far as the long-tail merchant of conducting transactions on the Internet. is concerned. (Long tail is an e-commerce Credit card companies have added extra term, referring to items that sell in low layers of passwords to enhance security. quantities, but overall generate large rev- I would say online transactions’ security is enues). Though corporate India, especially not such a big issue anymore. the manufacturing industry, has embraced e-commerce by automating large parts of Are e-retailers enhancing invest- its supply chain, a large part of the con- ments in new technology to boost sumer side of the service economy is not efficiency, speed and security? automated. A mature market like the US has under- Newer start-ups are realising that there standably realised the basic tenet of e- has to be a significant difference in the retailing – transactions alone do not help; value proposition of products and services relationships do. The technology, efficien- sold online – in terms of price, ease of cy, speed and security aspects of Indian purchase, multiple payment mechanisms e-retailers cannot be faulted – we are al- and post-sale customer service. This will most as good as e-retailers elsewhere in definitely increase consumers’ trust in e- the world. Focussing on the back-end – in commerce transactions and will improve terms of fulfilment and customer service online transactions. We see huge potential will probably be far more beneficial for and rapid growth in ecommerce over the Indian players than any online technology Shriram Adukoorie next decade. adoption.

13 Cover Story

year later. For instance, FlipKart.com, a consumer-to-consumer (C2C) e-commerce Bangalore-based online book shop, is industry. With an increase in the number growing at a rapid pace, and expects sales of mobile subscribers, there has been a of US$4.2 million this year, up from just rise in digital downloads to the mobile US$1 million in 2008. The firm was set phone. With the surge in the usage of up in 2007 by Sachin Bansal and Binny GPRS-enabled mobile handsets, the size Bansal, computer science graduates of the digital downloads market increased from the Indian Institute of Technology from US$35 million in 2006-07 to US$53 With its huge (IIT), Delhi, who worked for a while with million at end of 2007-08, according to the Amazon India. IMRB report. growth potential, “We started FlipKart.com because Analysts say the next phase of growth we felt the need for a good online book in e-commerce would be marked by India is a very store,” says Binny. “E-commerce is one of localised product offerings and making the toughest sectors to get into in India.” content available in various Indian important and According to him, the market for online languages. strategic market for book shopping was around US$5.25 India’s growing e-commerce business million in 2007-08 and is growing rapidly. is also attracting international players. For Alibaba.com. Another buoyant segment is online Alibaba.com, China’s top e-commerce classifieds, which saw revenues of company (which sells everything from US$170 million in 2007-08. Similarly, automobiles to fashion accessories and online subscriptions are also witnessing machinery to toys), India is now one of David Wei, brisk growth, though from a smaller base. the fastest-growing international markets. ceo, Alibaba.com It saw a 50 per cent growth in 2007-08, According to Jack Ma, founder of Alibaba, touching revenues of US$6.3 million. e-commerce has not been affected by the Along with the PC-based Internet global financial crisis. access, mobile-based Internet access is “In fact, e-commerce in India and China expected to drive growth of the B2C and will grow even faster because people will

14 Cover Story

‘Consumers are certainly more comfortable now with e-commerce’

RedBus was started in Bangalore in 2005 by a group of techies, all alumni of the Birla Institute of Technology and Science (BITS), Pilani, and employed with leading IT companies. During Diwali holidays, one of them wanted to visit his home town. As he did not know his schedule until the end, taking a bus was the only choice. But despite visiting several agents, he could not get a ticket. This triggered off the thought of setting up a portal to book bus tickets online. They started writing the code for the software, put together a business plan and presented it to the Bangalore chapter of The Indus Entrepreneurs (TiE), which helped the launch of redBus.in. An interview with Phanindra Sama, the ceo.

What kind of growth has your tus quo - given the economic situation. company witnessed over the last I am not aware of increased spends in two years? new technology. Some of the changes We have grown multi-fold in the last that we are seeing on the look and feel two years. The gross bookings this year of the websites of e-retailers are a re- are 500 per cent higher than the previ- sult of programs that were triggered off ous year, when it was about 900 per in the past. cent higher than the year before.

Do you see e-commerce establish itself in India? Will there be rapid growth over the coming years? want to use the power of the Internet to I cannot say that e-commerce is estab- cut costs and gain access to more global lished in India yet. However, the good suppliers and buyers,” says Ma, whose news is that it is growing. Many people firm reported a 138 per cent growth in its are now using facilities such as Internet India user base in 2008. Last year, Alibaba banking, which, in turn, makes cus- entered into a strategic partnership with tomers comfortable with e-commerce Infomedia India Ltd, India’s leading yellow transactions. Broadband has to be pages and special interest publishing made accessible and affordable for e- firm, aimed at helping small and medium commerce growth. enterprises (SMEs) take advantage of the services of the world’s leading B2B Are consumers now confident e-commerce company. “With its huge about the security of these trans- growth potential, India is a very important actions and is that the reason for and strategic market for Alibaba.com and the spurt in online deals? is a top priority for our global expansion Consumers are certainly more comfort- plans,” notes David Wei, ceo, Alibaba. able than they were earlier. One reason com. According to the firm, more than 3 for increase in online deals is that com- million of the over 8 million SMEs in the panies are increasingly adopting the hy- country are engaged in B2B trade. brid (online, offline and mobile) model With telecommunications majors for sale and fulfillment. rolling out fibre optic networks in a big way and expanding their broadband Are e-retailers enhancing their coverage in India, e-commerce transac- investments in new technology, tions will continue to see rapid growth to boost efficiency, speed and over the coming years. The potential for security? online transactions – both B2C and B2B – I guess e-retailers are maintaining sta- is indeed huge in the country.

15