Tuesday, July 31, 2012

Indian e-commerce's next big challenge - Pricing sanity

The first challenge faced by Amazon-like "all things for everyone" e-commerce stores is to get people to buy from their site.  One principal technique employed by e-commerce stores to make this happen is to price items much below the printed price so that the online offers are too good to miss out for the buyer.  While this is a good initial strategy, it is definitely not a sustainable one.

I believe the Indian e-commerce industry has reached a stage where the usefulness of this strategy is near its end.

Let us take a look at what is happening in the area of book sales to try and understand the kind of pricing strategy prevalent today:

A typical publisher gives anywhere between 20% to 40% discounts on the printed price of the book to the book shop.  40% discounts are extremely rare and usually reserved for the authors (when they wish to buy their own books).  Best sellers and fast moving books are discounted less (20%) while the books that sell less get a larger discount (30% - 35%). With this in mind, let us look at a few books and see at what price they are selling across different e-commerce stores in India.

1. Steve Jobs: The exclusive biography. Actual price: Rs. 899/-.  Seller's discount (25%  - my guess)
IndiaPlazaRs. 512   43%
IndiaTimesRs. 531   40%
InfibeamRs. 584   35%
BookaddaRs. 610   32%
LandmarkRs. 611   32%
FlipkartRs. 629   30%
CrosswordRs. 692   24%

2. Fifty shades of grey. Actual price Rs. 350/-. Sellers discount (20% - my guess)
IndiaPlazaRs. 200   42%
BookaddaRs. 234   32%
FlipkartRs. 245   30%
IndiaTimesRs. 245   30%
InfibeamRs. 252   28%

3. Brief history of rocketry in ISRO. Actual price. Rs. 450/-. Sellers discount (35% - my guess)
InfibeamRs. 346   23%
IndiaplazaRs. 360   20%
Homeshop18Rs. 360   20%
BookaddaRs. 431   4%
FlipkartRs. 450   0%

As you can see from the above most of the e-commerce sites are selling most of these books at a loss (if my assumptions regarding the discounts are right)  And remember, we have not even taken into consideration all the other costs that these companies incur including cost of running the site, salaries and the cost of free home delivery!

Obviously, this is not sustainable.  At some point in time, and pretty soon, prices will have to go up if these companies have to survive and grow.  But, with Indians being so price sensitive and sites like indiabookstore.net making it really easy to compare prices across sites, it is not going to be easy.

Indiaplaza.com and infibeam.com have been around for a long time and obviously some of their categories and their other services (infibeam also generates revenue from their buildabazaar.com offering) are profitable and so they may be able to delay raising their prices for a while.

Companies like homeshop18.com and IndiaTimes are backed by big corporates and since the big corporates have various other sources of income, they may be able to swallow any losses for a while longer.  In addition, they have access to a lot of media time from within their network(Network18, Bennet & Coleman, respectively) which is likely to give them serious access to cheap(er) advertising, leading to less burn.

FlipKart, on the other hand, is probably burning quite a bit on advertising and is probably most in need of bringing in some sort of pricing sanity at the earliest.  But if they are the only ones to increase prices, the chances are that a significant portion of their client base will flee to their competitors.  It's all down to their investors' appetite now.

Something's gotta give.  We'll have to wait and see who blinks first!

Tuesday, July 24, 2012

FlipKart mustn't die!

If I were a believer in the efficacy of prayer, I would be praying hard for FlipKart to succeed.

If Forbes is reading this, no, I don't work for flipkart, have no investments in flipkart, and have met Sachin Bansal only once.  Nor am I a product of IIT Delhi and so obviously have never been a resident of Jwalamukhi hostel.

So why am I interested in FlipKart succeeding?  No pressure on Sachin and his team, but I believe that the entire future of tech. entrepreneurship, startups and venture funding is resting heavily on what happens to FlipKart.

The fairy tale beginning.
FlipKart is a true silicon valley type startup.  The founders were young when they started, did not have a sugar daddy or a large corporate house to back them, nor did they have any serious experience in the eCommerce space.  All they pretty much had was their belief that they could make ecommerce work in India.  If they succeed, more entrepreneurs will be born and more of the good talent that today gets into "safe" jobs will begin to join startups.

More such fairly tale beginnings will happen only if this fairy tale has a happy ending.

Copy + innovate = success.
Like many other entrepreneurs before them, FlipKart took a well established (in the US) business model and replicated that for the Indian market. Having watched the likes of Amazon, NetFlix and Zappos innovate their way through tight situations,  like Peter Thiel very famously said recently, the founders of FlipKart initially found little need for innovation and copied the best practices from these companies.  That helped them build a extremely responsive and dependable organization that is truly a pleasure to buy from today.  But if they are still alive today and on the threshold of spectacular success, it is because of innovating in thousands of ways, most of them too subtle to wax eloquently about, that has helped them take on the truly humungous obstacles to building a great business in India.  Not being from this part of the world, I can quite understand how Peter Thiel cannot comprehend the sheer magnitude of the innovation happening quietly in the background.

Imagine for a moment what Netflix would have done without the reliable US postal service to bank on?  FlipKart today delivers over 45000 consignments each day through a captive 5000 people delivery organization that they have built from scratch.   That portion of the organization in itself is a huge success.

Now imagine what Amazon would have done if most of their clients were unable to or not inclined to pay online?  An already prolific credit card customer base meant Amazon did not have to spend sleepless nights wondering how to collect money from their buyers.  FlipKart on the other hand has had to struggle every inch of their way and if today more Indians are inclined to pay online it is because of companies like IRCTC and FlipKart who broke down the towering walls of online commerce reluctance by introducing cash on delivery.

Finally, imagine Zappos' plight if their customers had kept all the shoes that were sent to them for trial while paying for just one pair.  Quite rightly, while companies like FlipKart are loath to talk about the low ethical and moral standards of fairly significant sections of their customer base who have no qualms in ripping off a faceless commercial entity, it is again the silent and numerous innovations going on behind the scenes that are helping them tackle such problems. Read my entry on India specific challenges for some of the other issues faced by Indian ecommerce companies today.

With the US market ahead of the curve and countries like India having to catch up, copying of ideas and business models is inevitable.  But FlipKart has to succeed for us to truly believe that we can innovate and Indianize these ideas and succeed in this very complicated country.

Venturesome capitalists.
A decade ago, none of the major VC funds had an India presence.  Around 2003-2004 when I tried to raise some funds in the US for my Indian venture, one of the VCs said "I will not invest in a company if I cannot drive to their office from my Sand Hill Road office."  Today, most VC firms have a clear India strategy and presence and that is a fantastic endorsement of the Indian startup scene.  Nevertheless, given that most of the Indian arms of VC firms are still in their first cycle,  their appetite for risks is, quite understandably not as great as that of their more experienced counterparts in the US.  FlipKart is among the first few India facing companies that raised reasonable early stage funding well before their revenue model was proven.  Accel Partners and Tiger Global deserve all the appreciation they can get for taking the lead here.  And thanks to them, several other ventures have also been able to raise early stage funding.  However, all this will turn to naught if Accel and other investors do not have a fantastic exit soon.

For our VCs to be more venturesome and be ready to back riskier propositions (and eventually pave the way for companies like LinkedIn, Facebook and Twitter to emerge from the Indian startup scene), FlipKart has to be an unprecedented success.  If flipkart does not succeed, we can all kiss goodbye to early stage funding (or any stage funding for that matter) in India!

What's a book?
Already, most of the traditional book shops are closing their doors.  Odyssey has come down to six stores from over 70 stores across India during their heydays (not that long ago, mind you).  If after sounding the death knell to our offline access to books, the online counterparts die, I don't know where we would get our books from!

For all our sakes, I fervently hope that FlipKart succeeds beyond our wildest dreams.  

Wednesday, July 18, 2012

Things to check before you build your dream consumer app.

In50Hrs in Chennai is starting tomorrow.  In their own words

"In50hrs is The Idea-To-Prototype Event. Entrepreneurs, Developers, and Product Designers come together to work on audacious ideas and build working prototypes over a Weekend."

I am guessing that a lot of the prototypes that will get built over this weekend will be consumer mobile apps.  So here are a few questions that our budding entrepreneurs need to answer to themselves before they choose which app to build!

1.  Is there such an app already in the market?
What is available in the market? how popular is it? How different is my idea?

2.  Who is my app for?
If your answer is everyone, try and be more specific.  Is this for the tweens, teenagers, twenties, thirties, or older?  Is it for men or women or both?  Employed, unemployed, students,...?

3.  What is your criteria for success?
Is it the number of downloads, the number of users, usage (no. of logons, no. of requests, number of purchases, etc)?

4.  How will your potential users get to know about your app?
There are thousands of apps in the market place.  Do you expect people to discover your app on their own?  Do you have a unique way of reaching out to them?

5.  How are you going to monetize?
Is your app going to be free or is it a paid app?  Are you going to earn through subscription, from ads, or through in-app purchases?

If you have real good convincing answers to the above questions, you are definitely on the right track.

Go for it!

Tuesday, July 17, 2012

Ecommerce - India Challenge

FlipKart, Snapdeal, Myntra, FashionAndYou, infibeam, HomeShop18, inkFruit, ebay, Firstcry, hoopos, babyoye, bigbasket, 99labels, jabong,... the list of Indian ecommerce sites keeps growing every day.

FlipKart has raised over USD 100 Million, Myntra just raised USD 25 Million recently, snapdeal raised over USD 40 million a year ago, another USD 40 Million by FashionAndYou late last year - the investments have been coming thick and fast.

VC companies like Tiger Global Management, Accel partners, Norwest Venture partners, Intel Capital, Bessemer Venture Partners,  Nexus Venture Partners, IndoUS  Venture partners and a host of other top-notch venture capital companies have poured in literally hundreds of millions of dollars as a mark of faith in the Indian buyer.

Given the frenetic activity going on in this space, one would think all is well in the Indian ecommerce space.  But the truth is no one is sure yet who will win this battle or even if any of them will win this battle at all.

This doubt and worry is not due to any of the usual problem areas such as quality of goods, customer experience, ease of payment, or execution. The teams in most of the leading ecommerce sites have actually nailed these issues.  Finding what you want, buying it online and getting it delivered (usually well ahead of time) is as smooth as you can expect.  The problem is not related to the size of the market, or number of people with credit cards or the reluctance of the typical Indian to buy online without touching and feeling the product. A growing middle class, Cash On Delivery facilities and attractive prices have gradually eroded all these impediments, so much so that it is now believed that the Indian ecommerce market will be over USD 250 Billion by the year 2025!

So what truly ails the Indian ecommerce sector?  The real problem lies in the collective behaviour and psyche of the Indian - something that may not change for the foreseeable future.  Understanding the Indian mind and finding innovative ways around these essentially Indian problems is the only way to tilt the balance.  Just increasing volume of sales will not cut it if every individual transaction is making a loss!

Here are a few ground realities about us Indians that we need to accept.

1.  Customer delight hinges on only one criterion - price.  No matter how good the user experience on your site is, no matter how quickly you delivery, no matter how good your product is, or how generous your return policy, if another site is even a Rupee cheaper, we will go there.  Of course, you can still screw up, but you will get that opportunity only if you have been the cheapest option in the first place.

2.  Customer loyalty is non-existent.  However great our experience was with your site during our last transaction(s), do not expect us to swear allegiance to you.  Price is still king.  Then again, if you screw up badly, we will complain vociferously, but we might still quietly come back to you the next time if you are still the cheapest.  We have very short memories.

3.  User engagement is a pipe dream.   Do not expect any meaningful or substantial response to your overtures from us.  We are largely passive consumers of information rather than active participants or providers of information.  Take a look at the comments section of any site not related to politics, cinema or cricket if you want any proof.  Or look at the Indian contribution to the open source initiative. Even on seriously niche sites populated with "sophisticated" Indians, most comments are inane and add no value. (Check out the comments on India Nature Watch, for example.  It is a site where people share their nature photographs.  Most comments will be "awesome!", "Too good",  "Great shot" and "Super".  You will not find any meaningful dialogues.)

4.  Bad behaviour is not the exception (nor the rule, to be fair). We will promise to be at home at the time of delivery and then not be there.  We will agree to pay at the time of delivery and then try to bargain with the courier and return the product when the courier is unable to give a discount! We will return products on a whim, just because we can, but will make the collecting courier come three times before we handover the returned items! We will even use the items and then return them if we believe we can get away with it!  Not all of us will do this nor will we do this all the time - just often enough to hit you where it hurts.

Am I being too harsh and too cynical?  Use the comments section and let me know - if you can push yourself to do so :)

Monday, July 16, 2012

Android App maintenance - the future challenges and opportunities

We are, undoubtedly, in the honeymoon period of the Android revolution.  When people talk about the "honeymoon period", they are usually hinting at a post honeymoon realization that irritants in the partner that were completely ignored during the conjugal discovery period are no longer ignorable.  However, the honeymoon that I am referring to is at an altogether different level, say on the scale of the honeymoon of a thousand libidinous bonobos going at each other like there is no tomorrow!

And what I am hinting at is the post honeymoon period where we take on the huge task of raising all the baby bonobos born during the honeymoon period.  Don't get it?  I am thinking of the stupendous amount of effort we need to put in, in the near future, to maintain all the apps that are being built today.

Just consider the following few points to truly understand the magnitude of work waiting around the corner.

On the software side, there are tens of thousands of programmers around the world churning out apps to meet the needs of the new market.  While the majority of the apps currently being built are games, more and more non-game consumer apps are showing up and there are even a few enterprise mobility apps hitting the market. As in every new market, there is tremendous competition and everyone is out to get some early mover advantage.  The number of Android apps in the market today is estimated to be north of 400,000!

On the hardware side, the competition is no less severe.  There are several companies releasing new models of Android phones at a pretty impressive pace. At last count, there were over 150 Android phone models from players like Acer, HTC, LG, Motorola, Samsung, Sony Ericsson, and Dell.  This is not counting the loads of chinese companies already flooding the market with sub-$150 Android smart phones.  Apart from this other devices such as Netbooks and e-readers and tablets running on Android are also being released in quick succession.

On the third front, Android OS itself is undergoing frequent changes.  Not surprising, given that it is still a fairly young OS, with version 1.0 having come out as recently as Sep 2008.  Since then it has gone through several releases including Cupcake, Donut, Eclair, Froyo (frozen yoghurt), to its current Gingerbread with future releases honeycomb and ice cream sandwich expected before end of 2011.

With all companies going hell-for-leather, what is being overlooked, at least at this point in time, is the huge app maintenance requirements looming ahead.

Some more statistics:

If we look at the data from the traditional enterprise software world, operations and maintenance together take 67% of the total cost of the software with the development phase only accounting for about 33%.  Considering that the heterogeneity of a typical enterprise application environment is far lower than in the Android world, maintenance will probably take a much bigger chunk of the overall MDLC (Mobile software development lifecycle).

According to the Android platform agreement, a manufacturer needs to support a device only for 18 months from the time of manufacturing.

Studies show that people change phones once every six months on average.

The average life-time of a phone model is about 1 year and decreasing.

A 1000 Android apps are added each day.  This does not yet include all the enterprise apps being built.

A new phone is being launched every week.

Current android development outsourcing figures tell us that 95% of spend is on new development and only 5% is on maintenance.  This is expected to change to about 70% - 30% by the end of 2012.

Now take a deep breath and think of all the different form factors and screen sizes, different displays, cameras with different resolutions and characteristics, single and double cameras, different processors, devices with and without accelerometers, with and without proximity detectors, with and without gyroscopes, different connectivity and network support, Wi-Fi, Bluetooth, GSM/GPRS/Edge,... phew! The sheer heterogeneity of the environment is truly mind-boggling.

And I am yet to talk about support for non-android devices.

All this spells a huge opportunity for companies to provide app management and maintenance services.  If you are a software services company and working on mobile applications, how are you gearing up for this maintenance bonanza?

Top ten cross platform tools

Cross-platform tools are software development frameworks that allow one to develop software on a single platform and deploy on multiple platforms.

Cross-platform tools have had a long and tortuous history in the world of software development.  From complete development environments to UI tools, cross-platform tools have helped countless companies release the same product on multiple platforms simultaneously.  Based on my experience, I am tempted to say same sub-standard product, but that may be a little too harsh.  However, it is undeniable that cross-platform tools, as they need to cater to the least common demoninator of all the platforms supported, are not able to provide the same great experience that software natively developed for a particular platform can provide. Having said that, some of the ones listed below are working hard to go as close to native as possible by providing platform specific libraries to go with their framework.

The latest crop of cross-platform tools are the ones that help developers build apps for the major mobile platforms such as Android, iPhone, Windows, Blackberry, Symbian, Palm and others.  Given below are the top ten cross-platform development tools.   If you have used one or more of these and would like to share your experiences, please do leave comments.  If you are building or have built a cross-platform tool that you think should be covered in this column, please leave a comment and we will get in touch with you.

Here goes:

1.  PhoneGap.
Earlier called Apache callback, this is an open source Mobile development platform.  It lets people develop apps using javascript, HTML5 and CSS3. Basically, like most other similar tools, PhoneGap wraps a typical web app into a native app with a native browser embedded.  Since all browsers on the major mobile platforms support javascript, HTML5 and CSS3, the app will (almost) work on all platform.  The clever bit here is that the native wrapper helps by providing hooks to standard phone facilities such as contact details, camera, etc so that these facilities can be accessed from within javascript. Extremely popular.

2. Rhodes/Rhomobile.
Rhodes is an open source Ruby-based framework to rapidly build native apps for all major smartphone operating systems (iPhone, Android, RIM, Windows Mobile and Windows Phone 7). These are true native device applications (NOT mobile web apps) which work with synchronized local data and take advantage of device capabilities such as GPS, PIM contacts and calendar, camera, native mapping, push, barcode, signature capture, Bluetooth and Near Field Communications (NFC). Free.  Support is charged.

3. Titanium from appcelerator.
Another free, open source application development environment.  Apart from supporting Javascript, HTML and CSS, this framework also supports programming in python, Ruby and PHP.  You can produce native apps with this tool.  You can add in native code components written in Objective-C (iPhone) and Java (Android).

4. NS Basic/App Studio
This is VB for mobile according to their tagline.  Basically, it allows you to write in BASIC a language very similar to Microsoft Visual Basic and then internally it converts to javascript, HTML and CSS. Not free.

5. Sencha Touch.
Another javascript library that can be used to produce mobile web apps.  This is based on EXT.js, a very extensive javascript library used for website development.  EXT.js was very heavy and the code that needed to be written was also pretty heavy.  Performance used to be a problem.   Based on our experience, the same is largely true for the mobile version as well.

6. MobileReflex.
This development platform is targeted towards enterprises wanting to get some of their applications available on the mobile. Requires the MobileReflex client engine to be running on the mobile device.  Definitely not for you if you are building a consumer app.  Not available for Android yet! Not free.

7. Worklight.
This is VC funded company providing an IDE that lets you build HTML5 based, Hybrid and Native apps.  It lets you use javascript libraries such as jQuery and like most others allows integration with PhoneGap in order to provide access to native device features. Not free.

8. Application Craft.
Another open source framework. This lets you build web apps for all platforms using javascript, HTML5 and CSS3.  If you require hooks to native device features such as contact details and camera, you need to integrate this with PhoneGap.  All the information on how to tightly integrate with PhoneGap is available on their site.  This tool also lets you write server side code and helps you deploy it on your own servers or on the cloud.

9. MoSync
This lets you create HTML5 based applications. What is different is that they have a C/C++ library called Wormhole that lets you access native srevices through javascript (something that you cannot do with typical HTML5 apps).

Nothing special here.  HTML5, CSS3, Javascript based cross-platform development tool.  Added here to make it an even ten.

Top ten design considerations for an Android app.

A badly designed web site may survive, but a badly designed app will surely die

Some of the basic tenets to designing android apps:

1. Go native.
If you need a highly responsive app, the best user experience can be achieved only when using the native development environment.  Apps built using cross-platform development tools will not cut it.

2. Remember form factors
Your app will be run on phones from different manufacturers, with different size of displays and resolutions, on portrait and landscape as well as on tablets and possibly e-readers. Don't hard-code your screen layouts with a specific form factor or phone in mind.  

3. Support as many versions as possible.
Android OS versions are coming our thick and fast, as are the phones.  At any time, expect your target user base to be spread across at least 3 different OS versions.

4. Be prepared for missing components.
Not all devices have all the bells and whistles such as front cameras, accelerometers, and gyroscopes.  Use them in your apps, by all means, but don't depend on their presence either.

5. Stick to the basics.
Most people understand standard android app behavior - so follow the same standards.  For example, if your app has a menu, it has to be accessible from the menu button (which is going away, so I guess you should not code expecting a menu button).

6. Be prepared for lack of connectivity
Connections on mobile phones will drop.  Program defensively for such situations.

7. No time-consuming processing in the UI thread.
Use multi-threading wisely and avoid holding up the UI/main thread.  Even a sub 2-second frozen screen is enough the turn a customer away.

8. Don't hog the resources.
The Android phone is thin on resources and it has to be shared between all the apps.  Plus, Android provides users with easy access to data such as how much memory and battery you app is consuming.  As it is, most of the Android phones have to be re-charged every day.  If your app is seen to be draining a lot of the battery, it will be the first to be un-installed.

9. Don't force users to login everytime.
Typing is never easy, even with swype or SwipePad installed.  If the user has to login to access the app functionality every time, your app will never get used.  Avoid login altogether if you can. If you can't, then provide an explicit logout and leave it to the user to decide whether she wants to be permanently logged in or not.  Remember, a phone is a personal device and most often not shared with anybody else.  How many times have you logged into google mail from your Android?  Imagine if you had to go through the login process everytime!

10. Infer as much as possible.
If location information is required for your app, get it from the phone whenever possible.  Don't ask the user to choose the location from a long list.

Bonus.  Design for performance.
If you have to choose between easy coding/maintenance vs. better performance, always choose the latter.  Check out developer.android.com/guide/practices/design/performance.html.

Restarting this blog

It has been nearly a year since I updated this blog.  During this time, and for some time before that, I have been writing on the official jobsbyref blog, which unfortunately, along with the rest of the site, has disappeared from the face of the internet.

I have changed the blog title from "A fresh look at the job market" to "A fresh look..." so I can write about a wider range of topics rather than just about the job market.

With acceptance come liberation.  Look forward to writing more regularly from now on.