2B or 2C
The Economic Times - June 2000
It used to be said of a prestigious men's college in Delhi that when it rained in Oxford they would open their umbrellas here, in reflex. The dotcom industry seems to be in the same mode nowadays. When B2C sneezes in America, everyone here seems to develop a full blown cold, complete with cold feet! "B2C is out", is the buzz we have been hearing of late from consultants, funders, and valuation focused dotcom companies, scrambling to re-incarnate themselves as B2B.
Yet there is a parallel conceptual discourse going on that suggests the opposite. For example, in the June 8th issue of Economic Times there was an interview with a global management consultant who said "Any area where the gap is huge between the customer's desires and the realities holds good potential". In India there are several areas with yawning gaps that we know about and experience all the time. In the same issue there was a lucid article about the benefits of the net, by a senior manager from a global IT major, titled "higher efficiency at a lower cost". This is exactly what the Doctor ordered for a market which is huge and widely scattered, both in terms of purchasing power and geography. There was another article by the Director of a prestigious academic institution saying that the secret of enormously successful B2C dotcom companies was that they delivered " incredible value to their customers". Going by all these, it appears that the fundamentals of the B2C business in India are very sound indeed. But sound fundamentals will translate into money only if we expand the definition of 'consumers', understand what adds enough value for them to want to pay for it, and tailor-make a business system that can deliver that value profitably.
Accompanying this statement is a strong sense of déjà vu. These are precisely the lessons we learnt from our consumer markets' experiences post liberalisation. We learnt that the bulk of the value of the Indian consumer market lies in the larger numbers of the not so well off, consuming a little each, rather than in the few well heeled metro consumers who could reach international consumption levels soon. We also learnt that Indian consumers are annoyingly Indian in their needs and consumption priorities, and in how they process value i.e what they see as real benefits and how they calculate costs. We also learnt that value arrogance was the undoing of many admirable new entrants - assuming that a supermarket of international look and feel would automatically have a value advantage over the neighbouring kirana or that cereal in a box would have a nutrition plus over idlis. And finally we learnt that God lies in implementation. Create and administer a durables exchange scheme and the market responds. Create an ever spreading yet cost- effective distribution, and you can profitably mop up pockets of demand that competitors cannot even see.
By this reckoning, B2C in India hasn't even begun yet. The heart of the Indian B2C opportunity is not about struggling to provide more value added forms of entertainment, information and purchase convenience to a small number of upper class, who have reasonably good access to all of these. Let me describe two areas where the big Indian B2C opportunities and challenges could lie.
First, in creating a host of web enabled businesses which are reliable information and service providing utilities, available at street corners, targeting hordes of harrassed Indians, who are wasting time, money and energy, trying to get on with the logistics of living. The common man is continuously challenged by everything - railways, movie theatres, house hunting, plumbers, electricians and painters, hospitals, doctors, school and college admission forms, electricity bills, telephone departments, to name just a few. Reliable information, which may not be all that valuable elsewhere in the developed world, is a precious commodity here. Actually getting the work done takes even longer and is more expensive. The way people process cost in India includes cost of auto or bus fare to get to the place to get information / work done, cost of casual leave for half a day to do it, cost of getting the bai to re arrange her schedule, costs of greasing palms, and costs of not getting the work done on time. Will they part with a fraction of that amount for getting it done at the street corner, at a time of their convenience? I think yes. The game here is not to profit from creating disintermediation, but to profit from being the intermediary. The kind of businesses that will succeed here will not be those with a mindset of " building websites and being dotcom", but those who see themselves as web enabled, low cost, high reliability bricks and mortar and service through people operations.
Typical examples of such businesses: An access providing business that installs and maintains the net connection, for a start, at every ISD/STD booth, photocopying shop and big kirana or chemist shop. This is then 'rented out' to various service providers. Examples of service providers: a branded "ask me" chain, that is manned and offers information on a whole host of areas. If the distribution is vast enough to reach just 10% of rural and the middle class and above of urban, at a per family expenditure of Rs 30 per month, by 2005/6 the revenue would be around Rs. 2000 crores. Another example could be a doctors assistant' type service at chemist outlets where, with a bit of training and a lot of help from a master health web site, health information and explanation can be dispensed. It can also facilitate 'doctor and hospital' transactions, maintain family health records etc. There are many ways to price this, given the variety of customer needs that exist, and research has shown that the middle class is more willing to pay than the upper, because of lower access to doctors' time and greater financial risk if the chief wage earner or chief home worker falls ill!
The second big B2C opportunity is to be the market access intermediary for the prolific small scale sector consumer goods manufacturers, who have a low cost production base and relevant products, but are uderutilised in terms of capacity, due to lack of market access. Web enabled 'distribution and marketing agents' (who see their role as true intermediaries and not mere web site owners) could go a long way in making the small scale sector thrive, freeing it from its dependence on reservations and freebies provided by the Government. Even smaller than the small scale - the 'home scale' businesses could thrive with the help of a web enabled marketing intermediary. I heard about a lady in Karaikudi who makes unusual varieties of Murukku. A delighted customer put the details of her products and prices on a website. She now has a good number of NRI customers, details of their orders are faxed to her in tamil , and her fulfillment model is a friendly driver of the daily bus to Chennai. The relatives of her customers collect the Murukku at Chennai and send it onwards by courier. She's richer and busier now than she ever was. The Indian model is, as always, different!