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Alibaba Planning to Snap-a-Deal: Indian e-Retail getting hotter

September 18, 2014 Leave a comment

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The news of Alibaba, which has sales more than Amazon and eBay combined, looking for a share of the e-retail industry in India is definitely a great news for the e-retail industry in the country. The already hot industry scene is about to get even hotter.

The industry as such has been attracting large size investments from across the globe. But, this investment is different. Flipkart and Amazon have been considered Snapdeal’s biggest competitors till date. Where as Flipkart has been able to in crease its valuation to about $6 billion (with the last investment round of $ 1 billion), Snapdeal is still around $1 billion in valuation. Close on the heels of Flipkart announcing the closure of $1 billion investment round, Amazon announced an investment of $2 billion in its India operations. With these two announcements from Flipkart and Amazon, Snapdeal had started to look a shade pale. But, the news of Alibaba making an investment of $300 million in Snapdeal does bring it back into the game. Although, $300 million might look small in comparison to the investments Flipkart and Amazon have announced, the name Alibaba itself lends an lot of weight to Snapdeal.

Although no one is clear on how Alibaba will leverage its Indian investment, but one thing is for sure, it will definitely give a lot of competition to the other two giants.

Start-ups ride the Cloud!

September 8, 2014 Leave a comment

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Cloud computing services (SaaS, PaaS, IaaS) offered by various market players have over the years reduced the TCO for many Industry players. Although, about ten years ago when the cloud services started becoming popular, the reigning thought was that only smaller and mid-size industry players will move to the cloud. The bigger players will still prefer the ‘on-premise’ option. But, today we see even largest players in their segments availing the advantage of the cloud services to keep costs in control by paying-on-the go rather than incurring capital expenditure upfront.

‘Pay-as-you-go’ cannot me more beneficial to anyone else but start-ups. We all know that start-ups work on shore string budgets and would it will be foolish for them to spend on something which they are not using right now. Computing capacity is one such item on the list of start-ups. Why should a start-up pay for a storage space which it is not using? They would love the idea of expanding the storage space as their storage needs expand. This is one example of many instance where the costs for start-ups have been drastically brought down by the Cloud service providers.

A recent survey of 550 start-ups by BestVendor found out that majority of start-ups prefer using cloud-based resources for various activities- QuickBooks (71%) for accounting, Google Analytics (70%) for BI, Salesforce.com (59%) for customer relationship management, and Dropbox  (39%) for storage and backup. 

Reduction on up-front costs:

 A report on statistics on start-ups by O’Reilly Media shows that companies can save up to 30% in IT costs over a three-year period employing cloud resources versus on-premises equipment. This is a compelling proposition for the startups who would like to extract the maximum out of every penny available. The first three years are again very crucial years for a start-up. If the start-up is able to save 30% of its expenditure on IT- why should it think twice?

Fixed costs vs variable costs:

Every organization likes predictability. Larger organizations might be able to predict their future needs for various resources based on their empirical data of the past, but same is not the case for a start-up. One never knows how the demand for various resources needs to pick up (or go down). Cloud services help one to convert majority of the fixed costs on IT into variable costs. Now, that is what brings predictability to the forecasts for a start-up. One can ‘order’ storage space, processing space, number of email IDs etc on the go.

One of the biggest concerns earlier on cloud services was reliability of the provider. But, today, many big players in the IT industry today provide cloud services. The presence of Google, Amazon, Microsoft, SFDC etc. has brought a strong factor of reliability and security to cloud services. Majority of these companies have a strong focus on start-ups and its prudent for start-ups to explore these resources. Why not use these cloud resources on offer and save some precious dollars for your start-up?

 

X For Y: Try This Business Formula To Start Up

September 8, 2014 1 comment

Ever heard of an OKCupid for dogs? Or a LinkedIn for pets? Surprised? Don’t be, because I have heard about a start-up pitching itself as the LinkedIn for pets. There have been many successful start-ups that started as X for Y and then evolved their business model as they grew.

I am not a strong supporter of entrepreneurs pitching their ventures as X for Y as it kills the sense of innovation and originality, and creates more of a copycat or me-too feeling. Having said that and no more on the pitching part, the X for Y formula still holds water when it comes to presenting new business ideas and giving a sense of direction to new initiatives.

So how does one leverage this formula? There are two ways of doing it when you want to develop your own business idea. In the first case, take a small part out of a bigger business plan and create a niche around it. Out of a large customer base, try to target a segment with slightly different (or special) needs and build a service or product around these needs.

For example, OLX.in allows posting ads for almost everything under the sun. But there might be a specific set of customers with slightly different needs. For instance, there could be people who want to sell or buy antiques. Therefore, one can create a platform for posting ads to sell or buy these collectibles. Now what we have is a business idea that can be called OLX for antiques. Once the core is in place, the bells and whistles can be added as per customer requirements and additional features can be developed, depending on early adopters’ response.

The second way is to start a parallel business. If there is an existing venture providing a service to a certain set of customers and one feels that there is another service that can be provided to the same set or a different set of customers, the solution is to create a ‘parallel’ business. Zomato, as we know it, is a review and rating platform for restaurants. A similar start-up can be a platform for reviewing and rating some other service providers. In fact, there is a start-up in India that rates private coaching institutes. So, here is an opportunity to start a Zomato for X, Y or Z.

Before we overestimate the power of X for Y, I want to end on a note of caution. The X for Y formula should not be expected to churn out new business ideas. This is not as good or as easy as it sounds. Had it been so, generating business ideas would have been much easier than it is today.

I find this formula to be more of an idea ‘incubator’ rather than an idea ‘generator.’ This means, it can more effectively help one incubate and grow an existing thought in a new space instead of generating a totally new business concept. Still, go ahead and try it out.

 

[This article has been published online by Business Insider]

Starting an E-Retail Venture in India: Five factors to Keep in Mind

September 9, 2013 1 comment

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Organized retail in India has been a grand success in the last decade-and-a-half. The rapid urbanization in Indian cities gave rise to malls, multi-brand and single brand stores. The increase in income levels across the population as well as double incomes of the new generation nuclear families contributes to the substantial increase in the disposable income of the Indian consumer. Of late, the physical infrastructure is not able to keep pace with the rate of increase in urban population, giving a chance for both the consumers and sellers to explore alternate options.

With the increase in accessibility of the internet in India, the retailers have started going ‘virtual’. The ‘virtual stores’ or the ‘e-stores’ scene is already bustling with activity in India and given the demand there is a huge scope of expansion for established players and also a scope for new entrants. E-retailing scores over traditional retailing in a number of ways. The retailer is spared of the costs related with the brick and mortar set up whereas the consumer gets the benefit of choosing from a wide range of products sitting in the comfort of her home thus saving on travel costs and time.

A country’s prospect for online retail success is closely related to how many people use the internet and how many of them are comfortable purchasing online. There are almost 120 million internet users in India and looking at the 2020 vision it could reach to 1 billion if it continues to grow at this rate. A quick look at the demographics of India reveals that 64% of the Indian population is in the working age group of 15-64 and 35.0% is relatively young, aged 15 to 34. This is the user group readily willing to adopt the e-retail culture.

Given these figures, the Indian e-retail market is a very attractive proposition. There are already many e-retailers in India and many are planning to set up shop here. Even though the market is attractive, every day there are stories of online stores going bust. This is because online retail in India differs in many aspects from the other parts of the world. I have listed below the top five factors which an online retail business needs to pay attention to if it wants to avoid failure in India.

1. The ‘hybrid’ shopping experience: The Indian e-retail market is not a pure-play ‘online retail’ market. It is gradually moving to and will firm up as a ‘hybrid’ model where the customer ‘orders’ the product online but ‘buys’ only after checking it physically at the time of delivery. Although, this happens more in the cases of apparel where the customer needs to try the fitting and size of the product before buying. With the customers already feeling comfortable with the model, it will spread to other product lines such as electronics and even consumables.

2. Reliable delivery and returns: One of the most important factors contributing to the success of an e-retailer is the on-time delivery of the products. It is a known fact that the supply chain infrastructure in India is not up to the global standards. So, an e-retailer has to ensure that either he sets up its own delivery network or partners with a trusted party. The delivery network not only needs to ensure the delivery of the products but also the returns in case of change of mind at the time of paying or in case of faulty goods.

3. Cash-On-Delivery payment mode: The unreliable delivery infrastructure in India helped ‘cash-on-delivery’ option gain popularity. The customers were wary of paying upfront in the wake of uncertainty of delivery. The COD option allayed the fears of the customers as the cash exchanged hands only at the time of delivery. Even with the improvement in delivery infrastructure, cash-on-delivery will always be preferred payment option. Consider the fact that an established e-retailer such as Flipkart, which has a robust delivery network trusted by the customers, receives 60% of its payments as cash-on-delivery of card-on-delivery.

4. Pass on the savings to the customers: The Indian customer is very price sensitive, especially in the case of branded products. She would check the price of the article at multiple websites or stores before buying it. The e-retailers generally save on costs which tradition brick and mortar sellers incur on the physical infrastructure. Majority of the e-retailers are already passing on these savings to the customers. This has helped building a perception that online prices of products are and should be lesser than the store prices. Any new entrant in the market will have to follow the trend.

5. Difficult to fit one size to all: Always remember that India is a country with 1 billion plus population which speaks 20+ major languages and boasts of diverse cultural and demographic characteristics. No organization to have uniform policies and tactics across the country and hope to succeed. Same is the case is with e-retailers. They have to customize the products and services according to the requirements. The mantra here is to be receptive to the feedback, sense the needs of the consumers, tweak your operations and serve the customers.

On a concluding note, although the Indian online retail market presents a great opportunity for retailers to explore, many factors need to be kept in mind before taking the plunge. The entry barriers are low and there are hardly any restrictions from the government agencies to set up an online store. This is bound to increase the competition. Only those who go to market with a customer centric approach will be able to survive and flourish.

Simplifying the Bitcoin Mystery.

April 14, 2013 1 comment

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Majority of us would have never heard about the ‘Bitcoins’ till recently. However, since last few weeks, the low lying bitcoins are donning the headlines in business and financial news. Although a lot of newsprint has been devoted to the bitcoin hype in recent days and the phenomenon has generated a lot of interest in the in this new ‘currency’, but, many of us are still wondering about what exactly is the ‘bitcoin’ and why so much hype around it? I have tried to answer a few questions to help de-mystify the mystery.

What is a ‘bitcoin’?

Bitcoin was introduced by a pseudonymous developer named Satoshi Nakamoto in a paper published in 2009. Simply put, it is essentially a decentralized digital currency based on an open-source with peer-to-peer protocol which generates new additions to this number series. Not much is known about the real name of the person and the person himself and the attempts to search ‘Satoshi’ have yielded no results. Satoshi was very actively engaged with the users and other developers involved the evolution and drafting of the protocol and rules around the bitcoins till 2011 when he faded away and ‘moved on to other things’.

The logic that governs the creation of a bitcoin ensures that no more than 21 million bitcoins can be created out of this; 11 million bitcoins are already in existence.

The ‘owners’ or the bitcoins store them in ‘bitcoin wallets’ which are managed by a few companies that provide the bitcoin wallet service. So, essentially it acts similar to a bank account for the traditional currency, only that one does not get any interest. Also, there are online ‘bitcoin exchanges’ where the bitcoins can be purchased, exchanged and converted. Of late some companies have started accepting payments in the form of bitcoins giving it the status of a ‘legitimate trading currency’.

Why is it in news?

The bitcoins have always been a topic of interest and discussions on various internet forums. It’s been almost two years that I have been tracking the developments on the bitcoins. The bitcoins have made it to the mainstream news only recently because of the sensational rise in the price of a bitcoin. The price of a unit of bitcoin has risen from $13 in mid-January to almost $170 in April 2013. This along with the suspense around the connection of increase in trading transactions of the bitcoins to the Cyprus economic debacle has helped propelling the bitcoins into the headlines.

Can it replace the traditional currency?

Each bitcoin has a unique identification number which is similar to the ‘serial number’ we have printed on the currency notes. That is one part, but the more attractive fact that attracts people to bitcoins is that only 21million bitcoins can be made. This is a very good factor which will help in controlling hyperinflation. Also, with a majority of the monetary transactions moving online, many analysts around the world have started talking about the feasibility of bitcoins replacing the traditional currency. But, will it be possible for bitcoins to replace the traditional currency? My answer is that shifting bitcoins (or for that matter to a completely virtual currency) will take very long time. I do not see it happening in near future. Bitcoins can exist as an alternate method of payments but cannot replace traditional currency. There are multiple reasons for my view here but I would like to bring forth only a couple them from the list I have:

First, the bitcoins currency is a de-centralized currency. There is no ‘Nationality’ attached to it. The traditional currency has an inherent factor of ‘Nationality’ built into it. Believe me, although the idea of ‘one world’ and ‘one currency’ might sound very lucrative but is not practical. The idea of one region-one currency was tried in EU and it failed.

Second, the bitcoins are anonymous. This makes them perfect for illegal deals on the internet. Tracing the origin of the deal and the people involved in the transaction is very difficult- if not impossible. Abandoning traditional currency for bitcoins will be a huge compromise on security and traceability of transactions. In case it has to be done, some central agency will have to take up the issue of identification and security protocol.

Third, the issue of taxation. The fact that bitcoin deals are anonymous and have no nationality attached to it, brings in the factor of difficulty of applying taxation on the bitcoin transactions. No government would want to lose tax revenue due to shift to bitcoin transactions.

Grand Theft!

There is another major issue with the use of bitcoins- theft. The critics might say that the same issue also exists in the case of traditional currencies as well. But, consider this- The six biggest hacking, theft and fraud incidents involving Bitcoin exchanges, wallets, or investment vehicles have resulted in a total 1.2 million Bitcoins being stolen. This is out of a total of 11 million bitcoins in existence today. This means that more than 10% of all the bitcoints that exist in the world today are stolen! Whatever might be the dangers and risks involved in the transactions of a traditional currency, the ‘theft’ numbers have never been so high.

Is the current rise in bitcoin prices a Bubble?

According to my knowledge of economics, the answer is yes. This is because the prices of bitcoinc are rising because people are buying them and people are buying them because the prices are rising. So, the price rise is fuelling the demand and the demand is fuelling the price rise. Secondly, there is not much evidence of people using bitcoins for online transactions for buying or selling goods or services. Until that starts happening, which will be an economic driver, the rise of price for bitcoins is nothing more than speculation.

The bitcoins phenomenon might sound very exciting, but there is a need to contain this excitement. Considering bitcoins as a hedge in the case of economic crisis or considering completely shifting to bitcoins from the traditional currency might be a farfetched idea. There might be a time in the future when the currency will go virtual, but that time is not now.

Categories: Strategy

The Mobile Wars- What is Next?


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The last few years have seen the mobile manufacturers bettering each other on the hardware parameters (the processing power, the display etc.). But, there is only so much one can do when it comes to enhancing the processing power and hardware capabilities. Beyond a point, the difference that hardware makes is not worth the effort consumed in achieving so.

So, what is next?

When Samsung came up with S3, there was a sustained campaign around the device ‘made for humans’ the same thought has been extended in the next generation of the flagship product S4 being marketed as the ‘life companion. The device lives up to the expectations and offers many functionalities based on human gestures. Samsung has done a good job in making use of the ‘eye-ball’ sensors and the ones to recognize hand movements and gestures. Besides recognizing the hand gestures, it also senses the proximity of user’s fingers to activate the ‘Air View’ functionality. All in all, this is a major step in moving towards the era when the devices will understand and respond to the human movements and respond the commands of the device’s ‘master’.

The ‘Extended Humanprise’

In the coming years, we are going to see more and more of these ‘sensor’ based functionalities in mobile gadgets. This is what I call the ‘Extended Humanprise’ – the device is on its way to become the extension of the human being. The possibilities in this field are limitless. The sensors can be leveraged for reading the touch, the finger prints, the eyeball movement, voice, light exposure etc. With the combination of a few or many of these sensors, numerous functionalities can be built around the device. With companies already developing the prototypes of ‘wearable’ gadgets, many other human body movements can be used for interacting with the devices.

Without doubt, the next big thing for the mobile devices is manipulating the human-device interface through these sensors. This is an open field at the moment for companies to explore. Let’s wait and watch how these mobile companies use the technology to extend the human ‘reach’!

Categories: Strategy Tags: , , ,

Rise of the Angels- Why are Angel Investors so important today?


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Before the arrival of the computers and later internet, most of the enterprises were either based on manufacturing, trading or providing services. It took a good amount of money and time to take the idea from the drawing board into the hands of the first customer. Back then, a start-up could easily employ 20-50 employees even before getting its first customer. Even when the computers came, it was still very costly to acquire or lease a computer and build a team to work on it.

The last 15 years have seen the computers becoming affordable, internet reach wider and tools to ‘build’ the idea cheaper. The affordability of the computers and the internet, has drastically reduced the cost of creating a prototype and building a small team.

Venture Capitalists generally are process driven and have a long ‘Due Diligence’ process and like to invest an amount which falls in their ‘investing range’ and also would want a ‘Board Seat’. A start-up which requires just a 4 member team and softwares worth a couple of hundred dollars and a small place to work for a couple of months to create a prototype or ‘start-up’, might not want to go through the due diligence process or offer a board seat. And, yeas, the amount of money required to start-up and scale might not be that large.

Enter the Angels!

The Angel Investors generally invest much lesser amounts per start-up than the VCs. Angel investors are typically well-connected, wealthy individuals. The lesser amounts of initial funding required these days to start-up (which means a lesser risk to the investor in case the start-up fails to take off), has induced more investors in the start-up ecosystem. They have a much shorter or no due diligence process. For a start-up looking for small yet quick investment, Angel Investors become the automatic choice.

So, Angels are here. And, they are here to stay. The lesser amounts of money required to invest in start-ups today and the bigger risk appetite of the Angels, has made them very important to the start-up eco-system. They are the ones who germinate the seeds of entrepreneurship.

So what makes Start-ups prefer Angel investors over VCs?

There is no hard and fixed rule which separate the Angela and the VCs. Vcs behave like Angels and vice-versa all the time. Sometimes the investor participates in one or both the funding rounds- As an Angel or a VC. So, if you are ‘starting-up’ and are looking for investment, just check on the intentions of the investor.

Company vs the Product: Where as VCs come with a bigger investment, they are more committed to the creation of the company and guiding the entrepreneurs, the Angel Investor helps developing the product, or, as we say- prototyping the idea. So, if someone is looking for scale and growth, VCs are the ‘to go’ investors. The VCs also bring in their experience, contacts and also the early adopter customers. The Angels will just give you the money and generally do not involve in mentoring. So, take your pick. Carefully!

This is what Apple should be doing!

March 3, 2013 3 comments

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Apple stock tanked to $430 last week in the wake of concerns on the future of the company and its future range of products. The stock is 40% down from its peak.

There are rumors of Apple working on a ‘wearable gadget’ and has even filed for a patent application. But there are doubts on the success of this product. Also, this is going to be in the low price band ($100-$200), which definitely means lower margins. Also, going by the trend, Apple now will be spending much more on marketing its products than it did earlier. Times look tough for Apple.

Now what should Apple do? I have a suggestion.

It is high time Apple gets into Gaming. Apple, especially in the US dominates the UI for mobile phone and tablets (and to some extent the laptops as well). Given the ‘mobility’ of mobiles and tablets, Apple does have a great chance at Mobile Gaming.

Now, there are many games available in the Apple Store as app downloads. Yes, Apple is also making considerable amount of money from the downloads. How different Apple Gaming should be from the normal gaming Apps available at Apple Store? Apple should make the best use of the hardware available in its devices and introduce the ‘elevated gaming experience’- both online and offline, single player and multi-multiple leveraging the wi-fi and the 3G. Currently there are a few players in the mobile gaming arena but all of them either offer downloadable apps (Angry Birds by Rovio) with online integration or online games using the internet (Zynga on Facebook). There is also another category of devices such as the Sony PSP providing the ‘portable’ gaming experience. The true mobile gaming experience is still missing.

Now, if Apple is able to capitalize its dominance of the mobile UIs and its expertise in the hardware-software integration, it can usher a whole new arena for Apple to spread its reach and find a new revenue channel.

EA on SaaS- How to sell? or Whom to sell?

February 21, 2013 Leave a comment

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The recent years have seen a lot of interest in Enterprise Applications moving to the cloud. Salesforce.com, one of the first movers in the industry has had its fair share of success. Of late, we have seen the emergence of Workday as a major force to reckon with, especially in the HR Applications space. Besides these ‘giants’ there are a lot of small companies vying for their share of the pie. There is a lot of interest from the customers in these SaaS Applications, but, selling a in this space is no easy task.

My experience shows that ‘How to sell?’ a SaaS application finally boils down to ‘Whom to sell?’.

Take the case of a normal office employee. Now a days, the most often used application in any office is the email. There are millions of mails organizations send and receive in a day. As an employee I do not care whether the email is hosted by my own organization on its own server maintained by its own IT team or it is hosted and managed by some third party- as long as there is no difference in the end user experience.

While selling on-premise Enterprise Applications, we used to mostly interact with the IT function of the customers. The IT function of the customer was an important stakeholder in the decision making. This because they were the ones who would finally manage the system on a day to day basis. The second most important stakeholder was the Fiance Team. This because they would really be concerned on the one time investment and the maintenance, enhancements, upgrades and re-implementation costs of the Application. The end user was kept on the margins as a decision maker.

Things are different while selling a SaaS application. First, the IT team will be very skeptic in buying the solution given the threat to the in-house IT jobs. Second, they will have a lot of queries and concerns on the data security and up time of the system. Given these concerns and many more, the salesperson will find it pretty hard to go past the IT team!

How to approach a SaaS sales deal?

Target the Business Users: As mentioned earlier in this post, a business user is really not concerned whether it’s a SaaS or an On-Premise Application as long as his requirements are met. Try to reach out to the Business User Team, convince them that all their requirements are being catered to. Once you have the business users consent, half the battle is won.

Next, convince the Finance function of the customer on the costs. By far, the SaaS TOC on an average is much lesser than on-premise applications. The difference is more pronounced in the case of SMEs. I don’t want to generalize the cost benefit analysis to all the customers as it might differ from case to case. But, once the positives of the CBA have been established, move to the last hurdle- the IT Team.

Winning over the last hurdle is a little tricky. Believe me, winning the last battle boils down to the ‘Brand Image’ of your application. Every SaaS claims to be the best of the breed, but no one will believe you until you have facts and figures to support. It might be a little easy for a well known brand, but proves a little tough for the smaller companies and start ups. The best ammunition to have here is data from your existing customers and customer testimonials/ references. Make the bets use of your past and current customers to build in the ‘Trust Factor’.

Hope this post helps. Happy selling!

Categories: Strategy

What I want in Samsung S IV

February 19, 2013 2 comments

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Its been on the news that Samsung is ready with the SIV and will be releasing it sometime in March-April time frame. The latest news is that S-IV is being launched on 14th March in an event in New York. Many considered SIII to be equivalent if not better than iPhone 5 in specs and performance. Now with both Samsung and Apple raising the bar with every version release, consumers have also started expecting the very best in the next version of the gadget.

Here is what I expect from Samsung in S-IV (or the release after this):

1. Un-breakable Scree: In the last WMC, Samsung displayed bendable display that it is developing. I am sure, the bendable displays will take some more time to be commercially viable, but I do expect that the ‘unbreakable’ version of the same would already be available for commercial production. I expect Samsung to make it available in S-IV.

2. Own Operating System: Till now, even the bestsellers from Samsung have been using the free Andriod Operating system. The OS has been performing well but is not seamlessly integrated with the hardware (as in the case of Apple and iOS). This is a drag on the hardware resources of the gadget. If, Samsung is able to introduce its own OS, it will not only increase performance of the device but also decrease the prices of the device.

I sincerely hope Samsung will introduce the above two features, it will be a strategically important move for the company.

Categories: Strategy Tags: , ,