FAQ on Online Retail/ECommerce Startup in India

What were your considerations in the following areas with respect to an online store/ECommerce Startup

Q>Which store-front technology you choose and why? What are the vendor’s in the technology space to evaluate?  
Vinodh> After quickly screening Wordpress, Joomla, Drupal, OfBiz and a myriad other shopping cart options (Zencart, MartJack) I chose Magento (and goMagento) initially.  It was an easy framework to setup and allows one to get their catalog up and running within a few hours.  If you are looking to simply publish your catalog, you probably need to look no further.  However, most often, one will want to change User Interface, Payment Gateway options, Business Logic (including Discounts, Coupons, Costs and Taxes, Logistics/Shipping) and other back-end features/integrations.  At this juncture I found Magento lacking in support for Indian operations.  Another major concern was the Code Security options in the Social (FREE) version, given that framework directory structures are public domain knowledge.  Enterprise Edition was over 50K USD.  Given the above characteristics and the need for a cost-effective, scalable, extensible technology/architecture for the longer run, I finalized on the base stack of MySQL and PHP.  There are a number of Open Source and Public Domain add-ons (like Magic Zoom, Rating) available in this stack.  Development community is also healthy for this stack. 

Q>What payment gateway will be best and why?
Vinodh> I looked at Paypal, CCAvenue and EBS.  Finally selected EBS for their better Transaction Pricing (TDR).  Even though AMC is higher, one will realize that transaction-based costs are the bigger hit in a growing ECommerce site.  Their integration kit is comprehensive and provides support to multiple types of Credit/Debit/Cash cards and NetBanking options

Q>Who are the vendors for COD and how does COD add value to the business?
Vinodh> COD has become a norm these days.  This service is provided by Courier companies.  It carries higher charge (atleast twice the normal shipping costs) and has the inherent drawback of last-minute-shopping-repentance.  This is a dent in the Operational costs of a startup.  However, similar to "Amazon Prime" option, such customer-facing features are a must in a growing Ecommerce company.  I would recommend this option for the 2nd phase of operations when you have the ability to optimize Warehousing, Logistics and Distribution.

Q>What are the shipping vendors of choice considering Tier 2 and 3 cities contribute 40% and above of sales?
Vinodh> Logistics is a big chunk of Operational Costs.  I analyzed Blue Dart, Aramex, AFL, DTDC, Deccan 360.  One needs to be careful about the Fuel Surcharge, which is the biggest portion of the cost.  You can negotiate hard on the Fixed portion.  I prefer Blue Dart for the higher-end categories/products.  In Phase 2 of operations, Logistics must be reviewed and optimized (choice of using your own courier boys).  I also observed that it is a no-brainer to pick standard courier companies for local deliveries (absolute low costs), even though hiring your own runners is tempting.

Q>Criteria to select a good Hosting provider?
Vinodh> I chose CTRLS considering the predominant India audience and the value that they provide.  They are touted as the only Tier IV data centers in India.  There is definitely some backing to their claims.  My sites have never gone down yet :-)

Q>Internet Marketing Strategy like SEO, Social Media and Content marketing that worked and did not work for you?
Vinodh> Using Social Channels is mandatory.  As for other digital marketing channels, I suggest a campaign to campaign plan.  Honestly, nobody knows what the ROI exactly is and should be (given that costs are muddled).  Assuming that your technology portal is optimized to SEO, the startup team should dabble with these with careful monitoring of ROI.  You lose some, you win some...

Q>Loyalty program – what works better custom developed or standard module integration?
Vinodh> At this time, "Loyalty" is non-existent except for companies with brick presence.  Price and Promotions determine the merchant of choice.  Do a great job with product, price, shopping experience and customer service - Results will automatically follow...

Q>Is there a need of having an integrated back-end ERP/CRM/Accounting system ? If yes then Why?
Vinodh> This is once again a choice for phase 2, even though good accounting practices is a must from day 0

Q>How important it is to have an in-house technical team – What technical part should be managed in-house and what should be outsourced?
Vinodh> It is important to have access to the right amount of technical resources for the right need.  In the initial stage (0-9 months), it is possible to get everything done by commoditized vendors.  Depending on the growth and maintenance, you can slowly add in-house resources.  Cost of Technology Outsourcing is pretty cheap these days.

Q>How important it is to have a Mobile or tablet app for your store? How do you see the future of these technology in relation to online shopping?
Vinodh> Whether it is an app or an optimized small-factor browser experience, access via mobiles is a must.  When ease of shopping is combined with Mobile Payment options, the result has deadly potential.

Q>Does localization in terms of language help?
Vinodh> Given the growth of 2nd/3rd tier cities contributing to Ecommerce, it is not a bad idea to externalize all resources.  Catalog Development will be a bigger expense when Localization is introduced.  For a startup, English should suffice with the extension to Hindi and few other regional languages in Phase 2.

Q>Any other key learning’s you will like to share?
Vinodh> Remember VAT, CST, Packaging, Return Logistics etc contribute to operational costs.  Include them in your Financials.  Manage Revenues, Capital Expenses, Operational Expenses and Transactional Expenses very closely.  It is easy to miss some of these and project a hefty profit margin within the first year itself...

Most Importantly, spend as much time as possible on the product and its procurement.  Without a good product range, any store (online or brick) is a non-starter.