E-commerce, the business of selling products and making money from them on the Internet, may not be as popular in India as it is in the U.S. but despite of that it is still a living and thriving business. The successes of websites like Flipkart.com, Myntra.com and Amazon.in is witness to this fact.
Especially Amazon.in because with this website Amazon – an international brand – entered into the Indian markets. Although statistics suggest that Flipkart still leads the marathon in India but that is another matter, of course.
More than half of the population in India lives in villages where there is poor electricity, leave aside the Internet. Hence most people here don’t know that they can buy products online. However the other people, or at least the ones who are educated and live in big cities, know very well about e-commerce and the advantages it contains. Especially they know for a fact that things online are much cheaper than what they are in the brick and mortar stores. Hence they do buy a lot of products online.
IRCTC and Yebhi.com – IRCTC announces entry into e-commerce
Indian Railways tourism and catering corporation which is sometimes simply referred to as IRCTC is the department of Indian Railways that allows people to book their railway tickets online. They were making a decent profit selling tickets but last year in March they announced they will be foraying into the e-commerce market.
You see at that time they had 2 crore registered users (!) and their website was getting 1.2 million hits every day. They were getting a large influx of traffic during the peak hours, when people were logging on to book tickets, but after that time the website was running stale.
They decided that they can’t just let 2 crore users come and go. People often visit the site not just to book, but to check their reservation status i.e PNR status. Now Internet marketers will tell you that building an audience is one of the toughest things to do online. But once you have a market you can monetize it i.e. make money from it through hundreds of different ways. But the tough part is getting good traffic.
So here IRCTC were standing with 1.2 million hits a day and had only one monetization strategy to make money with – selling tickets. They couldn’t accept that and hence decided to partner with some good e-commerce company.
IRCTC partners with Yebhi.com
IRCTC’s Managing Director R. K. Tandon told The Hindu Business Line that, “We are discussing with existing firms in the e-commerce space to thrash out the details. This will help us monetize our registered user base of over two crore.”
So they invited bids by several e-commerce companies for partnerships. Many companies including Infibeam.com applied. However IRCTC felt the proposal of Yebhi.com was the most impressive. In July last year they announced that they are entering into an agreement with Yebhi.com.
Yebhi was supposed to build and run the e-commerce store for IRCTC on the domain name provided by IRCTC. It was decided that Yebhi.com’s name will not be published anywhere on the site, neither would be their logos or any other form of branding.
The online store would be branded completely by IRCTC although the store creation, progression and the rest of it would be taken care of by Yebhi. Also to maintain the inventory of products and to oversee the delivery of couriers to the customers would be the responsibility of Yebhi.
In exchange of these services IRCTC will give Yebhi access to its 1.2 million visits per day. The profits from the goods sold will be shared between the two companies. IRCTC will give Yebhi a commission on all the goods sold. And they have a deal that this commission will go down as the number of sales on their e-commerce website will go up.
On an average, 4 lakh tickets are booked on the IRCTC website every day. Redirecting this traffic to an online store would imply massive profits for that store. Also, Yebhi.com expects to widen its user base by partnering with the company. Yebhi plans to tap into tier 3 and tier 4 cities by getting access to IRCTC traffic which runs into pockets across the country.
The profit plan
The chart above displays the percentage of commission that IRCTC will give to Yebhi.com when the relevant items are sold through their online portal. Note how this percentage of commission goes on decreasing from left to right. As the sub-headings written above the relevant columns show that each percentage depends upon the number of sales for a particular month.
So if less than 2 crore electronic items are sold in a month the profit percentage paid to Yebhi will be 3%. But suppose in any month 3-4 crore electronic products are sold then the percentage will decrease to 2.4%. If you understand this then the rest of the chart is easy to read.
I hope you would have found this article on the e-commerce aspect of IRCTC to be useful. Tell me in the comments below what you think of this merger.