E-COMMERCE PROJECT REPORT

On

Online Retailing of Shoe Laces Elaces.com

Faculty Guide Prof. Lakshmi Vishnu Murthy

Submitted By: Nirbhay Taneja Sudhanshu Agrawal Debarati Joardar Prihana Bhasin Rishabh Vyas Sourabh Aggarwal

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Elaces.com Executive Summary It is a new start up venture which will focus on selling shoe laces only. Additional shoe accessories will only be added to the portfolio if the company will see sizeable returns in a year. This online company will help to satisfy the need of consumers who look for various colored shoe laces to customize their shoes (make them look attractive) or replace them with the old/torn laces. After the customization option available in various shoe companies like Nike, the consumer attitude towards the customized shoes has been favorable but consumers are not ready to pay exorbitant prices for their shoes customization. Elaces.com will gratify their young consumers needs as well as the retailers who are prone to say no to consumers when asked for different colored shoe laces. Our business model will serve both i.e. B2B and B2C. The new interactive website to be developed will be user friendly; will use simple and convenient options for retailers as well as consumers to browse through the laces under various shoe categories. Company Description: Elaces.com is a virtual store on the Internet where customers can browse the catalog and select products of interest. There will be different options for the retailers /distributors who can give bulk orders and consumers who can also buy any number of items as they want. The shoe laces are outsourced from external supplier who already is into the business of manufacturing shoe laces. Outsourcing shoe laces will help the company to concentrate on the core business of providing speedy delivery to the retailers and consumers selling them the quality product. The company will set up its warehousing facility on lease to store the inventory. Even the contracts with product delivery provider will be made and incentives will be given if the service provider will lessen its delivery time to the destination. The shoe laces will be sold to the consumers in an attractive packaging and discounts will be offered after buying a certain amount of pairs. After opening the Elaces.com website, the main page will display options to choose shoe laces on the basis of shoe category. The selected items will be collected in a shopping cart and the consumer can also save it in the wish list. At the checkout time, the items in the shopping cart will be presented as an order. At that time, more information will be needed to complete the transaction (name, address, contact number). Usually, the customer will be asked to fill the personal information, a shipping address, a shipping option, and payment information such as credit card number. An e- mail notification is sent to the customer as soon as the order is placed. Since we dont have many competitors selling shoe laces online, therefore we have competitive advantage (as were majorly focusing on shoe laces only) over others which can help us understand the consumer behavior and provide them with plethora of choices at attractive price. The online shoe laces store will allow customers to search shoe laces of their choices on the basis of different categories. The customers will be able to receive the orders within three days of

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dispatch and the payment can be made through various options ((debit card, credit card, and cash on delivery (for more than two pairs)). Mission of Elaces.com To make Elaces.com an iconic brand providing shoe laces at reasonable prices with finest quality and various color combinations. We exist to attract and maintain customers as well as retailers by exceeding their expectations through fast delivery and hassle free services. Products & Categorization On the main page, our website will provide the option to choose the product (shoe laces) from various product categories. These shoe laces can be chosen in different sizes (on the basis of eyelids of shoes).

Round & Thin laces

Fat & Round Laces

Thin & Flat Laces

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Flat & Fat Laces

Sport Shoes Laces

Third Generation LED

Market: India has an internet base of about 135 million users as of June 2013. Penetration of e commerce is low as compared to the other markets like United States and United Kingdom but it is growing. The growth is at the inflection point. Indias ecommerce market was worth about $2.5 billion in 2010 and it has jumped to $14 billion in 2013. About 75% of this is travel related (airline tickets, railway tickets, hotel bookings etc). Online retailing comprises about 12.5%. India has close to 10 million online shoppers and is growing at an estimated rate of 30% CAGR. Electronics, Apparels, Foot wears are the biggest categories in terms of sales. Since we are establishing our business on Pan India basis, we are targeting those segments who purchase foot wears online. There will be domino effect, because people purchasing from our websites might recommend their colleagues to make a purchase from the same place. The motivating factors that are driving us to establish the startup: Increasing Broadband internet & 3g penetration

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Rising standards of living and a burgeoning upwardly mobile middle class with high disposable incomes Busy lifestyles, urban traffic congestion, and lack of time for offline shopping Lower prices compared to brick and mortar retail driven by disintermediation and reduced inventory and real estate costs.

Competitors: We are not the first movers in this segment. Apart from us, there are various other competitors: For e.g. Fashos .com, my laces.com and big laces.com Fashos.com:

My laces.com

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Unlike Fashos laces, My laces.com which require leather, cotton, jute ,hemp,etc the shoe laces offered by us are made up of synthetic fibres that gives less rough appearance, suffer less wear from frictions and are less susceptible to rotting from moisture Their pricing structure ranges from Rs40 to Rs180. However in our case we are planning to set our price between Rs60 to Rs150 per pair. Big laces .com offers only neon shoe laces, in our case we are providing the customers with wide variety of options. We are planning to inculcate the feature wherein while making the online purchase the customer can see himself wearing the shoe along with the laces in virtual window and can see whether it is suiting his/ her personality or not. This is a unique feature which is not adopted by any other online shoe laces retailers In addition to that we will keep our customers updated with the recent trends in the market and provide them with various design patterns which can help them to invent various styles in their shoes. Risks Associated With an E-Commerce Website Consider the following sample of stakeholder concerns around an ecommerce site:

Each perspective adds value to the overall risk. However, accounting for each voice means there is no one-size-fits-all ecommerce strategy applicable to every organization. Risk One: Compliance & Security Considerations If sensitive consumer information is transmitted, stored and/or processed through your ecommerce system, you need to factor compliance into your strategy. Compliance plays an important role in the architecture and security requirements of your ecommerce site. As such, it is extremely important to understand the role an ecommerce system plays in the payment card authorization process. If an ecommerce system processes, stores and/or transmits cardholder information, specifically the primary account number, Payment Card Industry Data Security Standards (PCI DSS)

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compliance is required. Measures to meet those requirements should be included in the inventory. Ecommerce sites have three ways to meet the PCI DSS requirements. Merchants can either: Use a payment gateway which involves integration with an Application Program Interface (API) to facilitate the transmission of the Primary Account Number with or without the storage of this information; Transmit and store the Primary Account Number internally; or Choose to outsource the transmission, storage and/or processing of payment data.

Ultimately, the route an organization takes to meet the requirements of PCI-DSS is a business decision and should be evaluated carefully. Each approach has benefits and downfalls to consider. PCI Compliance Ecommerce transactions must be performed in a way that helps build consumer trust by limiting the risk of fraudulent activities, while ensuring the privacy of consumer information. The reality, however, is that since 2005, the Privacy Rights Clearinghouse has recorded over 152 million breached records resulting from retail transactions in the U.S. alone.2 These records include credit card numbers, personally identifiable information, or other cardholder data that was lost, stolen, or accessed without authorization. PCI Benefits to Business To minimize this risk, the Payment Card Industry (PCI) created a commission, the Payment Card Industry Security Standards Council (PCI SSC), charged with setting and maintaining the Payment Card Industry Data Security Standards (PCI DSS). PCI DSS helps alleviate the vulnerabilities associated with the transmission, storage, and/or processing of cardholder data, specifically the Primary Account Number. Achieving compliance with PCI DSS is a continuous process of performing assessments, remediation efforts, and reporting the results. The Council maintains a library of documentation to help merchants and service providers mitigate risk and maintain secure online transactions. Overall Site Security PCI DSS is based on best practices for the protection of sensitive cardholder information. There is little to no guidance on how to scale an ecommerce environment while maintaining compliance and performance. Nor does it provide guidance on how to manage elements of an ecommerce strategy outside of PCI compliance. Additionally, the systems (server, storage system, etc.) that support ecommerce transactions are not always in the scope of PCI DSS. This is an area where hybrid cloud solutions, which allow merchants to combine cloud and dedicated
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or on-premises gear, is growing. With a hybrid approach, merchants can take advantage of cloud efficiencies while maintaining compliant systems to actually transmit, process, and/or store cardholder information. Outside of PCI DSS compliance, ecommerce websites have a host of other security considerations that need to be captured and accounted for when building out strategy. Malicious attacks from DDoS attacks and email-borne viruses can still grind operations of a compliant site to a halt. Just as compliance plays an important role in the architecture of the environment, risks to performance, availability, and scalability are equally important. Risk Two: Addressing Performance, Availability, and Scalability The risk mitigation portion of an ecommerce strategy includes threats associated with availability, performance, and scalability. Here we will discuss a broad range of audiences from a single merchant hosting their own ecommerce site, to a hosting provider for ecommerce merchants, to a company that makes shopping cart software, or someone considering public or hybrid cloud offerings as an ecommerce solution. Availability Not having the ability to handle faults or spikes to maintain operations is a big risk to an ecommerce site. If your environment encounters an issue with a patch, an update to code, a service or hardware component failure, or a natural disaster, what happens to your site? Can it still serve your customers? If not, do you have a sorry page or a contingency plan for expected and unexpected downtime issues that cannot be quickly resolved? Performance Stable and reliable performance is also a critical factor for an ecommerce environment. If a site does not respond in a timely fashion or reacts erratically, customers will abandon the site. Performance must be monitored in real time and over a period of time to determine if resources are overtaxed from both a hardware perspective and from a response perspective. Without these tools to test and monitor the overall responsiveness of a site, an ecommerce merchant could lose valuable response time without even knowing it. Performance should be considered throughout the entire ecommerce environmentfrom network throughput to disk I/O and even memory or CPU utilizationas the single weakest link can cause the entire environment to respond poorly.

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Scalability Your store needs to deliver a consistent experience whether serving five concurrent users or 5,000 concurrent users. Some merchant sites may experience predictable seasonal traffic which provides time to prepare the environment. Other sitesparticularly new sitesmay not know what levels of traffic to expect but need to be adequately prepared. Both environments need to have a strategy in place to account for scalability but may end up taking vastly different approaches. One of the biggest scalability questions for any ecommerce site is focused on how many connections the site can handle, which is a difficult question to answer without performing tests. Every system has physical limits and most ecommerce environments will have some uniqueness to them. The only real way to know an environments scaling capacity is to test all aspects of the site and view the results from an end users perspective. Risk Three: Mapping Site Flow and Processes Sit in the role of the consumer and follow the steps they need to take to purchase on your site. Though it sounds simple, taking the time to carefully connect all the dots between the inventory line items, back-end processes, and customer experience to find and fix gaps is critical to future success. The following sample connects the site flow process as categorized into areas of focus: business, technical, and customer facing activities: Business: Customer: Technical: Registered URL configured to resolve to a Public IP Address through DNS then IP resolved to an Internet Service Provider (ISP) IP Address request sent through a series of routers to your data center IP Address and port number (80-http/443-https) travel through a series of switches. Web service server accepts the request and responds with content or sends a request to a database server. Users access site using an internet browser and their desktop, mobile, or tablet device Request travels over the Internet (caching name servers/root name servers) Marketing campaign, sales promotion, or media mention drives customers to website Social media activity stimulates traffic Internal/employees access site for reference

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Information travels back to the customer for each request

Operational Risks Even for an established business thats running smoothly, risks can slow growth or halt sales. These operational risks are ever present and frequently outside of our control. They could include the following. Search engine optimization risk. Google changes its search engine algorithms and your website traffic drops by 50 percent overnight. Hosting risk. Your website hosting company suffers a series of failures and your stores are offline for hours.

Price competition risk: Your largest competitor drops prices by 30 percent and your sales suffer. Supplier risk. Your top-selling product line is suddenly pulled from the market and you are faced with a huge loss of revenue. Shipping risk. A container load of products from an overseas supplier is stuck in customs because of a change in policy or an error in the shipping manifest you have little inventory to sell. Marketplace risk. You sell products on Amazon that it does not carry but it suddenly sources the products itself, at a much lower price.

Assumptive Risks For a new ecommerce business, assumptive risks will likely include: Estimated website traffic; Conversion rates; Average sales order size; Cost per acquisition from advertising; Operating costs; Gross margins; Market demand for your products; Cost and time to build out your website.

As with operational risk, one must first identify the assumptive risks one faces and prioritize them. Rather than first thinking about what to do if the results are different than ones assumptions, one need to test your assumptions as much as possible to validate them. Financial Plan

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We believe that as this website will be a significant part of our business, we wont cut down on expenses on the design and development. If we expect to pay say 3-4 lacs for a brick and mortar retail shop (inventory, interior design, furniture, rent, utilities, staff, equipment, insurance, etc.) then it is not viable to balk at paying reasonable rates for the creation of our online business. For setting up a new aspect of business, our company needs to inject funds from various sources. These funding sources include: An equity loan where our business will receives capital in return for a shareholding in the business. Loans from banks and financial institutions Venture Capital Investments There are 3 types of costs in running an online business: 1. Recurring costs 2. Fixed costs 3. Invisible costs Recurring costs for running a web based business: Domain name Hosting PayPal Commissions Affiliate Newsletter costs Shopping Cart costs Online backup of computer data

Fixed costs or one-time expenses: Any software you need Web site design Logos, Branding Set up fees Computer / Laptop

Invisible costs: The biggest invisible cost is your time. Even if you assume $10 per hour, this number will be 8*30*10 = $2,400. But this is all invisible and you do not feel this cost as a burden on your business. Internet, telephone and electricity charges House rent Books, resources etc.

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Factors affecting Website cost: With competing sites appearing every day, a business needs to work harder to differentiate its products and services from the competition. When trying to budget web design costs there are a number of factors to consider: Is this a brand new site or a redesign? How prepared are you do you have a detailed requirements document? Do you need blog or content management functionality? Do you have graphics already created for the site? How are you planning on servicing mobile customers? Do you need multimedia (Flash, video, etc.) on the site? How much content do you have and how much do you need created? Do you need other special features like social media channels, SEO, ecommerce, or something else? Who is going to maintain the site after it has been launched?

Answering all the above stated questions, the website cost ranges from $1,827 - $2,472 i.e. approximately INR 150000. Maintenance cost budget has been estimated to be INR 15,000 per month. Revenue model: Assumption: No of shoe buyers = no of lace buyers. Base Price of lace INR 60 Premium price- INR 180 Average lace price (SP) INR 120 Average Procurement price INR 10 (8.5% of SP per lace) ($0.16 - http://www.alibaba.com/) Other expenses - 55% to 60% (Brown Shoe Co. Inc. Their other expenses are 33% of their SP). Total cost = INR 72 Profit margin =120 - 72 = INR 48 per unit
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Infrastructure cost (Warehouse + Office): Approx. INR 1,00,000 Couriers Services (Outsourced)-For Cash on Delivery: Variable pricing Break-even Point Fixed cost / (Unit price-Variable Unit cost) = 1,50,000/48 = 3125 units Marketing Plan: The vast landscape of the internet holds a mass of information when it comes to online marketing today. Target Customers: We will target wide array of customer who make their purchases online for various products and services. From time to time, customers will be notified via email or mobile messages regarding the latest designs of our products. To attract customers, we will give them recommendations to buy shoe laces of different product categories. In addition to this, we have the additional feature for changing the color of shoes (of all categories) and trying different colors of shoe laces on them. Publish an online newspaper and will have a frequently asked questions section. Update our Web pages and their content frequently so that our Web site reflects recent events or current trends. Provide a way for people to reach out to each other e.g. chat rooms, bulletin boards, and mailing lists conversations. Make a strong effort to follow up every contact, particularly with first-time visitors. At a minimum, people who place an order will be advised on its status and likely delivery date. We can use the following marketing strategies to give an exposure to our online website thereby boosting large volume sales: Search Engine Optimization: Out of all the marketing strategies, this is one of the most critical because it can have a huge impact on our bottom line once we get this one right or our rankings start falling into place. SEO takes a lot of keyword research and strategy in terms of what pages and keywords were optimizing. Its becoming more and more competitive and if we have the budget to outsource SEO to professionals, it is worth the advertising dollars. ONE keyword can have a HUGE impact on your business. Pay per Click (PPC): We are planning to move forward first with search marketing (PPC) which is very similar to SEO in terms of keyword search and how we want our customers to find what is there on our website. It is very important that we start collecting visitors and customers email address from the get-go to start thinking about email marketing which should be a big part of your ecommerce marketing strategy.
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With PPC, we can generate instant revenues, but if we dont watch it, our costs can quickly skyrocket out of control .In the following ways we can increase the number of sales and decrease the costs. Capitalize every word The first letter of every word should be capitalized. Google doesnt all the entire word to be capitalized, but our ad does stand out and get more clicks and sales if we capitalize the first letter of each word. Usage of emotive words Appeal to peoples emotions thats what gets them buying. In particular, appeal to their greed, fee, altruism, envy, pride, or shame. Using the language of our market we can be clear and direct, but our conversions will increase further if we use the words our customers use to discuss their needs. Solve a problem We dont have much room to work with in terms of character count, but focus on the problems our customers have and solve them in your headline. Conversion rate Maximization The top PPC ads get people who are just browsing, harming our conversion rate. People scrolling further down the page are really interested and know what they want. We might get more sales at the top, but well get a better conversion rate in positions three and four. Use plural forms or synonyms of competitive keywords Sometimes, the competition is too stiff, and were better off accepting defeat and taking a new direction. Use a plural version of a keyword or a synonym which might be less competitive, instead. Social Media: Facebook and Twitter are the two largest social hubs right now online and can have a big impact on our business. We are going to market through these channels thereby we can gain followers and fans to start promoting and branding of our website. These are all ideas that we will need to come up with as every business tends to have different strategies to get social with potential consumers. One great idea in going social is promote contest. Contest can stir things up if were giving people something of value. As social media continues to grow, we may be possibly needed to shift resources from other marketing strategies over to the social web. Blogging: Blogging is the part of our marketing strategy. Blogging will enable us to add contents which we might not be able to add on our website to create many different pages and try to optimize for many different keywords and phrases OPERATIONS PLAN Business Location and Operating Facilities As an online business, the primary location of our business is the Internet. However as a small start-up and for the general operations and warehousing we require a physical presence which will be in Delhi as it is the place which has the highest number of manufacturers of shoe laces and it will enable us to get the laces the cheapest cost. The logistics is also done at bulk from there and hence cost of it will minimize the overall cost. We will require a 600 sq ft(min) office anywhere in Delhi (preferentially outskirts) which is easily reachable. This facility will be accommodating the entire IT infrastructure required to carry out the business. The warehouse should be near airport so as to have greatest efficiency in the cost and timing of shipping of products provided that the office and warehouse is nicely connected to each other.
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As part of IT infrastructure we will require initially 12 computers connected by a host server so as to work concurrently. This will be backed up by a double back up plan so that we have security over data. At least a 10mbps uninterrupted internet connection and if possible a backup internet connection for emergency. Few laser printers, scanner and other necessary office equipments will also be required. Right now we do not have any plan of purchasing any sophisticated ERP or CRM system and we will work in excel and open source software. The domain name will be registered and we will not require any logistic vehicle as we will have a system that the logistics provider will pick up the shipments in periodic basis so to manage logistics cost effectively and efficiently. The laces ordered by us will also be shipped to the warehouse by the provider itself through rented vehicles. PRODUCT SELECTION PROCESS: As we are dealing in both B2B and B2C, two different selection processes are:B2C - In this category our company aims to provide laces of good quality, latest in fashion. For mainstream laces and which are standard across the industry will be outsourced by the bulk manufacturers which will be supervised by a quality manager. To catch up the latest trend we will also have a manager which will take on the latest trends in the shoe market and respectively their laces. We will custom order them from the manufacturers and gain the advantage of latest trends. B2B - In this category we will follow the same strategy for mainstream laces as we will be having the stock in bulk for those and for special orders the business client will provide us with the design, material and colour and therefore the possibility, time, charge quotation will be given to the client and if proceeded then the order will be given to the manufacturer. We will follow a 30 day credit policy with our providers so that we always have cash surplus and additional operating cost is not required. Order Fulfilment process

1 2 3

Order acceptance Filtering Sorting Transferment Checkup and Packed Shipped

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After we get an order or quote from any customer we will filter it to find out whether it needs to be transferred to the warehouse for the fulfillment or the quotation to forward to the manufacturer. After the filtering we will sort it out whether the order is COD or prepaid. If prepaid and the payment has been credited to the account we will transfer the order to the warehouse and for the COD order we will have an OTP and an IVR system so as to get a further confirmation of the order and be sure that the customer has not placed the order by mistake which is sometimes a tendency in Indian customers. After the confirmation the order will be transferred to the warehouse. Once the order reaches to the warehouse to the order attendant he will transfer the order bill to the quality manager who will check the availability and the quality which is being given is equivalent to what promised. After checking the product will be packed and the unique order number which will be given by the IT team will be pasted along with the address of the customer. This unique id will help to trace the order and will make it easy for the customers to return the product for the customers. We will be managing the inventory to a minimum level and will only hold the inventory for 15 days and there will be inventory management system which will be handled by the IT team and there will be a flag level given to every product so that a alert will be generated whenever any item goes below the required inventory level and further action course will be taken. RETURNS- For any kind of returns the customer will be identified by the unique order number and if any customer wants to return any orders then the customer have to make a return request from the site and provide the pin code of the area from where the pickup needs to be taken. If that area comes under where our partnered logistics providers gives that service then a tentative date will be given immediately and if we are not able to provide that service then the customer has to himself ship the product to the ware house. Product once reached will be checked by the quality manager that the product is not used and in same condition when it was shipped from here then it will intimate the IT team on a daily basis and the reimbursement will be provided as shoe points which will be equivalent to the amount of order. This will help us to cover the loss of logistics which the company is incurring due to a cancelled order. By this way we are making sure that the customer will at least order something or the other in the near future. We will also have an option if the customer wants refund then we will deduct the logistics cost that the company bearded during the order and refund the rest but in case if the product which was shipped was not same which was order or damaged then there will be no deduction and full amount will be refund on request. To serve the customer better we will have few service manager (according to increase in number of orders) at the warehouse to keep a check on the speedy delivery of the orders and they will handle all the complaints regarding the delivery of the product. These people will be directly connected with the IT team so as to quickly solve the problems.
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Our customer service will be at the IT place and if the manpower became insufficient then it will be outsourced. AUDITING TECHNIQUES We will do the audit for companys campaign in a monthly basis and we will follow these techniques: Count conversions, not clicks Scrutinize calls to action check Google analytics Consider cart abandonment

ACCOUNTING TECHNIQUES We will use accrual based accounting techniques because for example, if in a given period you collect little or no receivables and you pay lots of bills, under the cash-accounting method, you have expense without income you've lost money. On the other hand, if you collect a lot of money and don't pay your bills, you have big income. That's a major distortion of what actually occurred. Accrual-based accounting doesn't care whether you've collected or paid your bills. Income (received or not) is matched to an expense (paid or not), resulting in a proper match of revenue, with the expense generated to produce the revenue. This provides a truer picture of operations. Exit strategy We can fully or partially sell it to the third party with or without an auction Corporate partnerships or joint ventures Selling the company to employees An initial public offering

Selling the business to a third party- It will create an opportunity for us to diversify from a concentration of the wealth tied up in the business. From simplistic perspective, an outright sale may be made to either a strategic buyer (one who seeks synergies with the sellers business) or a financial buyer (one who is more likely focused on shorter term investment goals). The strategic buyer seeks a good fit with some aspect of the sellers business. He frequently is in the same business and is trying to access new markets, increase market share, or acquire expertise, patents, or company know-how, including strategic management resources. The buyer sees the target as a way to acquire those elements that fit with or enhance its existing business. Often times, this decision stems from a potential buyers analysis that it is cheaper and faster to buy an existing company than it is to build or develop their own from scratch. Advantages
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May provide highest valuation for shareholders in the near term May enable us to completely walk away (i.e. obtain the greatest liquidity) Potential operating synergies can improve the business Typically, strategic buyers are very knowledgeable from an operational and business perspective, facilitating due diligence and closing; may be able to close much faster than financial buyers Qualified buyers may not be constrained by financing contingencies or be at the mercy of the credit markets

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