Bombay - India is a tough testing ground for e-commerce: Credit cards are still a rarity, only one in 300 adults uses the Internet regularly, and shopping trips are widely considered to be entertainment.

Even the one chief advantage of being a young market - the chance to learn from other people's mistakes - isn't all that it's cracked up to be, because not all of the U.S. lessons apply here. "The funny thing is, I have not even logged on to eBay in the last four months," says Suvir Sujan, co-chief executive of Baazee.com Inc., a one-year-old Bombay-based Internet auction site modeled on eBay Inc., the popular San Jose, California, Internet auction site. "The market is so different, there's no point."

The Internet may someday create its own global culture, but in the developing world, local conditions are still shaping e-commerce. Baazee, for one, has struggled with problems eBay never had to worry about. Indians tend to equate auctions with bankruptcy liquidations. So Baazee started holding live auctions in shopping malls to promote the idea. Unlike the U.S., India has few nation-wide brands that Indians trust enough to buy without seeing. So Baazee is setting up "exchange centers" in different cities, where the seller and the winning bidder can complete their transaction in person after the buyer is assured of the item's integrity.

The one thing Baazee would have liked to have taken straight from eBay - a technology designed to handle great leaps in volume — It had to hire a local company to design. After complaints that people weren't able to place bids, Baazee had to stop all marketing for three months this past fall while building the new system to keep up with bidding traffic.

India's population of one billion, and its troops of talented software engineers, make it a promising online market for companies looking ahead. But until now e-commerce has been disappointingly small, estimated at half of even China's low level of online sales. Most of India's Internet users and online purchases are concentrated in a handful of large cities. Some analysts expect e-commerce to boom here, as telecommunications improves and credit cards spread, but others warn that personal computers won't become a mass commodity until large numbers of Indians first buy washing machines, color televisions and other big-ticket consumer goods common in developed countries.

Some of the broad lessons from the U.S. have been a help to Indian start-ups. Indian Web entrepreneurs, for example, haven't spent much time promoting content-only sites — like Salon.com in the U.S. - that rely heavily on advertising money. "It took the U.S. seven or eight years" to learn that Internet sites needed direct revenue from surfers, says Dewang Mehta, Executive Director of the National Association of Software and Service Companies, a computer trade group in New Delhi. "Here, we've learned it in six months."

Other trends have been harder to follow in a country where retailing still lags years behind the U.S. Last year's mantra in the U.S. was "brick-and-click" - that shopping sites should hook up with established retailers and let them handle warehousing and distribution. Witness the link between Toys "R" Us Inc. and Amazon.com Inc. that was announced this past summer. But in India there are no retailers with nationwide distribution, such as Toys "R" Us or Wal-Mart Stores Inc. in the U.S. "A dot-com in India that depended on somebody else's fulfillment chain would be in big trouble," says Saurabh Srivastava, Chairman of the New Delhi-based venture-capital fund Infinity Ventures, which has funded a dozen Indian Internet ventures in the past year. If anything, Indian sites are moving away from "clicks" toward "bricks" as they struggle to survive. For example, Indiagames.com Ltd., a Bombay-based Infinity-backed site, had 200,000 downloads in 1999 of a free game allowing users to shoot at Pakistani soldiers (India never lost), according to Chief Executive Vishal P. Gondal. Rather than trying to get people to start buying games online, the company is concentrating on producing CD-ROMs and writing customer software. The Internet is "not a business, it's a business enabler," Mr. Gondal says.

Ashish Dhavan, a Harvard Business School-educated partner in Bombay-based venture fund Chrysalis Capital, says Entranceguru.com, a graduate-school test-preparation site he helped fund, was having problems because Indians already were too used to getting the information free on the Internet. But when another site printed and bound the same material, it was able to sell it for up to six times the online price, he says.

Suspicious Surfers

Others have found experienced Indian surfers suspicious of anything that happens offline. When banker Harsh Roongta started Bombay-based Apnaloan.com India Pte., a consumer-loan site, he used Charlotte, North Carolina-based Lending Tree Inc.'s Web site. LendingTree.com as a model, even asking friends with U.S. Social Security numbers to put in applications as a test. But he says he quickly decided that Indian Web users would drop out if he followed Lending Tree's practice of promising responses by e-mail "within one business day." That was too long for his site's skeptical users, who were used to instant responses on the Internet. He had to convince banks to share enough information with Apnaloan to allow it to give loan quotes while the users were still logged on.

"There is a huge degree of cynicism of anything off the 'Net," says Mr. Roongta.

One reason India's e-commerce market is so quirky is that most of the country's two million or so Internet users are in offices and Internet cafes. So, the office would seem a natural place to seek electronic commerce - except that Indian offices aren't immune from the country's telecommunications problems. Clips India Pte., a New Delhi office-supply retailer, has received only a trickle of orders on its Web site, and founder Arun Jain got insight into one of the reasons last month when he bid to supply office products to a U.S. company that he declines to name. "The connections kept hanging up," says Mr. Jain, who spent the day running between two computers hooked up to two different Internet providers, as he made his bids. He had connection problems with both providers.



Pick Up and Deliver

A small market does allow some experimentation that would be hard in the U.S. Take the problem of payment: Few Indians have credit cards, and e-shopping sites don't like cards anyhow because the country doesn't yet have good verification systems. One Bangalore-based site, Fab-mart.com, came up with its own currency, "Fabmoney", sold in Internet cafes. For gift sites, delivery companies have agreed to pick up cash at one location and deliver the gift to another to avoid the credit-card problem. With India's low labor costs, delivery companies charge the e-tailers only about $1 for the service.

Shirish Gariba, Vice President of e-business for courier firm Elbee Services Ltd., says his Bombay-based company's association with Atlanta-based United Parcel Service Inc. helped prepare Elbee for e-commerce, but this particular innovation was home-grown. "We could offer flexible procedures they can't do," he says. "They deliver millions of packages a day."