With more than 350 eCommerce companies in India at last count, one wonders - are they making any money, or are they going the way most of our malls are - glitzy stores, low footfalls, and inevitably, shutdowns.
The big ones are definitely seeing sales going up - riding the millions spent on eye-catching advertisements, huge discounts, free shipping, cash on delivery and no-questions-asked return policies. Even though it results in heavy logistical costs, options like cash on delivery and free shipping and returns have been responsible for eCommerce picking up slowly but steadily in a market like India, where plastic money or netbanking is not too common. Even though it means companies might actually be losing money on every sale, it is resulting in "habit formation", and that can only be good news for the industry.
But does eCommerce have a future in India, and if so, why?
I am bullish, and here's my theory: India's tier 2 and tier 3 cities, and the rural majority, do not have access to the glitzy malls and shopping arenas of our larger cities. But there is money, and there are aspirations, driven by much larger exposure to the world. Unlike when we were kids, we now know what is out there. And we want to buy. And if the eCommerce portals can get their distribution channels - and maybe even share them - there is a huge market out there for all the cool stuff that has hitherto been accessible only to the well-heeled tier 1 upper middle class.
One indication of the maturing of the market is that a lot of eCommerce is now focussed on apparels and life style - not just ticket bookings. Since apparels and life style products require a "touch and feel", these are some of the most difficult products to sell in an emerging eCommerce mindset. Once the population gets used to that, as it seems to be happening in India right now based on sales numbers from the biggies, it is so much easier to go ahead and expand to electronics, books and so many other such products.
Interestingly, another side effect, not so good for brick and mortar retailers, is what is called "showrooming". This is the term used to describe the situation where consumers visit showrooms, check out products (especially electronic and household stuff), get demos, do trials, and then leave, going back home to order on the Internet, from the best discount site. Unless brick and mortal retailers jack up customer service and provide serious value adds, they are soon going to have deep trouble.
Either way, consumers have everything to cheer about - but for how long?
2 comments:
e-Commerce is actually going to have a tough time in next 6-12 months. Even I am bullish on the Indian e-commerce story, considering the increase in the Internet and mobile reach and the change in the mindset, but that's a long term view.
The reason, next 6-12 months are going to be tough is because per unit economics are not working out for almost every online portal out there. You might have read the Forbes Story on Flipkart and the current feeling in the VC circle. Each one of them needs to up their margins and eventually become profitable. In this phase, we'd see some consolidation and some deaths and hopefully it will make way to few - survival of the fittest!!
From the consumer perspective, yes, it's going to be honeymoon until the e-commerce guys realize that they don't have any more money to be burnt on discounts!! Till that time, consumers can enjoy :)
Yes, totally agree. When the market leaders focus on land grab, keeping profitability considerations aside, the consumer wins - and the weaker/smaller players get wiped out.
But sometimes, when the market leader continues the land grab for too long, without starting to worry about turning the corner, they can die themselves, leaving the lurking second and third players to step in... sounds similar doesn't it? KFA led the way, opened up the aviation sector in some sense, and then shut down, leaving Indigo and others to lap up the customers on offer.
Over the next few months, online shopping portals should focus on improving engagement with their customers - and understand that loyal customers do not need just discounts and free shipping, they need to know and feel cared about.
That's where a well designed loyalty and engagement program can make a huge difference.
Come to eMee, and find out how! :)
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