E-Commerce is the Success Mantra ? – The Reality Check

Is e-commerce the only mantra of success for startups? Well, I don’t know about only but perhaps it is the best route to success. Although, the term startup was never coined then, startups have been coming up since time immemorial. Take for example, in pre-independence India, the swadeshi movement is believed to have set off many startups focusing on the use of indigenous goods by the local population.

E-commerce came into the scene in the mid to late 90s in India with the launch of many B2B and B2C applications. Amongst these the “matrimonial portals” and “recruitment portals” were the most noteworthy. The unprecedented success of e-ticketing for both the airlines and the railways further sowed the idea of e-retail, which took-off around 2007.

It may come to you as a surprise that with an internet user base of over 375 million, India is only second after China. You may be even more surprised to learn that India scores very low in internet penetration at only 30% compared to 84% in the US and 81% in France. Are you getting the idea? Yes, there is still a phenomenally large group of consumers waiting to be discovered and tapped. The internet user base is growing at an exceptional rate of around 6 million new entrants every month. The e-commerce market in India stood at $3.8 billion in 2009. In 2013 it was estimated at $12.6 billion with e-retail accounting for $2.3 billion.

Ever wondered how an e-commerce system works? There is no rocket science involved and you will find that most of them follow similar processes, although I will not be too critical and call it a case of herd mentality. Like in any other type of business the transaction is the crux, with all other activities built around it. In a brick and mortar (B&M) setup, you go to a store, select your product, pay at the cash counter and walk away with your purchase. The online store works in a similar fashion with some finer differences. You get into the store online and select your product. Now, here is the first difference, you cannot physically handle or feel the product. Next, you make the payment or opt for cash on delivery at the checkout counter. Another difference is that you don’t walk out with your purchase, it is delivered to you after some days.

The basic items you will need to run an e-commerce system are a web server, a database system and a warehouse-based dispatch system. The web server will handle your store including the item display and user interface. It will also take care of processing the transactions together with interactions with banks for payments. The database will keep track of the inventory, which involves updating it on a real-time basis as orders are placed and replenishments get added. The database will also ensure that orders are placed with suppliers when inventory levels go below minimum. The dispatch system’s responsibility is to ascertain the location of items and send them to the appropriate buyers in the shortest possible time.

You may argue that a sophisticated database system and dispatch system can be done away with, and you will be right. There are many businesses that use a website to showcase their products and accept orders. The stock control and dispatch are done in more conventional ways. You should keep in mind that the preferred mode of payment by e-retail customers in India is cash on delivery, amounting to 75%.

Like all other systems, e-commerce too has its share of advantages and disadvantages. Let us look at some of them.

The first and foremost advantage for an e-commerce company is that there are no boundaries. You can reach out to customers, suppliers and partners globally. There is no additional capital investment when you move from a regional market to an international market. Information is kept in digitized form and not on paper, so you save on costs and on the amount of paper work. E-commerce induces simpler processes that are faster and more efficient thus enabling you to provide better customer service.

You need to take care of some technical aspects before they bring your e-commerce business crashing down. Improper implementation can lead to security, reliability and standards issues. Insufficient network bandwidth can become another issue. You may require special types of servers and software for smooth operations. Integration and compatibility issues also need to be thoroughly investigated and resolved. Besides these, you have the cost, time and quality of the e-commerce application to look into. You need to gain the trust of the customers and ensure the safety of their money and their privacy. You also need to educate your customers on how to use the internet and the e-commerce application and motivate them to use the internet even if it turns out to be expensive. Last but not the least is the lack of a physical product that the customer can touch and feel before purchase.

As an e-commerce enterprise you create an enormous impact on the environment and society as a whole. You are contributing to the global GO GREEN movement as your customers do not need to travel to visit your store thereby reducing the load on road traffic and pollution. You can provide products and services at a lower cost thus enabling less affluent people to aspire for prime and luxury items. You are providing services and products to people located in remote and inaccessible areas. You are supporting governments initiatives to bringing statutory and social services to the general public. Moreover your company is instrumental in the growth of other businesses and employment of many people. Other than your regular suppliers and their employees, there are other e-commerce businesses that provide various types of support to the customers visiting your store, like Paytm, product and price comparison sites, advertising agencies, product support services, accessory providers, ancillary business etc. We should not ignore the massive dispatch network that ensures the delivery of your products.

Startups are mainly concentrating on e-commerce due to the success and huge revenue figures achieved by the existing players in metro cities. Other players have trodden the same paths as the pioneers. It started with a Flipkart and is now flooded with Snapdeals and Shopclues and scores of others. It has now become “run-of-the-mill”, and many aspiring entrepreneurs are eyeing e-commerce as a tried and tested prospect.

Look for different options, look at different markets, but do not fall in the trap of “one-size-fits-all”, as Gaurav Saraf, Director of Epiphany Venture’s says:
*To reach Rs 100 crore in revenue, you must be present across the country
*Supply chain challenges are different in Bangalore and Gurgaon. You cannot replicate your model

Newcomers, especially e-grocers will find it difficult to get funding and at the same time they have to face tremendous competition from other e-commerce startups as well as B&M giants like Future Group who are exploring options to sell products online alongside their B&M stores. According to Kashyap Deora, President of FutureBazaar.com, We are doing pilots in 30 stores in Mumbai to check the feasibility of shipping online orders from the stores.

Vaibhav Goel, founder of FamilyKart accepts this challenge saying
*We have a small window of opportunity
*In a year we will have to be at a level where we can survive even if the big guns enter

I just remembered a quote by Leon C. Megginson .It is not the strongest or the most intelligent who will survive but those who can best manage change.


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