As featured in the Entrepreneur Magazine - August 12.
E-Commerce in India – From Boom to Gloom.
An entrepreneur shares his four major worries.
Do you know why you meet so many people called Vijay and Ravi? I am told that the super hit movie ‘Deewar’ (1975) inspired many parents to name their kids after the characters in the film.
In USA, it’s been documented that the most common baby names of 2010 are ‘Bella’ and ‘Edward’, named after the characters of the epic movie ‘Twilight’.
Nowadays, in the entrepreneur community, whenever I ask someone, “Dude, what are you doing?” The answer is almost always, “e-commerce”.
Now, I have no problems with e-commerce! For an Internet entrepreneur like me, the progression from bricks to clicks is natural and welcome. However, a few concerns in the process have begun to haunt me:
1. Buying a Zebra
Let’s assume that you want to buy a zebra (why not?!). Now, if you ask me for advice, I will ask you to go to a zebra farm, choose and get one of those beautiful animals home!
image courtesy - factzoo.com
The challenge you will have would be differentiating one zebra from another! Even though zebras are striped uniquely from each other (like finger prints), it’s very difficult to tell the difference between two zebras.
There is no comparable difference!
I just searched for online options to buy my favorite book, ‘Autobiography of a Yogi’. On the first page (google), I found eleven websites, selling the same book, at the same price, with the same delivery terms, etc.
The point I’m making?
There is no difference between the hundreds of e-commerce sites in India, and that is a big cause of worry.
Some of these entrepreneurs tell me they are building a ‘brand’ that consumers will be loyal to, but that’s bunk. Great companies become brands; expensively built brands don’t become great companies.
Suggestion - to succeed, each e-commerce business in India must have something unique to offer. They all can’t sell zebras and still pretend to be distinct.
2. Getting a free dinner
The Zodiac Grill – an up market and chic restaurant that was launched many years ago at the Taj Mahal hotel in Mumbai, had a menu, but without prices! The restaurant left the decision of how much to pay, on its patrons.
image courtesy - grandluxuryhotels.com
Now, the Zodiac Grill was being very clever.
It actually collected hard-to-solicit information on what refined diners were willing to pay for a very classy dining experience in India. Once they had enough data, they switched to a full-priced menu (err... really expensive) and became a huge success.
The Zodiac Grill served a free dinner that was not free after all!
As far as e-commerce sites go, the concept of ‘cash on delivery’ (COD) reminds me of Zodiac Grill’s free dinner experiment, but with a sad twist. That’s because data now indicates that almost 40% of e-commerce buyers are returning COD goods on flimsy reasons such as, “This is not what I wanted to buy…” and so on.
Forget paying for the food, they’re returning it after it comes to the table!
Other challenges include moneys by courier companies being pilfered, repeat visits to customers’ houses to conclude a delivery (thereby escalating costs), etc. COD could have been a nice way to get consumers to ‘try’ e-commerce, but not ‘the’ preferred payment engine!
Suggestion – get consumers to pay 50% advance when they buy online. That way their intent to buy will be proven and they will be around to collect their purchases and pay up the remaining sum!
3. The challenge of the Black Trousers
A few years ago, I happened to buy a pair of black trousers at a store. It turned out to be perfect! It had an amazing fall; it fitted me like a glove and even the color stayed true black after repeated washes.
image coutesy - ahfasion.com
A few months later, I went back to the store to buy another pair of black trousers, but was disappointed to be told that they had stopped producing that particular range. The store manager tried selling me the new range, but I just didn’t get the same ‘wow’ feeling when I tried it on.
I left the store without buying anything.
In the years to come, I never managed to lay my hands on the ‘perfect’ pair of black trousers. The lesson I learnt was that when you get something great, buy it in multiples and keep them for later.
Now, it seems the same lesson is being applied in a rather perverse way by Venture Capital (VC) firms who are blindly investing in multiple e-commerce firms in India, all of whom are in the same line of business!
When I asked a VC “Why?” … he said, “Alok, we need a couple of e-commerce sites in our portfolio. It’s just making sure that we have covered the industry. Sure we know that many of these guys will fail. But we just need to have e-commerce in the closet.
Suggestion – entrepreneurs should make sure that they are not those Black Trousers that VCs are buying blindly, just to stock up! The fallout is that you become one amongst the many, that will never receive special care and attention (follow up rounds of investments, etc) when you need it!
4. Entrepreneur Hara-Kiri
In Japan, Samurai soldiers killed themselves in a ritual called Hara-kiri rather than compromising their honor.
The big worry I see today is that a large swathe of Indian digital entrepreneurs have started their first ventures as an e-commerce company.
Some of these entrepreneurs are naive; some have been misled, some even bribed by easy money into doing this. I just hope that when massive consolidation happens and lots of e-commerce companies die and perish, these young entrepreneurs don’t give up or slink into oblivion.
We need an army of business Samurais (entrepreneurs) in India, so we can’t afford to let them do Hara-kiri!
Suggestion – entrepreneurs must not replicate what’s already been done. There are so many business opportunities available, so why settle for starting the 233rd e-commerce site in the country?
lot of harsh reality.
in ecommerce i see people doing all kind of cash buring crazy stuff once they land VC money.
but may be we will see ecom 2.0 and 3.0 in India which make more sense like amazon and ebay.
one of the best suggestions i learned today
Made for a great read! "Great companies become brands; expensively built brands don’t become great companies." sums it up!
This is very insightful for all the entrepreneurs who are planning/ already in the e-commerce industry! Thanks for sharing this article.
The real reason behind COD is that Indian consumers are afraid of giving their card details online.So whether its 10% or 50% or 100% means the same thing. Card details are online and therefore, in the consumers mind, at risk.
Strengthening their security systems is something websites should work on and use it as a marketing tool to differentiate..
The banks along with the websites should work on changing the consumers perspective on the safety of online payments, the problem needs to be addressed at the roots of the issue....
Also, there is a factor called black money!
I simply love the way you put forth your words. Another great read :)
No entrepreneur does a mee too ecommerce ..those guys are businessman....they go where the money is...value or creativity is alien and meaningless to them...
Very Interesting post. aligns perfectly with what I wrote some time ago http://pranav.tumblr.com/post/27662395818/ecommerce-in-india-after-...
Gr8 Post, True Insight of eCommerce.
I was just talking to one of the managers from Blue Dart who visited our office last week,he informed me that they are getting approximately ten calls a day from start ups to open the account with Blue Dart.He said and lot of them already closing down in six months to a years time.
Really ? i think they deal with Bluedart because of the next day delivery option. but at the same time they are also worried about the costing.. Rejected orders, Delivery Failure Orders etc etc
I think may be some one has to work out on Speed Post option.. any one with this experience?