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eCommerce: Do you know the seller’s story?

To Online customers,

My name is Gurudatt. I have a business in Home appliances.

We are online sellers with Flipkart, Amazon, Snapdeal, Paytm, Shopclues and Ebay.

This is my experience as an online seller addressed to all the online buyers in India.

We sell Home appliance products of all major brands like Milton, Cello, Nayasa, Signoraware, Prestige, Tupperware, etc.

As you are aware, all the above mentioned companies have moved from “Inventory based” model to “Marketplace” model. “Marketplace” model means the eCommerce companies do not own any inventory, they enable sellers and buyers to connect with each other and transact.

We know that the eCommerce companies have changed the way we do commerce in India. They offer discounts, wide product selection across all categories, faster delivery, customer care support, user friendly return policies, cancellation options, product exchanges and thus made our lives easy. We can sit in our home or office and order anything we want and pay easily with credit cards, debit cards or cash on delivery.

So half a billion people are excited about eCommerce in India and this number is growing.

I will explain the other part of it – from a seller’s perspective. I will explain the hassles we face to keep you happy.

I was excited when I decided that I would sell home appliance products online through eCommerce portals. I made the list of products I wanted to sell and uploaded my catalog on the websites. On day 1, I got 11 orders. Who could stop me now? I was on a journey of infinite miles.

The initial days were good as I was just focusing on number of orders I got per day. I reached 10, 15, 30, 50 orders per day and I started dreaming of becoming a millionaire soon. Dreams are great but I was not keeping the accounts of the sales properly. One day, my chartered accountant called to ask all sales and purchase details to file monthly returns, then I looked at all my bills, bank account statements, invoices, pending payments from eCommerce websites and could not find a logic or proper cashflow in my accounts. I started digging my invoices and got to know that I was losing more money on product cancellations, returns, logistics, and marketplace commissions than I expected.

On an average the marketplaces charge:

Marketplace commission – 15%
Domestic shipping per Kg – Rs 30
National shipping per Kg – Rs 45.
Fixed commission per order – Rs 10 ( for orders above Rs 250 )

Along with these, I incurred huge losses in

*Customers using products for a week and sending them back.
*Product damages (they tell us we can claim for damages, but they never do). 
*Product returns (they come in a condition, where we cannot resend to other new orders. Most of the covers/corrugated boxes of brands are damaged.)
*Reverse logistics charges (When you cancel, the seller pays the return logistics charges) 
*Marketplace commissions (When you cancel, we the sellers are still charged the commission).
*Product Cancellation (Paytm charges a commission of 15% + logistics fee of Rs 45, when you order and cancel in minutes. See the logic, the customer cancelled it by choice and order not yet shipped. But still seller has to pay commissions).

Please note that the average return rate for eCommerce in India is 30 %.

Our operational cost:

* Office Rent.
* Admin costs (I have 1 person for packing apart from me )
* Packing material costs (on avg Rs 15 per order package ).
* Transportation cost incurred for product purchases.

I do not have a retail shop, so my costs are minimum. But can you imagine the above expenses if I was paying Rs 1 lakh rent for my shop?

Logistics Issues:

* The pickup guys do not come regularly. If they skip pickups for 1 day, 30 % of our customers cancel the orders. And no company takes the responsibility. They tell you, “vehicle was not available”.
* We have to call the pickup guys every day and tell them the number of orders and whether they should send a van or bike. Amazon and Flipkart does a good job here by making the process automated. But Ecom, Bluedart, Delhivery teams are way behind in communications.

Payments:

* Shopclues take 30 days to settle the payments (so we quit selling there).
* Flipkart -15 days for settlements after the product reaches customer.
* Amazon – 10 days for settlements after the product reaches customer.
* Paytm – 8 days for settlements after the product reaches customer.

Sellers are made to compete for pricing. I have seen sellers playing the number game rather than serving the customer. Sellers are left with very little or nothing at the end. You will ask, why are sellers not complaining? I do not know. But most retailers who started selling online, gave up after 2 to 3 months, couldn’t communicate with anybody. They either get satisfied with offline sales or think it’s not for them.

Every day thousands of sellers are added with no knowledge of the rules of the game. The companies talk big numbers and sign them up. But the companies never call and ask you how you are doing or what problems are you facing with business or how they can help to grow our business…?

Taxation:

I bet 99.999% of chartered accountants do not know how eCommerce taxation works. Not to blame them, but every company generates invoices in different formats and when we sit for filing our returns, it’s pure headache.

Marketplace?

The eCommerce companies have total control on our inventory. They can block us anytime, make our listings inactive anytime, can damage our orders in transit, delay our payments, cut huge commissions, cut buyer claimed refunds without giving any notification.

Dear Online Buyers,

Who is paying for your offers or discounts? Please note, that to change your online purchasing behavior, habits or addictions, eCommerce companies are just racing to capture the market share to get more online buyers, increase their buying trends, capture all your shopping data to raise the next billion dollars from venture funds.

There is nothing wrong in eCommerce companies modelling their business and pricing the sellers with such policies. But in the long run, this is a biased business model, where sellers are screwed to make customers happy. The discounts and offers do not go a long way and the customer expectations are increasing day by day. To meet those expectations sellers are giving up their margins and closing businesses.

I am still optimistic about my business and not quitting my journey. It’s a start. I am here to build not to fall.

Hope your support stays with all online sellers to serve you.

Thanks

Gurudatt

Founder & CEO 

Smarthomez

Twitter handle: g_datt

Awarded the

“RodinStar” Post 

of the week!!

 

*****

 

EDITOR’S NOTE: JUNE 15, 2015

 

Rodinhooder Suresh, an experienced online seller has posted a rejoinder to this post.

 

*********

First Published on: Jun 10, 2015

 

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71 Comments

  1. Profile photo of asha chaudhry

    WHOA!!!!

    what a perspective gurudatt. i’m not such a huge ecom buyer and have never returned anything. but i can only begin to fathom what an ecom seller goes through 🙁

    thank you for sharing your side of the story. i sincerely hope this post serves as an eye opener to indian online buyers; perhaps they will be a bit more considerate before cancelling/returning??

    ps: i didn’t understand the logic behind this – it seems pretty unfair! ” *Product Cancellation (Paytm charges a commission of 15% + logistics fee of Rs 45, when you order and cancel in minutes. See the logic, the customer cancelled it by choice and order not yet shipped. But still seller has to pay commissions).”

    hats off to your perseverance!

    quick academic q – have the number of orders per day increased from 50 now? or has the number gone down owing to the mad rush of online sellers? (i realise the number of buyers has also gone up incredibly 🙂

    MAY THE FORCE BE WITH YOU!  

  2. Profile photo of Rishi

    Thanks for writing this in detail Gurudatt.  If I may ask, overall, in your experience who is doing a better job (Amazon, FK, or some other) from seller management (processes, technology, communication etc.) perspective?

  3. Profile photo of Ananta Kumar Roy

    Amazing insight Gurudatt!!! Got to think twice now before cancelling orders just for fun ;). But, this also provides for an opportunity for someone to serve as the connecting link between Sellers and Ecoms. Sellers too need a single platform to meet their needs just like the customers.After all, Sellers are like customers to Ecoms. 

  4. Profile photo of Karan Setia

    I am going to start selling online in a few days, and this has got me thinking all over again. Added to “Things I didn’t keep in mind” list. Can you tell me if the orders have increased over the time or are the same ? Around 40-50per day ??

  5. Profile photo of Devendra Sarda

    Very well written.Thanks Gurudutt for sharing.

    I am sure, we have considered most of the aspects related to Shopkeeper in mind while designing our (to be launched soon)model.

  6. Profile photo of Preetinder

    Thank you Gurudatt. An eye opener for sellers and will help many who are thinking of going into same path.

  7. Profile photo of Divya Sharma Dixit

    This was one real eye opening article. What I can see is that Marketplaces have become consumer biased. Consumer satisfaction is one thing but this seems like unfair for the sellers. Aren’t there any ways to regulate policies?

    Next time when I will be buying a 1000 INR thing for 400, I will definitely be reminded of this article

  8. Profile photo of Ranjit Patel

    My friend it is really a eye opening articles

  9. Profile photo of Natwar Maheshwari

    Hey Gurudatt,

    This is an amazing post. I love how you showed emotions but backed every statement with data. Truly remarkable. 

    I would love to talk to you more about this. Let me know if you are interested. 

    PS: Not gonna sell you anything 😉 I founded Around.io and all I do is work with online sellers 🙂 

  10. Profile photo of Gopal Sharma

    whoa – an eye opener. Guess it to be one of the factor ecomm hasnt replaced local in developed / matured geographies.

  11. Profile photo of S.Vinoth Kumar

    You hit the bulls eye, im also a market place seller, but till date i have never gave even a single rupee discount on my products, as we validate things in business its sellers responsibility to understand things and sell accordingly. To my knowledge, of course there are issues in market places, but its growing at good pace. The major problem is with sellers who sell passively to generate additional income, secondly unethical behavior of customers

  12. Profile photo of asha chaudhry

    gurudatt,

    alok shared your post over his fb & twitter. do follow the fb thread and read the comments!

    https://www.facebook.com/rodinhood/posts/10155876668095495

  13. Profile photo of neeraj shukla

    awesome to read. Thanks for sharing.

    Yes, even I actually shop based only on the price as long as the seller has decent reviews. I think there should be some way to create your brand as a seller, other than ‘review rating’, but I am unaware of that. What is your thought on how can a seller differentiate himself on the marketplace?

    Keep the story up!

  14. Profile photo of Sanchita Dutta

    Wow Gurudatt,

    forced me to pen down after a long time here on this forum. couldn’t resist wanting to write that you have hammered the nail right into the head on the marketplace. i Would STRONGLY suggest that you submit this article to ALL BLOGGING PLATFORMS like your-story, rediff, sify etc.

    The reason is more and more people need to know what goes behind the scene. We have undergone these issues having been in the business initially with ebay and now with all platforms mentioned and have exited most branded segments despite manufacturer giving upto 50% margin on MRP…

    Reason, these NEW AGE SHARKS keep pouncing on every pound of flesh they can lay their hands on. With no mercy or remorse or care for sellers. Surely this wont go for long. Very right you have put acorss that new sellers will realise what they have gotten into after a couple of weeks or months. the ad of Aamir khan is very cute, unfortunately we are paying through our blood and sweat and not the company or the buyers.

    The most lecherous of the lot is snapdeal. the segment we deal in, they charge, 22% upfront, 25 to 50 rupees for every transaction, shipping, return shipping plus commission, if buyer returns item. Others are not far behind.

    As a result we end up selling items for 500 rupees what we buy for 100. No regrets!!! Buyers as a whole(unfortunately though since its only a few rogue fishes in the pond) you deserve it for playing around with rules. Markeplaces, your time is near. Trust me, I have already seen the transformation at micro level, just a matter of time before it happens on the big screen. as for new investments in these companies, let fools continue to play ‘Bigger Fool Game’. Who cares

    As a result, we actually decided to start selling on our own platforms http://www.indiacod.com, though it is still at a stage away from tipping point in terms of sales and impact, we are happy with the progress we have made and continue to invest in it.

    Loved this article.. Best wishes

    Sanchita, Hometrepreneur, http://www.indiacod.com

  15. Profile photo of Crystal D'souza

    Wow. This is something we have to keep in mind before we start selling. I knew it was a hassle, but this makes it even more so. Has the number of orders increased? Would you continue selling? 

  16. Profile photo of Sanchita Dutta

    @asha,

    Logic, well there is none, these people are worse than sharks. u need to see their terms to believe it, im sure if someone makes their commission terms public, it will be a PR Disaster like what Maggi has done for Nestle.

    example, in one site, a buyer orders and cancels, the system shows it, but company still says we have ship the item and it will be returned and thereby making us pay both side shipping charges. Most ridiculous rule. Guess someone could not sort out the issue at the backend and hence decided to milk this also at the expense of sellers.

    Another example: A buyer buys the item, uses it, then decides to return the item saying we wants replacement, the company QUIETLY adds the replacement order as a Fresh Order in our backend. And we like fools would ship the item twice, and receiving payment for one, getting an unsaleable item back (god knows when) and charged THREE Times Shipping, first item both ways and second item one way AND TWO TIMES COMMISSION for Both the times shipment. ALL QUIETLY. Company literally has no separate coloumn or section for this. As the author brought out correclty, Foolish new Sellers will realise with time what a great mess they have fallen into and by the time they realise, their lakhs of rupees will be with them, and then these sellers will keep getting bled either to get that money back or continue to do business at such peril.

    Worst Part: Sellers too have become ruthless and have started hiking prices thereby bringing DOWN the BIGGEST USP of e-commerce, low prices. This has happened in unbranded items, will soon happen in branded items.

    And if u still see new sellers selling at ridiculously low prices, their time will come when they reach our or this author’s state

    regds

  17. Profile photo of Gurudatt Nadiger

    Yes Asha, We are processing on an avg 80 orders per day now and its growing. No dearth of orders in ecommerce.. We will grow also..Thanks for all your response..

  18. Profile photo of Gurudatt Nadiger

    Hi Rishi, Amazon -> Flipkart -> Paytm -> Snapdeal -> Shopclues -> Ebay..This is the rank you can expect for overall technology, operations, fulfillments and payments. But no one platform is a clear leader. Let me know if you need any more information ?

  19. Profile photo of Gurudatt Nadiger

    Hi Ananta, Yes sellers need one uniform interface to manage catalog, order processing, payments, etc. Few startups are working in this domain.

  20. Profile photo of Gurudatt Nadiger

    Hi Karan, yes the orders have increased. We process close to 200 orders during promotions otherwise 80 orders per day. Let me know if you need any more information ?

  21. Profile photo of Gurudatt Nadiger

    Welcome

  22. Profile photo of Gurudatt Nadiger

    Hi Divya, we need proper policies in place to educate customers that they can’t expect offers/discounts all the time. We are killing market economics here. Its should be competitive in all dimensions. This education should set right attitudes of shopping in customer minds. Thanks for your time.

  23. Profile photo of Gurudatt Nadiger

    Thanks Ranjit

  24. Profile photo of Gurudatt Nadiger

    Hi Natwar, 

    We can definitely talk. Give me your contact number and i will call.

    Thanks

  25. Profile photo of Gurudatt Nadiger

    Hi Gopal, ecommerce is really good. But the way it is done is biased towards sellers. They need wider vision of building a healthy ecosystem / competitive markets and keep everyone’s spirit alive in long run. 

  26. Profile photo of Gurudatt Nadiger

    Good job Vinoth..keep continuing your work… all the best.

  27. Profile photo of Gurudatt Nadiger

    Hi Neeraj, you have limited access to create brand in marketplaces. Most of the customers buy whereever they find cheap. Amazon does a great job here. But the rest ecom marketplaces are blank on this. 

    The way to difference is to sell those products where you have lesser competition, faster delivery, fulfilling right products as described. 

  28. Profile photo of Gurudatt Nadiger

    Hi Sanchita, good to see your response. I will submit this blog to all the forums as i have written this to educate as much people as i can. Its good to see that you have put your experience and great to see that you have come up with your own portal. All the best. Let it be small, but we are with you. Keep doing good job. All the best.

  29. Profile photo of Gurudatt Nadiger

    Hi Crystal, Yes we are processing on an avg 80 orders per day. Yes we continue to sell also. The issues are there and so we sell.

  30. Profile photo of Balachandar Muruganantham

    sad to hear it. i am also a independent seller running my online book store at chennaishopping.com . all these marketplaces approached us for listing.

    As a business owner, i tried to calculated the net profit after all the expenses before even signing up. most of the marketplaces charge heavy fees by combining the logistics into it.

    these marketplaces are suitable for direct manufacturers. and not sellers or resellers for sure.

    Gurudatt, you should understand that these marketplaces are not here for charity. i would say you did not execute well in this which lead to loss. 

    As a business owner, we should work out every P&L before tying up with these MNC’s.

    remember, its our money. it is very easy for us to say that we are sellers of famous brands.

    but at the end, if we don’t compute profit, it is a loss for us. not for them. hope you understood.

    As far as i have heard, most marketplaces are running to sellers just to woo high number of listings. thats how, amazon became largest online store by combining products from amazon.com and from sellers in india.

    hope my 2 paise tip helps.

  31. Profile photo of Rishi

    Thanks Gurudatt. No questions for now. Just wanted to get perspective from someone who is in to it; the same order was my guess. Thanks again for writing such an objective piece. Best wishes.

  32. Profile photo of Ishani

    This reminds me of an article which talked about “the other dubai” i.e. the plight of workers working  in Dubai. from outside it Dubai look attractive to many people who wish to take up jobs there and then are caught in the inhumane working conditions etc… Similarly (not saying that sellers are workers), online sales also looks attractive to many sellers but soon they are caught in the strongholds of the marketplaces!

    Glad that Gurudatt posted it for benefit of all potential sellers on ecommerce!

  33. Profile photo of Hardika Patoliya

    I make handcrafted jwelleries and average price of the items is around 150 rs. So I found it impractical to sell those through Flipkart, Snapdeal, Craftville, Fleaffairs. As they charge 16% commission, 50rs for delivery, max 2 days time limit, lot of paper work, and the bad platform. Compared to all of them, I found etsy.com very fast and simple. I have my own store at etsy at http://bit.ly/pHDesigns and I am looking for good options similar to etsy.com for Indian Market. Please suggest if anyone of you have experience of such good platform for Indian Market. 

  34. Profile photo of asha chaudhry

    hardika – natwar above is a good person to ask. (yes etsy rocks!)

    also pls ping tanya – http://therodinhoods.com/forum/topics/ask-tanya-about-online-selling she should be able to guide you. ps: have you tried creating a facebook store?

  35. Profile photo of Natwar Maheshwari

    Hey Hardika,

    Etsy is pretty awesome. There are some basic things that needs to be done in order to be successful on Etsy, but after that, its one of the best platforms for sellers that I know.

    Let me know if you have any questions about that. 

    Best

    Natwar

  36. Profile photo of Ramesh Chandran

    Hey Guru, Thank you so much for the insights. I have toying with the Idea of getting started with my hand crafted products on these sites. But your experiences is quite scary and telling me step back and rethink. Can I call you or drop you a line please. My mail is atthennow@gmail.com.

  37. Profile photo of Ramesh Chandran

    Hey Natwar,

    I work with Traditional Craft and some of friends have suggested Etsy to me. I am getting prepared in terms of Packaging and shoot what are the basic things that one need to do. I am giving you my facebook link for you to see and help

    https://www.facebook.com/pages/Then-Now/202299306461299?ref=aymt_homepage_panel

    Regards

  38. Profile photo of Anirudh B Balotiaa

    This is an eye-opener! This should be front page of Economic Times!

    With such numbers, how can anyone survive, its definitely not sustainable! 

    Even I have never returned just on my whims and fancies…we gotta respect all stakeholders as that’s the only way we all can benefit in the longer run! 

    On question on this –  

    “One day, my charted accountant called to ask all sales and purchase details to file monthly returns, then I looked at all my bills, bank account statements, invoices, pending payments from eCommerce websites and could not find a logic or proper cashflow in my accounts. I started digging my invoices and got to know that I was losing more money on product cancellations, returns, logistics, and marketplace commissions than I expected.”

    Were you not looking into finances before the CA asked for this and all things came out? How are you handling your finances? Are the dashboard provided by each marketplace effective? 

    Thanks for the share Gurudatt. 

  39. Profile photo of Vinod Das

    Hi Hardika. You could look at going on http://www.craftfurnish.com a relatively new marketplace. They have earned a reputation for looking after supplier/vendor interests. They can be reached on 180030020980.

  40. Profile photo of Vinod Das

    Hi Ramesh. You could look at going on http://www.craftfurnish.com a relatively new marketplace. They have earned a reputation for looking after supplier/vendor interests. They can be reached on 180030020980.

  41. Profile photo of Ramesh Chandran

    Hi Hardik,

    Try http://www.japypore.com…Owner is Puneet Chawla . Have been dealing with them. Good folks.

    Indianroots.com…This is a NDTV promoted website. they approached us , Got scared by an 18 page agreement. Sent back one drafted by myself and they are still checking with their legal department…lol 

    Gaatha.com…wrote to them and spoke to the co-founder…no response. Basically lazy fellows I guess since they seem  to have been seed funded by GOI. Need help drop in a mail at atthennow@gmail.com 

    Cheers

  42. Profile photo of yuvraj wadhwani

    Gurudatt, 

    I feel your pain. Let me clarify some policies for you. 

    On Snapdeal, if the buyer does not accept a COD product and the product is returned, there is no charge to the seller. (Logistics, payment).

    If there is any kind of complaint on the product (user not happy, does not want anymore, size issue, etc), then in most cases seller bears all costs, forward and reverse logistics and commissions. Exceptions to this are size issue and change of mind orders. There you are not charged.

    For returns, I have instructed my team to open all return shipments while being recorded only. If there is any problem with the product, Snapdeal will give you 5 days to raise a complaint regarding that. Include the sub-order number and video/pictures. You will be refunded and ratings and payments reversed. You will have to track returns manually as of now.

    Even with issues like size, change of mind, I always record the RTO shipment opening. This becomes your proof and will save hassles later on. Most of the complaints I get are bogus so this becomes essential.

    On Flipkart, follow the same process but here you have 14 days to initiate an SPF claim (seller protection fund). Even a small damage will be covered under this. Even if outer packaging is damaged then too the SPF claim is valid. Here you will get 100 refund.

    I am not selling on Amazon currently so don’t know about policy there. But buyers there are ruthless as anywhere.

    I have streamlined my process of doing this by using free softwares. If you need any help with that, let me know.

  43. Profile photo of Gurudatt Nadiger

    Hi Ramesh, please check your mail. I have shared my contact number

  44. Profile photo of Gurudatt Nadiger

    Hi Anirudh, regarding my finances: I am keeping my accounts updated at my end, but never analysed the numbers before my CA called me. He asked me the details more than i had recorded. So i have to see all my invoices in detail and give it to him. 

    The dashbords provided by marketplaces have limitations. We have to manage data from multiple marketplaces and that too the invoices and taxes are markedup in different ways. Its our job to keep them uniform to keep our balance sheets healthy.

  45. Profile photo of asha chaudhry

    wow yuvraj – you should write a post about this!!

  46. Profile photo of Abhik Prasad

    Ok, I am not really sure what the brouhaha is about…it’s business at the end of the day and no one is forcing you to sell on a particular platform with a gun to your head. If you don’t like marketplace’s policies, why are you still on it ?

    Am I missing something…I mean how will it change a consumer’s behavior by learning what the seller’s go through ?

    Or was this meant to warn other sellers ?

  47. Profile photo of yuvraj wadhwani

    consider it done! I’ll write an in depth guide to this.

    PS: I just submitted a detailed post about my review about KartRocket, please go through it and approve if you like it. Its a monster piece.

  48. Profile photo of yuvraj wadhwani

    I think the point he is making is that marketplaces are ruthless and buyers are ruthless as well. On top of that, the margins are cut throat. This would serve as brain food for sellers just starting out or people who are wanting to start selling online.

  49. Profile photo of Haribabu Thilakar

    Indianroots – avoid at all costs. My wife had a brief experience selling on their site last year and it was disaster all round – unable to modify listings, unable to update inventory, inaccurate orders,poor accounting, horrible communication. I think they still owe her a few thousand rupees.

    The sense we got was that the people they’ve hired to manage and run it are neither competent nor have any stake in making it work.

  50. Profile photo of asha chaudhry

    hi gurudatt,

    i messed the bottom part of your post!

    hope you don’t mind 🙂

  51. Profile photo of Ramesh Chandran

    Thanks Vinod…Will do so. Regards

  52. Profile photo of Ramesh Chandran

    eagerly await the piece.

  53. Profile photo of Abhik Prasad

    Yep, it will definitely help potential future sellers get a reality check and get off the rose tinted glasses.

    However, I don’t quite agree that buyers are ruthless… some of them will be unethical but most of them are looking for a good deal to save money – It’s human nature 101 all over the world.

    And the buyers flocked to the online marketplace in the first place because of good discounts….Now that you have a steady stream of buyers habituated to discount pricing, one needs to figure out how to serve them in a sustainable manner instead of blaming the marketplaces…after all they also need to make money.

  54. Profile photo of Ramesh Chandran

    HI Yuvraj,

    I was contemplating tying up with KartRocket. I will now wait for the review before talking to them.

  55. Profile photo of yuvraj wadhwani

    Ramesh, the review is live already.. check it out here http://therodinhoods.com/forum/topics/kartrocket-review-from-a-long-time-customer-1

  56. Profile photo of yuvraj wadhwani

    Totally agree there. There can be both kinds of customers. I myself have never returned anything bought online but my wife does return many things all for legit reasons and in original condition of course. 🙂

  57. Profile photo of Suresh Mansharamani

    Dear Gurudatt

    I have addresses all the issues you have raised about selling on market places in my seperate wrtiteup

    http://therodinhoods.com/forum/topics/ecommerce-marketplaces-a-curs

    I am going to copy paste here also. There is a lot of positive side to it. Hope it will help.

    eCommerce Marketplaces: A Curse Or An Opportunity?

    Well I am writing this separate blog inspired by the recent story by Gurudatt Nadiger. This is in answer to all the points he has raised. I will try to give solutions to each problem he has mentioned and will also add this in the comments on his post.

    One of my businesses vertical sells perfumes on most of the market places ever since they started in India. Here is my take based on my experience of selling on these marketplaces.

    There is famous quote by Ron White “I believe that if life gives you lemons, you should make lemonade… And try to find somebody whose life has given them vodka, and have a party”

    In my opinion these marketplaces are a great opportunity for SME’s. It’s a 24 hour mall with huge amount of traffic from pan India. You get a shop here for ZERO, yes zero with big Z upfront cost like huge rentals and interiors. And on top of it, these high traffic malls will ask you for your profile and if you are not a big brand they will REJECT you. These market places are evolving and I see them making great efforts to solve these issues.

    What Gurudatt has shared is true; in fact every word is true. But entreprenuership is all about finding solutions and win. We all face obstacles. The world outside is full of dangers. Eastman Kodak a 130 years old company is not around anymore. Lehman Brothers is another similar story.

    Coming to the points raised by Gurudatt; here are some practical solutions applied by us:

    On an average the marketplaces charge…

    It’s perfectly alright if they charge 10-15% commission and shipping charges. There is nothing wrong with it. Your marketing cost is zero, rental is zero. We are doing crores worth of business from these marketplaces with just 3 employees and negligible rental. And you pay when you sell, nothing upfront.

    COD Returns And Used items Returns

    Well this is a huge problem with Indian eCommerce. You are saying your returns are 30%. In our case it’s 10%, max 15% rarely. To solve this problem we have transferred our inventory to their warehouse.  Amazon calls it “Fulfilled by Amazon”, Flipkart Calls it “Flipkart advantage” and on Snapdeal it’s “VOI”. All the returns are their headache. We save on manpower, wastage of packaging, space and employee cost. Another thing you have mentioned used items returns this is negligible and Flipkart and Amazon are very quick to settle those claims SD takes little time but they settle these claims too. We don’t lose any money on account of this.

     

     Logistics Issues:

    Yes sometimes there are issues but not much. It doesn’t hurt our business at all and mostly are routine in nature. May be you faced some major problems but with us we do not have any issues here.

    Payments:

    Don’t deal with ShopClues if the payment terms don’t work for you. We only deal with Flipkart, Amazon and Snapdeal and we get paid max in 10 to 15 days. In fact I love this part of the business. You don’t have to call anybody in accounts section or follow up. Money gets transferred in your account three times a week. One of my friends, who sells ethnic wear in the offline market to boutiques and retailers gets paid in 4 to 6 months.

    Recently we got two calls – one from Flipkart that they have tied up with Bajaj Finserv and will provide unsecured loans against sales. Second was from Capital Float on same lines for FK, SD and Amazon. If this works out we can double our sales in few months.

    Competition

    You are saying sellers are made to compete on prices. Yes sellers are competing on prices but they are not forced to compete on prices. The competition is everywhere. In our b2b textiles business we have competition from other vendors and countries like Bangladesh and China. We lose some good orders sometimes because of competition. But it’s part of every business. Apple is charging full premium for their products but they have competition too from Samsung and other brands. We have to find our own niche and beat the competition.

    Taxation:

    I think I will leave it to my CA to handle and we haven’t faced any issue with this so far.

    Marketplace

    Yes they can block you any time if there are many complaints about your products and service. On the other hand if you are a good seller they respect you more and discuss with you ways to increase sales. I am sure soon they will shortlist good sellers and work with them for the long term.

    Online Buyers

    Yes they are spoiled right now with discounts, faster deliveries and ‘no questions asked’ return policies. I am personally happy about it and love shopping online. Few customers who are cheats by nature like to return used products or sometimes they replace the expansive item with some cheap item and return. But these are very few and we get our claims on these items very fast.

    Bottom line

    Gurudatt your problem is you are selling branded items like Milton and all. How do you compete on pricing with sellers who are not paying vat and may be some seller comes up with fakes. You will never be able to make money on these products on market places. GET OUT OF IT AS FAST AS YOU CAN. Another idea is to combine these items with some freebees. Be creative just don’t compete only on pricing.

    It’s a great opportunity for SMEs. The only only thing is you got to be a manufacturer or find a friend who is a manufacturer and if you can find an item where there is not much competition your life is made. One my young friend who makes meditation chairs and some other unique accessories is growing his business on these marketplaces and earning good money. He always thanks me for introducing him to these marketplaces and guiding him. You should have minimum 50% or more gross profit then all these headaches will not be headaches because you will sell so much which is otherwise impossible to do offline.

    I hope this helps.

    I’m on twitter @PerfumesCrush 

  58. Profile photo of JAINEEL AGA

    This is in fact an extremely valuable post – so thanks Gurudutt for being transparent about something you know only when you are on the “inside”, and running your own company. I also want to thank Suresh for BEING SPOT ON and actually giving the answer to many budding entrepreneurs for something many of us have realized through course of our startup experience. I am going to mention some additional points below:

    • Selling 50 pieces @ INR 100 is better than selling 100 piece @ INR 50 –  Feels like a no brainer? Ask Gurudutt why has he not cut down on his discounting inspite of poor unit economics? What is the compulsion to continue getting “leeched?” As an ecommerce operator, I know that Guru probably has a very solid reason to do so – Compulsion to drive Volumes maybe aimed at Getting High Inventory Turnover even at lower margin which takes you to my next point

    • Dead Inventory Will Kill you So Think through what Vertical You are Selling One reason why a seller probably continues to compromise margins for volume is the need to roll over old inventory in an industry which has high obsolescence – Have you ever seen the pricing of a consumer electronics with the same specs go up in time? So while many of you may scoff at a sellers “Greed” to continue giving discounts at lower margins, please understand that if his inventory of this season does not move – he will be stuck with it this dead inventory whose value depletes with time and simultaneously blocks Cash  (Rem Finance101  – Cash is King)

    • The Marketplace Conundrum: You love them because they bring you orders, you hate them cause its turnover with little profit. So what do you do? You will need to CREATE a BRAND. Let your BRAND resonate with some VALUE Proposition beyond Pricing alone as a value proposition will be easy on volume but very tough on sustainability cause there is ALWAYS a cheaper options – ALWAYS!  

    • Online Myth Busted: If anyone believes that doing a business online is cheaper than offline, they need to give it a second thought. The marketing and logistics as % of revenue eat away >30% of your margin and hence as Suresh said, either manufacture or resell a product which has > 50% Gross Margin to be able to be sustainable in the long run. Most bootstrapped entrepreneurs will not have millions to burn and sustain losses and hence be cognizant of this reality in evaluation of which online business you want to get into. Reselling a commoditised product is probably going to hurt you the most – 1) No Differentiation hence no Pricing Power means erosion of margins

    At Planet Superheroes we are trying to implement some of these lessons but yes its a difficult business! Feel free to connect with me to exchange notes on Marketing / Logistics or even Product Differentiation

  59. Profile photo of Puneet Nirogam Aggarwal

    Natwar – its been a long time since we spoke. 
    Let’s talk. I also need help. 

  60. Profile photo of chetan shah

    Thank you Gurudatt for such a insightful details about most important side of entire value chain of Ecomm biz. Most of the time when we as investors or as customers attain any conferences or events no one tells us whats true picture is and how it works. Small question in logistics side whats your view in terms of their preparedness and how online retailers like Flipkart or Amazon is working on that. 

    thank you once again.

  61. Profile photo of Naveen Bachwani

    Thanks for taking the time to share this, Gurudatt.

    I also read Suresh’s rejoinder, and agree with him on the key issues:

    Yes, it sure helps to have a “platform” that takes away the stress of upfront costs and rents. But that cannot be a substitute for good old business practices. 

    It also helps to hear the “seller’s perspective” on the challenges they face.

  62. Profile photo of Ramesh Chandran

    Hi Natwar,

    What are the basics that one needs to do get on with Etsy. I would also be grateful if you could let me know the accounting process one needs to follow.My mail id is atthennow@gmail.com

  63. Profile photo of Suhas

    Hi Gurudatt !

    This is quite an insightful article. Vast majority of shoppers do not have any idea on the several pain points that online retailer undergoes. suhas katti

  64. Profile photo of Natwar Maheshwari

    Hey Ramesh,

    Lets get on a call and I will be happy to walk you through all the basic stuff 🙂 Email me at natwar@around.io 🙂 

    Best

  65. Profile photo of Natwar Maheshwari

    It has indeed been a while 🙂 You have my number, its talk tomorrow. or let me know when you are free and I ll call.

    Best

  66. Profile photo of Shalini

    OMG!! Honestly although i always shopped thinking if it doesn’t work i will return it but thankfully since i seldom buy anything beyond grocery and diapers online, i never ran into a situation where i needed to return and I understood today that that is just 1 part of the pain that a seller probably is going through.

    I seriously feel your post deserves to be shared with shopoholics who are constantly buying, returning for no reasons.

    This is a typical case of BIG startups having it their way 🙁 SAD very sad.

    Hats off to your gut and perseverance.

    Good luck!

  67. Profile photo of Gaurang Agrawal

    This is super brilliant. Thanks for sharing this awesome piece of wisdom :))

  68. Profile photo of Tejesh Nandyala

    Hi Gurudatt,

    Please try the below marketplace

    http://www.shoppezo.com

    It is extremely good. One biggest feature is that the return policy is very stringent. we wont accept unless there is manufacturing defect. it is backedup by the group of funders. And all the payment terms are automated with great marketing tools that can be used

  69. Profile photo of Sanjay Mulchandani

    I wonder whether when Jack Ma says that Alibaba is an e commerce enabler in China and that He is there to help the small guys,does He also mean it in spirit or is it only in letter? My graduation in pharmacy tells me that except drug categories like Schedule G,H,X and the likes(you can google these,simple explanation on google), Biotech products and perishable food,practically anything can be sold. However,your experience tells me it is a long way before e-commerce will become a pre-dominant way of selling things.It will be interesting to see what do manufacturing companies do in the times to come-which model do they prefer to distribute? Your experience makes me feel the Cap on marketplaces is just a small step by the Government to create a level playing field not just in letter but spirit,the Industry has a long way to go

  70. Profile photo of Manoj Yadav

    Hi Gurudatt,

    Your post was one of the most read articles on therodinhoods.com and we are happy to have featured it again on the home page! Check out – http://therodinhoods.com and congrats!

  71. Profile photo of Amit Shroff

    Hi Gurudatt,

    Great inside. We our ourself planning a market place and plan to address the concern of sellers to ensure we do justice to both ends.

    I would love to speak to you in person and take your valuable suggestions and feedback to address these concern on our platform.

    Let me know a good time to speak.

    Regards,
    Amit
    9811122212

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