Awarded the
“RodinStar” Post
of the week!!
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”
Image Source.organicfacts.net
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 about finding solutions. 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.
Image Source- Google Amazom.co.uk
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
*****
Joginder Tanikella
“sellers are competing on prices but they are not forced to compete on prices”
This one line sums up the real value of your entire post.
ps – Sir, I believe I met you at BNI national dress day 🙂 and spoke to you later regarding some real estate. Have a great weekend!
yuvraj wadhwani
This is a great follow up post. Very apt too as just today I received a pair of shoes as returns. I don’t sell shoes.
Online marketplaces present a great opportunity and many will become millionaires in the coming future. Many must have become already.
Suresh Mansharamani
Yes Yuvraj I see this as a great opportunity for entrepreneurs
Suresh Mansharamani
Thanks Joginder. where was this BNI national dress day?
Alok Rodinhood Kejriwal
This is the benefit of experience, white hair 🙂 and perseverance.
As you have proven, its the BUSINESS that you do that makes you money – NOT THE PLATFORM!
Puneet Nirogam Aggarwal
Suresh Ji,
You nailed it. I completely agree with this.
– For us at Nirogam also, we do not have the returns as high as 30%. Infact I am going to calculate the return percentage, but I am sure it should be below 15%. I think it depends on the domain you are in.
– I agree that selling third party products does not make sense at all, unless you are doing FBA, or you are one of the very few sellers in your category. We need to innovate, develop our own products with margins upwards of 70% or more.
– These marketplaces are like high-street malls and a good customer acquisition strategy without any upfront, store costs. And if you maintain a good seller rating, there should be no reason, why it should not become profitable for the seller.
Thanks as always.
Puneet Nirogam Aggarwal
Absolutely
Joginder Tanikella
Hello Sir,
I was the Visitor in Dhoti on Independence Day, 2012! Just realised it’s been 3 years! 🙂
Naveen Bachwani
Brilliant rejoinder, Suresh. Thanks for taking the time to post this.
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.
Suresh Mansharamani
Thanks Alok. White hair and bald -Lethal combination 🙂
Suresh Mansharamani
Thanks Puneet. If you can figure our products with good margins, you can make plenty of money. These market places will keep on loosing money but you will keep on making:)
Suresh Mansharamani
Wo
asha chaudhry
sureshji,
i messed up your post a bit on the top. sorry!!!
🙂
Jaykishan Prithiani
Thanks SureshJi for article.
I am launching my brand next month and very much looking forward to online platforms
Suresh Mansharamani
Thanks Jaykishan
All the best for your launch. If I can be of any help please call me anytime.
Suresh Mansharamani
Wow. Thanks Asha ji 🙂
I always thought I am not a good writer. When I started my carrier I had a huge complex of English because my whole education had been in Hindi medium. What ever I learned I learned from travelling and experience.
Have I earned my t-Shirt now?
asha chaudhry
:)))))
the number of page views says yes!!
in the coming weeks – let me announce some winners – i just haven’t been able to do the announcement posts 🙁
Rohit Kanthale
Hi,
I am a seller too on these platforms and following rodinhoods for quite some time now. Sir,while I admire your points (which reflects spirit), I think Gurudutt has some very valid points.
The marketplace are Kings and nothing is in Black and White. There are many shades and one can see the real colors of marketplaces when one tries to scale up for instance.
Sure an entrepreneur knows how to fight back but you can not keep on falling prey to a marketplace who controls your advantage (read creativity).
Anoop Nair
Very Nice post Suresh Ji. And congratulations for being awarded the Rodinstar post of the week 🙂
Varun Miglani
My Dad is Delhi based manufacturer of Men’s and Boy’s Ethnic wear. Reading your post I am thinking to ask him to start selling his private label online as well.
Suresh Mansharamani
Dear Varun
If I can be of any help. Please do let me know.