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According to a 2015 report by Goldman Sachs, 30% of an Indian e-commerce company’s expenses are towards discounts.
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Here are 5 most common pitfalls that you, as an e-commerce seller, should look out for.
It goes without saying that the online retail and e-commerce market is continuously evolving and heading in new directions. This has led to tremendous competition between online sellers, and those retailers who do not adapt and keep up the pace tend to disappear very quickly.
Keeping this in mind, here are 5 most common pitfalls that you, as an e-commerce seller, should look out for:
Usually hundreds of online sellers and merchants list identical products on marketplaces and quite often the only differentiator is the price-point. It’s this sort of price competition that especially hurts retailers who do not have the purchasing power to compete with large online sellers.
One of the ways to compete on price is to procure larger quantities in a single order and get bulk discounts; this comes with its own problem, namely working capital finance to pay for such orders.
Marketplace policies are highly favourable for buyers. The usual 30 days return policy provides a lot of time and often buyers return used products to the seller within that time frame. The seller would have to pay commission to the marketplace even if the product is returned in a damaged state.
Also, generally it’s the seller who pays for the return charges. The biggest challenge is to resell the product, once the label or the packaging are significantly damaged. To solve this problem, e-commerce sellers can connect with various refurbished goods sellers, who are more than willing to buy such products, although at discounted prices.
Related Post: Success story of Sachin Bansal: The entrepreneur who almost shut down Flipkart
The recent trends in the Indian e-commerce industry has seen mostly established, large, offline retail outlets doing well online due easy access to capital from traditional banks & NBFCs; since they have physical assets to use as collaterals, large turnovers & multiple years of vintage. A new entrant to the vibrant e-commerce space does not generally have easy access to any of these.
Here again a financer can help them out. Their loans are completely collateral free and do not require extensive financial documentation. All that is needed is proven e-commerce marketplace sales of 6 months, and the seller is given a multiplier of his sales as a loan. These loans can go upto big amount.
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Many small online stores buy products at wholesale prices from distributors or manufacturers to sell at retail prices. This is the classic business model for retail stores.
Unfortunately, e-commerce’s low barrier to entry has encouraged numerous manufacturers to start selling directly to customers. This means that the same company that sells your products may also be your competitor. As more manufacturers start selling online this problem will likely become worse.
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Simply put, it’s easier and much more profitable to sell to loyal customers than it is to constantly search for new ones. Smaller e-commerce sellers rarely have resources to drive loyalty for their products or store. Also, the loyalty built is generally towards the marketplace, and not the actual e-commerce seller.
The best way to tackle this is to create a delivery experience which is memorable for all customers and drives them to give high ratings on the marketplaces. Positive reviews can also be sought by connecting with the customer post-delivery via SMS/emails.
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The story of how the two men started with just two laptops and grew to its current size is inspirational. At the time of raising $1-billion last year, the Bansals’ combined stake of around 15 per cent in Flipkart was valued at Rs 6,000 crore (Rs 60 billion).
Sachin Bansal – The master mind behind the Flipkart idea, one of the first people to establish an e-commerce website in India, an IIT graduate and a business man who created something of a history in the great Indian internet shopping revolution.
At the time of raising $1-billion last year, the Bansals’ combined stake of around 15 per cent in Flipkart was valued at Rs 6,000 crore (Rs 60 billion).
The story of how the two men started with just two laptops and grew to its current size is inspirational.
They were not only able to ride India’s robust consumption story, but also earned the investors’ willingness to place their bets on their company.
Image credit: www.forbes.com
The ongoing e-commerce war spilled over to Twitter on Friday, when Sachin Bansal, co-founder of India’s largest online retailer Flipkart, made a direct jibe at competitors – Snapdeal and Paytm.
The ongoing e-commerce war spilled over to Twitter on Friday, when Sachin Bansal, co-founder of India’s largest online retailer Flipkart, made a direct jibe at competitors – Snapdeal and Paytm. Bansal tweeted, “Alibaba deciding to start operations directly shows how badly their India investments have done so far.” Recently, Chinese e-commerce giant Alibaba, which has stakes in Snapdeal and Paytm, expressed interest in entering India directly this year.
Alibaba deciding to start operations directly shows how badly their Indian investments have done so far
— Sachin Bansal (@_sachinbansal) March 25, 2016
Snapdeal’s co-founder Kunal Bahl was quick to respond to his arch-rival’s tweet, saying, “Didn’t Morgan Stanley just flush $5 billion worth market cap in Flipkart down the…”, accompanied by a toilet emoticon. “Focus on your business, not commentary,” Bahl tweeted. His comment come on the back of Wall Street powerhouse Morgan Stanley recently marked down Flipkart shares by 27%, bringing down the country’s most valuable privately held tech firm’s its valuation to around $11 billion from $15.2 billion.
Didn’t Morgan Stanley just flush 5bn worth market cap in Flipkart down the ?? Focus on ur business not commentary 🙂 https://t.co/8NpkhWWo2j
— Kunal Bahl (@1kunalbahl) March 25, 2016
This is not the first time Bahl and Bansal have locked horns publicly. Last year, Bahl had said in an interview that he will top Flipkart’s gross merchandise value or GMV by the end of 2015. Flipkart responded immediately through another interview, indicating it will remain the number one player in the Indian e-commerce market.
Alibaba holds around 5% stake in Snapdeal and nearly 40% – directly and via its arm Ant Financial – in online payments major and e-tailer Paytm.
The Indian online retail market is seeing a hotly contested battle being fought among the domestic players like Flipkart, Snapdeal, Paytm and the Jeff Bezos-led Amazon. “This shows that none of the existing e-commerce players show leadership of the market. That’s what makes it such an easy decision for Alibaba to enter. Almost $7 billion of investment has gone and yet there’s no winner in sight. So it’s not just a reflection on Snapdeal and Paytm but the whole sector,” an investor in multiple consumer internet companies said.
Indian e-commerce companies have so far been burning millions of dollars in cash on discounting, logistics and marketing to get to a substantial scale. These subsidies have been financed by investors who have ploughed more than $3 billion and $1.5 billion in Flipkart and Snapdeal, respectively. But with the overall funding environment tightening globally and in India, from here on it won’t be easy for these players to rack up financing and consolidation in the market looks imminent.
This article was originally published in Times of India
