Where are Indian E-Commerce players getting it wrong?
In the wake of a new reshuffle at top that has happened at Flipkart, which looks more like investor driven and a Hail Mary of sorts to try and avert and impending disaster, it is pertinent to look at E-Commerce in India and where it is now. While the early movers have become poster boys for the startup movement, they have accomplished little else to instill any sort of pride or respect. Let us try and look at this sector and what ails it today.
The Indian E-Commerce scene was one that was watched and studied with a lot of interest by the global community. The buzz was that a major share of the next billion buyers was coming from India and everyone wanted a piece of this goose that apparently was seen to lay golden eggs. There was mass euphoria, a mad rush of investors to get their pound of flesh and valuations went to unheard of levels for Indian companies. The CxOs were seen distributing knowledge and basking in the glow of all this attention at every other gathering of people that matter. The media loved them. The buyers loved them for the crazy discounts they were able to give on just about everything that was bought online. Indian Startups became all that everyone was talking about. But then, a basic fact seemed to have escaped the founders in the middle of all this din, a startup also has some performance parameters that it has to live up to. They were so focused on building a brand, buzz and valuation that some critical fundamentals were forgotten. And therein lies the start of the bursting of the bubble.
The first and arguably the most important problem lies in the way online retail business is conducted in India, on the back of very heavy discounts. While this is good to get users to come to you first, it is not a recommended strategy in the long run. The bottom line there is the fact that at the end of the day, the investors are bleeding for every unit that you are selling at a discount and this cannot be a method to run in the long term. But in India, every player in the segment started competing with the other and offering absolutely ridiculous discounts, it then became a sad case of whose investors are bleeding less.
And even with all this going on, the race to get to billions in valuation clouded the angle of investors perspective from these behemoth startups. They started expanding like crazy, adding people at the drop of a hat and building humongous office campuses that became more lifestyle showpieces than anything else. All the while the investors were still bleeding and bleeding badly. They kept going for multiple rounds of funding at crazy valuations. Two important thing took a hit here — the exit plan for investors was a mess to put it very lightly and unit economics became a joke.
It became a scene where the investors had to pray for miracles like a chinese takeover for them to see any chance of an exit. The other key area where they were and in my opinion are still wanting is strategy. There was no plan to build a loyal user base, there was no coherent user retention strategy. Some of them jumped hurriedly into the app only route only to be slapped in the face by the users and retrace their steps back again. It is worth noting that the South Korean e-commerce scene had moved to app only on the back of a brilliant unified experience and loyalty strategy and laughed all the way to the bank. But in India, no such thing happened, the churn at the CxO level and Senior VP level was like the popular cameo list in prime time american TV shows, too numerous and too frequent.
The Indian jugaad mentality has also been a deterrent to the healthy operations of many of these e-commerce players. The most recent example was the fracas that ensued between Flipkart and OnePlus when the former did a massively discounted sale of one of the flagships of the latter while the latter had an exclusive partnership with Amazon for online sales. There was neither an apology nor a clarification. Flipkart just cocked a snook at OnePlus and went on with it anyway. OnePlus on their part made it very clear that they will have nothing of the sale and there will be no after sale support for devices that are not bought on Amazon. This event is a reflection of the high-handed way in which e-commerce companies work, in this case, the buyers are at the losing end as they end up with handsets that are not supported.
Then there is the elephant in the room, Amazon! Amazon has years and years that it has spent writing the book on e-commerce and optimizing various aspects of the whole business that everyone else is playing catch up with them and they will for a long time. They have understood the fact that the customer is the focus point of the whole thing and they have been coming out with many value added services like Prime Video in India that puts them in a league of their own. The best response from the Indian players has been a pathetic response that they are selling gadgets while Amazon sells even groceries. At the end of the day, Amazon has the wherewithal to take all this on the chin and still laugh all the way to the bank. The more appropriate response should have been in the form of steps taken to improve user loyalty and add value to them.
So in a nutshell, they need to get unit economics right, get user loyalty right, work on a clear schedule to go public and ensure that investors are not left in the lurch. While it is very easy to say sitting on a chair here in my office, when it comes to it doing takes a lot of effort. As a keen believer in the Indian startup scene, I really wish them all the very best and hope that the house gets in order soon. What do you think?
Note: Image is a screen grab of Flipkart Website and they own the copyrights. This was first published on my blog at http://thequill.in/2017/01/10/where-are-indian-e-commerce-players-getting-it-wrong/