Being a great E-commerce company of 2015 is not good enough!

Billions are being raised and spent in the e-commerce dream of India. Amazon, Flipkart, Snapdeal are all playing the long-tail i.e., all categories e-commerce and going only broader. In India, Amazon is flirting with classifieds, grocery deliveries too. Flipkart followed Amazon into digital content and flirted with hardware too.

One can’t beat the three at this game of long-tail but is it even worth playing anymore?

While these companies are great if one knows what to order. They are not much better than a Walmart on the web for discovering and making buying decisions. Figure out what you want, and we will deliver it to you. Or Hey neat discounts! Hell, companies like Canopy.co just help one with the Discovery challenge of products at Amazon.

Some of the larger challenges for the big incumbents —

1. But getting discovery and decision-making right is especially hard for long-tail of products. Only 16% of big e-commerce sites present a decent filtering mechanism, let alone helping with bigger decisions like whether this would go with my wardrobe, is this compatible, or what suits my priorities.
2. Then there is the limitation of the advantage of scale. Smaller companies can not only do better in terms of discovery but then can negate the scale advantage with lean operations, better-suited, high volume products for niche segments. Subscriptions, exchanges, renting, selling your collection, etc.
3. While Amazon has understood these challenges and is not sitting on their laurels of having 70–80B of revenue or for having hundreds of millions of customer data — they have inspired a host of other e-comm businesses in various countries like Flipkart, Snapdeal who seem to be in the game of getting people to buy online. The series G, H, I funding rounds of billions of dollars for just marketing-reach in the hope to making a killing in 4–7 years. Are these rounds of funding just lighting the path for newer, smaller players?

4. But the biggest challenge of all is that long-tail products can’t get the larger context right for all products. I don’t want to buy a camera, I want to take awesome photos, I want to be cherished by my friends for awesome photos. Or I want to update my photography skills with tools as per my skill levels. A parent would rather buy a diaper subscription along with a bunch of other useful stuff for infants/kids from a company with scaffolding for new parents than from Amazon Prime. This larger context can’t be achieved in long tail. Period.

5. The whole landscape around online buying is changing within their proposed investment cycle — 3D printing with marketplaces for designs, Bitcoins for fairer trade, zero-rent marketplaces, Possibly ease of trade across borders, Artificial narrow intelligence to help with buying decisions, Local E-com as easy as making a Facebook page for SMBs with plethora of local delivery solutions. Why would I wait for a day when I can get the product delivered in 2 hours from a local shop. Or I can make the decision online and just visit to make a purchase?

Amazon diversified a lot over a decade and a half and has never turned profitable. In doing so, they sacrificed profits from long-tail e-commerce with operation profitability of 6–8% (with overall profitability of ~0.5%). The numbers make sense on the large scale. It is a tough business but Amazon has widened their vision progressively, starting new profitable businesses which help them invest and take a hit in other places. Amazon has such massive scale that it should translate into huge profits ‘somewhere’ down the line even with competition from niche companies. But what about the non-Amazons, the non-Alibabas?

While few e-comm companies are ahead of the pack and are pretty good e-comm companies, they don’t seem to be a viable business in the long term. Their viability depends more on how the whole commerce landscape is shifting and the timing than just executing their e-comm product and their marketing goals.

Some of the other finer challenges-

1. From an outsider’s perspective, these leading players have solved many operational challenges. But what was an advantage a couple of years back is quickly getting commoditized. Third party solutions for last mile delivery, scalable infrastructure, 2-hour local deliveries, online shops of SMBs are or would be in every company’s reach.

2. General e-comm without any network effects or network value would lead to no long-term advantage. The Data and your network is now portable.

• Amazon recommended the products for me on the basis of my history and the data points of others. But now I can give access to my wardrobe easily, my Facebook account, or my phone to access the apps I use — to come up with more than a persona and it would lead to a much richer experience.

• We are just cashing on the VC money to get discounts — does one prefer Flipkart or Snapdeal or Amazon? Well, I do prefer Amazon actually because of their exceptional return policy for electronic goods. But none among them for their core product or experience.
• The core-product or experience should help me in taking a decision. But all companies seem to have prioritized marketing over actual product value, competing with mega-sales. It is like one vanilla marketplace platform that scales very well with traffic.
• Hell, they haven’t even invested beyond the banality into the reviews, a bare modicum of network value.
• With the investments are they just lighting the way for smaller, newer companies who get the advantage of the behavior change of buying online.

3. Few companies could still live or thrive if they invest in orthogonal opportunities akin to how Google survived with Android. Examples like e-com for villages, a difficult problem to crack but would still leave longer-term dividends. Or say a product discovery, review network that sits over the internet rather than just a particular portal. Or help online shops to discover high-value clients and help them with scaffolding. Or help SMBs reach their neighborhoods. But the priority seems to be running TV adverts, FB adverts, and the vanity metrics. Amazon could survive because it has been taking these orthogonal leaps.

4. How long is the party of crazy valuations going to last. The projected downturn in the investment cycle is in 2–3 years. Are they going big before that with the unsustainable, crazy burn rates? Who are going to fund the series G, H, I just to keep the lights on?

Most of these e-com companies were started in late 2000s with due “inspiration” from Amazon trying to sell everything. But now that the tech and aspirations in developing markets, Europe is in sync with US — the rate of change is getting accelerated. Their traditional first mover advantages are getting evaporated. China on oligopoly in tech is running contrary to this trend.

But some good should be acknowledged too — like trying the app ecosystem (Which Flipkart can safely play around with Myntra) or focussing on merchants in case of Snapdeal. Hell, I enjoyed the latest 150 seconds ‘long’ Flipkart advert. But that high was soon replaced with apathy for the product and the experience. That discussion is another topic but simply put — the marketing gets the larger context of people trying to be awesome, but the product-experience is just navigating a bunch of pages with technical product description, and with bare-minium help/context. More on the larger context by Kathy Sierra here.

The mantra to capture the market first, growth at the cost of product and experience are a manifestation of the available risk capital. This is not limited to e-commerce. We also have companies valued in hundreds of millions, billions with their stagnant realty products, the neat restaurant menu collections, food delivery with discounts and traditional goliaths in telecom infringing on privacy and neutrality rather than doing any innovation. Let’s hope for a stable middle east to keep the party going. Hell, we have a couple of rounds to raise before that.