Indian Ecommerce Marketplaces
The Challenge Ahead
Flipkart, Snapdeal and Jabong have sustained exponential growth. For each of them, there are tens of other ecommerce sites that have slowly stopped growing or even disappeared. You wouldn’t find many of them mentioned in the media because, well, there is not much of a story to tell.
As an increasing number of Indian shoppers become comfortable with online shopping, this growth may seem to come relatively easy. But if the U.S. ecommerce industry growth patterns were to taken as a representation of the path the Indian industry would follow, then this growth cannot be taken for granted for long. To understand how Indian marketplaces can build sustainable growth, it is important to start by understanding how their offline counterparts dealt with this challenge.
(Image courtesy: Trak.in)
Historically, traditional physical retailers’ growth has come from new store expansion. The largest retailers in the world have a lot of stores — which in turn attracts new customers. Examples in this category include retailers like Walmart. Branded manufacturers, on the other hand, have grown based on customer loyalty to their brands. Companies like Nike and Apple keep track of customers interested in their products and do everything they can to nurture that engagement to convert prospects into customers and for customers to increase loyalty through repeat engagement.
In the online world, growth is driven by customer acquisition and retention. Put simply, marketplaces need to drive more new customers or keep churn down. Any new site typically starts by investing heavily in customer acquisition first to gather invaluable consumer data. Over the course of time, investments begin to skew more towards retention tactics as the rate of acquisition and churn begin to approach an equilibrium.
Merchants in the U.S. use a combination of data-driven insights and human judgementto present the right product to the right customer at the right time. While the human judgement aspect of this will need some years of experience to build, the data-driven aspect of it can be cultivated early on through training and education. The challenge ahead of the Indian Merchant is to get a deeper understanding of this relationship between their actions and the customers’ reaction to it. Analytics and data-driven commerce capabilities will be key in helping these merchants navigate this challenge.
For many of the Indian ecommerce merchants that entered the market in the last 2-3 years, a lack of a comprehensive customer database may take some time to build. In such scenarios, customer data analysis is usually ad-hoc in reaction to events on the site. While building the necessary experience to improve the influence of human judgement might take while, ecommerce merchants in India would do well to invest in building customer databases and data analytics capabilities to improve their chances of success in, what is turning out to be, an increasingly competitive area.
