e-Commerce to many in India has lost its sheen. But transacting on the internet is a great innovation. Businesses which earn their revenues from online transactions are here to stay and will grow at a massive rate. Reports suggest that the Global e-Commerce market will hit a mind boggling 1 trillion dollars in the next few years.
Despite Flipkart, Snapdeal, Myntra and other e-Commerce giants accounting for a large chunk of the current market share in India, there is enough room in this vast market for startups to come through and shine. However startups are going to face some potent challenges in a few areas. Here are 5 key challenges that Indian e-Commerce startups will face in the coming years
1) Finding a Niche
In a conversation with Mukesh Bansal, Co-Founder and CEO of Myntra, he had stated that finding a niche in e-Commerce means finding people who will be willing to transact over the internet for a specific product. Contrasting to this approach, is Snapdeal, which goes full out on assortment and having everything under the sun on their online catalog. Kunal Bahl, the co-founder of of Snapdeal places assortment above all else.
While Snapdeal’s approach is going to need a lot of funding (an investor’s worst nightmare), a niche ecommerce site is something that a startup can take up. But there are too many niche e-Commerce players in the market and finding a large enough market willing to buy online is going to be the first and foremost challenge for a startup.
2) Customer Acquisition
To get people to come on an e-Commerce site and make a purchase involves heavy cost due to advertisement and marketing . This cost is significant and can be brought down to cost per customer. Experts say that the average figure for this metric in the current e-Commerce ecosystem is between INR 500 – 1000 customer, which isn’t sustainable for even medium sized companies, let alone early stage ones.
This is the next biggest problem that an early stage e-Commerce startup will face.
3) Reliable Logistics and Supply Chain
This is a good problem to have. If you’re facing problems with respect to logistics and supply chain, there are transactions that are happening at your portal. However, failure in this area can mean detrimental damage to a startup’s future. The average Indian customer poses great trust issues for e-Commerce transactions and this in effect hurts the brand overall.
Bad products, which are almost a given when working at scale, also require reverse logistics. The longer a faulty product from an e-Commerce portal stays with a customer, the worse the reputation of the e-Commerce portal gets.
Getting this right will be a challenge, and experts who know what to do are far and few.
4) Customer Service
Customer service is something that is overlooked in the Indian context. However, in this dense e-Commerce market, quality customer support is going to be a big differentiator. Reassuring customers of a situation or telling them the status of a process is sometimes all that is needed to keep the customer from hitting the panic button and taking to public media.
Getting customer support oriented resources in India will be a challenge that a startup can face.
5) Raising Funds to Scale
Once an e-Commerce company has got its traction going, getting the branding right is going to be quintessential. Every e-Commerce success in India has got their branding right and has been an important part of their scaling process.
This, however, will require funds. The current funding bodies are once bitten, twice shy about funding e-Commerce companies in India. An e-Commerce company can bootstrap to a certain extent, scaling requires funds. A large majority of them have failed in this phase.
So even if you’ve got your act right, past record in the industry is working against the early stage startup at the cusp of scaling.
Come to e-Sparks 2013 to meet the people who’ve overcome these challenges and know how they did it.