Tuesday, 15 August 2017

What ails Indian businesses in e-commerce?

The Great Indian Festive Season kicked off last week with Raksha Bandhan. Today, we celebrate India's 70th Independence Day; retailers and brands are pumping in large budgets on newspaper, television and online ads for this occasion. Although the latter clearly is only an artificially created retail phenomenon that is now treated as a 'festival'!

While it is pretty clear that the largest spenders in all forms of advertising have been the e-commerce majors, the Indian e-commerce industry still far away from maturity. Clearly, the all-powerful Indian brands have not truly been a part of the Indian e-commerce journey so far. They are mostly happy to piggyback on e-commerce majors like Amazon and Flipkart. Of course there are exceptions and we at Shoptimize are privileged to run e-commerce for such exceptional brands.

What ails Indian brands in e-commerce? Where are they falling short? Let's look at a few areas -
  • Lack of vision and foresight: Some brands are happy to be followers. More than USD 20 billion have been invested in Indian e-commerce till date, but there still is apprehension about it's future in their minds. The leaders in this space have witnessed 25% to 30% of their total business being driven through the e-commerce channel, while the followers still do not want to 'disturb' their distributor-dealer network.
  • Inability to take calculated risks: India is a land of entrepreneurs. Some very large businesses have been run by feisty businessmen not only in India, but internationally too. However, mostly they have been the first-generation entrepreneurs. The following generations, many a times, keep spending endlessly on tested methods like the 'expensive highway hoarding', but do not want to risk that new digital commerce venture at 1/10th the cost.
  • Absence of knowledge: Training and education becomes so critical in any new age industry. Absence of it leads to incorrect decisions, irrational spends and hence eventual loss of interest and trust in that particular new age business. I know of a very large Rs. 4000 Cr. company that got duped by a digital marketing agency after being charged Rs. 25 lakhs for 50,000 Facebook Page likes!?! Therefore, finding the right e-commerce partner or building the right team in-house is crucial. The latter is of course very expensive.
  • Inability to stay vested for a longer time: GOOD, CHEAP, FAST - You can choose only 2 out of 3. The decision is yours. I have encountered so many businesses that want to break even from day one of their new e-commerce business! No, it will take 6 to 12 months to break even. If you want to build a brand, you can not break even from day one. If you want to break even from day one, you can not build a brand. And if you want to build an online brand in the first place, you can not adopt a pure variable cost model.
  • Unwillingness to take ownership: Brands shy away from venturing too far in e-commerce because (1) they do not want to manage inventory and fulfillment (2) they do not have the right people in-house for e-commerce (3) they do not want to be blamed for failure (4) they do not want to acquire knowledge. Essentially such brands do not want to take ownership of their e-commerce business and are only looking for excuses to put the blame on their vendors. A complete recipe for disaster! These brands will die a slow painful death online and will face the risk of going into oblivion only to be replaced by next-gen online brands.
Indian e-commerce (retail) is slated to be a USD 100 billion market by 2020 and a USD 200 billion market by 2025. The pie is genuinely very large and there is space for everyone. And now is the time to invest in bits and pieces while it is still affordable and feasible. You surely do not want to miss the boat!