Challenges in E-commerce

E-commerce spending has risen to $2.1 Trillion in the past few years and will reach $5 Trillion by 2020. Such rapid growth promises a great future for the Indian E-commerce industry signifying a strong market and increased customer demand. Despite these growth trends, many e-commerce businesses fail to take off within their first year. It is worth exploring the various challenges which the ecommerce industry faces today.

Borderless Economies – Mobile technology has empowered consumers in myriad ways. It has opened doors to a digital economy, taking globalization to a new level. Traditional boundaries are clearly blurring, with online retailers expanding to new geographies. This leaves companies to deal with government regulations, geopolitical status and extensive local and international competition. Modern E-commerce businesses are in race to provide the best premium services to their consumers while finding the right balance between globalization and localization.

Building Trust – Building consumer trust and brand loyalty is essential for any business to succeed. The traditional brand building exercises are mostly irrelevant in the current E-commerce sector. It is easy to lose an online customer. Failure to deliver on any one aspect of customers’ demands would lead to failure in retaining them.

Disparate Systems – There are various data management systems such as – Point of Sale, Enterprise Resource Planning and CRM systems. These systems differ tremendously in their architecture, deployment and usage, usually built on dated technology and are prone to stagnation. A great deal of your resources is being spent on separate systems, interfering with internal business demands and distracting the focus from the core tasks.

Lacks of Collaboration – There are four key divisions in E-commerce – Technology, Data Curation, Product Delivery and People management. Modern companies face the challenge of collaborating between different departments, some geographically isolated and present in different time zones. Marketer’s merchandisers and E-commerce managers need to learn to strategically operate through one integrated channel.

Personalization – Modern E-commerce thrives on delivering the best personalized experience to their consumers. Managing a repository of customer data is a challenge in itself, added to that e-commerce companies have to understand how to use that data. Delivering customized content in the form of advertisements, special offers etc. are some of the methods which can be employed.

Ease of Technology – Ease of use and technology have given consumers more power and increased global competition in the e-commerce sector. Omni-channel retailing is the way forward for e-commerce. This places pressure on companies to deal with technical issues of running an online store like server issues, bandwidth issues, dynamic IP address, data privacy and security issues. The transition from a multi-channel business to an omni-channel is another aspect that is not easily adopted by many companies.

Managing logistics, seller registration and inventory accounting present bigger challenges for the e-commerce companies. To overcome these challenges would require greater deployment of manual resources and can’t just be solved through cloud services.

Metro to Marketing Train

Advertising to increase by 12.7% in the coming year, GroupM said in a report. From Digital to print advertising, businesses are fighting to give their ads and spending in crores to attract customers. Now, Companies are targeting Metro train coaches in cities to promote their business. I was travelling in one of the Yellow line metro and whole Train was covered with advertisement of E-commerce giant Amazon India.

It was very difficult for me to understand Where the Train was last up to. Everything was covered with ads from Amazon. Even the interior ad space was covered with E-commerce ads. The Delhi metro covers 190.03km across six lines and ferries close to 260,000 passengers on a daily basis. Part of it is underground and part overground. DMRC runs 216 trains with 1,282 coaches. According to a report, 8 Million people used its services in 2013-14. Presently, most of the Metro trains have become marketing trains.

Earlier companies fight for ads on TV and newspaper, now they are fighting for ads on Metro. It might a situation in India when companies will promote their business on Indian Railway, which is one of the longest networks in the World. In Delhi, after IndiaMart, Amazon, and Political parties, Myntra will be seen advertising on Delhi Metro coaches. Paytm and Snapdeal are also in discussions to do the same. Advertisers may around Rs. 25 lakh to wrap up six to eight coaches of the metro for a month i.e. on average Rs. 4 Lakh for a coach.

The companies are also hoping for similar opportunities in Bengaluru and Chennai. Mumbai smaller Metro has trains sporting ads from BigBasket, UltraTech Cement, and Oxigen, an electronic payment service. Consumer goods and mobile phones companies may also join the queue. Delhi Metro has awarded exclusive rights for displaying advertising materials including pictures, printed material, electronic media, smart posters, and visual displays. The concept is very popular in Singapore, Bangkok, Hongkong, Dubai, and the US.

This is very catchy and effective medium. This leads to increase in consumer base, more downloads of mobile apps, and increase in revenue. Even, people who are not aware of it know about companies. It becomes easy for sales person to reach out in a local market and sell products because of awareness of companies and products. What if Metro trains are also used to increase awareness of Social causes? Display ads of Government campaigns may increase awareness and it will last long. With changing scenarios of marketing in last two years, huge amount of money will flow in market and there will be more marketing trains.

Indian E-commerce Train

Indian e-commerce is projected to explode from $10 Billion to $43 Billion in the next five years. There are eleven categories and within them 42 players that are poised to shape this blazing path. Let us look at e-commerce industries in different categories, their investors, and funding raised by them.

The first in the category of e-commerce is Market Place. This multi category segment is on fire this year. The largest pie of the line retail ecosystem is drawing the maximum risk capitals and eyeballs. The top three players – Flipkart, Snapdeal, and Amazon are expected to do $4 Billion in sales this fiscal. All multi category players are on the Inventory less market place model. They are all investing heavily in warehouses and delivery. They are making acquisitions. Their focus is now on growth and less on profitability. Investors in Flipkart are Accel and Tiger Global. Investors in ShopClues are Nexus Venture and Helion Ventures. Snapdeal investors are Kalaari, Nexus Venture, Intel Capital, Bessemer, eBay, and Premji Invest.

The second category in the list is Travel. If multi product players have the eyeballs then travel portals have the wallet. At around $8 Billion, online travel accounted for 70% of the overall Indian e-commerce market in 2013. Three shifts are underway, one with air tickets becoming a staple, travel portals are turning their focus to hotel bookings and travel packages. There is a growing emphasis on smartphone traffic and applications. Big players are Cleartrip, Expedia, Ibibo, IRCTC, Makemytrip, RedBus, and Yatra. Investors in Cleartrip are Concur Technologies and Reliance Ventures. Investors in Makemytrip are SAIF partners, Tiger Global. Investors in RedBus are Naspers. Yatra investors are Capital 18, Norwest, Intel Capital, IDG Ventures, Vertex, and Valiant Capital.

The other category in Indian e-commerce is Fashion. After electronics, fashion and lifestyle is the largest industry in online retail with a 25% share. Myntra and Jabong are the leaders competing fiercely with discounts and for exclusive brand partnerships. Myntra is launching private labels including Roadster and Dressberry. With external brands give up to 35% and in house labels go up to 60%. Jabong is in partnerships with international brands and designers. Other players are Yepme, Fab Alley, and Zovi. Investors in Jabong are Rocket Internet. Investors in Myntra are Kalaari, Accel, Tiger Global, IDG Ventures, and Premji Invest. Investors in Yepme are Helion Ventures. Investors in Zovi are SAIF Partners and Tiger Global.

Furniture is the third largest segment in e-commerce. The value of goods sold by leading players is on course to increase 3-4 times this fiscal. Pepperfry and Urban Ladders are the leaders. Among market places, Snapdeal has launched and Flipkart, Amazon are exploring. In this industry, players need to build a specialized supply chain and help in building the manufacturer ecosystem. Pepperfry is working with manufactures to build furniture that can be assembled on delivery. Other players are FabFurnish and Zansaar. Investors in FabFurnish are Rocket Internet. Investors in Pepperfry are Norwest and Bertelsmann. Investors in Urban Ladder are Steadview, SAIF Partners, and Kalaari Capital. Investors in Zansaar are Accel and Tiger Global.

With an estimated market of $350-400 Billion, the grocery segment is larger than anything else is. It is also challenging. One needs to build Hyper-local sourcing, warehouses, and supply chain. Expansions across regions are staggered. The exception is BigBasket, which is in three cities. Other players are Ekstop, LocalBanya, IndiaMart, Homogennie, and Zopnow. Investors in BigBasket are Ascent Capital and K Ganesh. Investor in Ekstop is Unilazer. Investor in LocalBanya is Karmvir Avant Group. Zopnow investors are Accel Partners, Qualcomm, and Times Group.

Hyper-local market is the other growing category in India. Even if big players enter into market then also small shops and establishments will make a large percentage of sales. Platforms like Just Dial, Findable, PriceBaba, and Zopper are looking to bring them online in multiple ways. BookMyShow is doing the same with ticket bookings in arts and entertainment. Just dial the largest local search player with revenues of Rs. 561 crore in 2013-14 extended into transactions this January, enabling services like doctor appointments and flower deliveries. Zopper and PriceBaba are also expanding quickly. With smartphones and data connections, their numbers are expected to increase. Investors in Just Dial are Tiger Global, SAIF Partners, and Sequioa. Investors in Zopper are Tiger Global, Nirvana Ventures, and Blume.

Some e-commerce websites are differentiating by targeting niche customer profiles. GreenDust sells factory second and refurbished consumer electronic products at a 10% - 76% discount to market price. Limeroad is a social shopping platform focused on women that also offers users tools to curate and share collections offline. Onemi sells products only on equated monthly installment even to customers who do not have a credit card. Overcart is also a new startup. Investors in GreenDust are Lightbox Ventures, Vertex, and Reliance. Investors in Limeroad are Tiger Global, Matrix Partners, and Lightspeed. Investor in Onemi is VenturEast. Investor in Overcart is K Ganesh, and GSF Superangels.

Other than these, there are some smaller specialists in different categories. First is the Babycare category. Babycare and kids wear products categories are emerging. The leader is Pune based FirstCry. FirstCry is flanking its online presence with stores – 70 running and 30 more coming this year. It is collaborating International brands to provide free hospital kits to parents of newborns in about 6,000 hospitals in top 18 cities. Other players are Babyoye and Hopscotch. Investors in Babyoye are Tiger Global, Accel, and Helion Ventures. Investors in FirstCry are SIAF Partners, IDG Ventures, and Unilazer. Investors in Hopscotch are Lion Rock Capital, and Nisaba Godrej.

Healthcare is one segment where niche portals have managed to build strong franchises. While focus of Healthkart is protein supplements and personal care, that of Lenskart is eye care. It expects post revenue of Rs. 100 crore this fiscal. Other startups in this segment are Healthadda, Helathgenie, and Saralhealth. Investors in Healthkart are Intel Capital, Sequoia, and Kae Capital. Investors in Lenskart are Unilazer Ventures and IDG ventures.

Stores in general, have failed to offer Indian women a wide choice of products or a comfortable shopping experience. Online players are stepping in, offering wide variety of products, new categories like shapewear and the privacy to shop without human contact. China largest category in e retailing is apparel. Online players are PrettySecrets, Koovs, and Zivame. Large players like Flipkart, Myntra could acquire them to make these brands anchor tenants on their website. Investors in PrettySecrets are Rehan Yar Khan. Investors in Zivame are Unilazer Ventures, IDG Ventures, and Kalaari Capital.

India’s appetite for jewellery is growing every year. Players are entering into online platforms and Bluestone, Caratlane are some established players. Investors in Bluestone are Accel Partners, Kalaari Capital, and K Ganesh. Investors in Caratlane are Tiger Global. Online business is also growing in Food Chains sector. Platforms like Zomato and TastyKhana are offering in wide categories. While Zomato is into restaurants chains and it is Google of Food, TastyKhana delivers your food in quick span of time. Medical shops are also entering into online selling and delivering of medicines. Apollo Pharmacy, 98.4, and local keepers are entering. In flower delivery service, Ferns & Petals, and other players are emerging. Taxi and Ride booking is also emerging at a rapid pace. Electronic stores, customize printing business, fruits and vegetables,  are some other categories where business is growing. It is expected that after five years everything in India will be available online.