E-commerce in India is still at a nascent stage, but the retail space is fairly large and may assuredly provide Internet players with better growth opportunities as organised retail has not lived up to initial expectations, feel the panellists at the VCCircle E-Commerce Forum, held in Delhi on March 14.
The fourth edition of the summit drew a packed gathering of around 230 participants – ranging from new-age e-commerce entrepreneurs to investors and bankers. The first panel – Indian E-Commerce: Staying Power, Profitability & Unit Economics Are Back – featured Harish Bahl (founder & CEO of Smile Interactive), Prashanth Prakash – Partner at Accel Partners, Dhruv Shringi – CEO of, Yatra Online and Ambareesh Murty (founder of PepperFry.com). The session was moderated by Mahesh Murthy – Managing Partner of Seedfund.
Murthy, however, kicked off the session on a wary note. "Investors are now cautious about funding e-commerce ventures. Earlier, they were bullish and cash was free-flowing. But the scenario has changed now,” he said.
According to the panel, the golden rule for any e-commerce company is pretty simple – be cautious while you are spending the investor’s money. One must think of the ROI (return on investment) while targeting a specific segment. The marketing strategy has to be smart and every bit of funding should be spent for effective returns. "Moreover, the kind of people you are looking to hire is also very important as they help the firm scale up," added Murty.
The low transaction size (Rs 1,000 or so, on an average) also puts a spanner in the Indian growth story. If the margin is low, the cost of customer acquisition automatically becomes high, the panellists noted.
Shringi of Yatra pointed out, "One should be able to tweak the average order value by providing great service. One needs to get the algorithm set, right from the beginning."
According to him, great customer experience would make people come back to the site again, thus reducing the cost of acquisition. It could also increase margins as goods might be sold in bulk that way. Hence, new e-commerce firms need to focus on lifetime value of customers. And for that, they need to have the proposition and products right.
Next, a heterogeneous panel of speakers discussed the various e-commerce models, as well as their pros and cons. The second panel at the forum featured Gaurav Khachru of Dealsandyou.com, Neeru Sharma of Infibeam, Sandeep Agarwal of ShopClues, Sanjay Nadkarni of Babyoye and Rahul Khanna of Cannan Partners, who was moderating the session.
Will ‘Zero Inventory’ Work?
Khanna opened the session by asking whether there could be a ‘right’ model to be followed for e-commerce success. Opinions varied widely as various business models came to the fore. According to Agarwal, who runs ShopClues, a ‘zero inventory’ model works well while the company focuses on enhanced user experience and efficient product management. “We market our business on three pillars – great product selection, low prices and efficient delivery,” he said.
However, customer experience seemed to be the pain point for all, as user experience at the front end would almost always make or break a deal. “Fundamentally, all models look the same and it all boils down to customer proposition. Indian customers are the most value-oriented and consumer experience, coupled with good value proposition, would be the best fit for Indian psyche,” said Khachru of Dealsandyou. His site offers discounted deals to customers and is essentially a marketing platform for sellers.
The debate, once again, came back to inventories as Neeru Sharma of Infibeam stated that having one’s own inventory would be essential for any large e-commerce portal housing thousands of brands.
Consequently, shipping would be easier and quicker, thus holding the customer. “Customers want their products as soon as they can and Infibeam houses close to 5,000 brands. We need to have an inventory to know if we can ship the product immediately or not. We do keep track of virtual inventories of the goods that we don’t stock, but having an inventory works for us.”
“Inventory is great but there are people who know how to stock goods and take care of those better than we do,” Agarwal of ShopClues countered. “So we are leveraging their inventory and ensuring traffic for them while consumers get good value propositions. I think inventory is best left to people who are already doing it.”
But there’s no fixed ‘model’ for success and sites like Dealsandyou follow a mixed model – a combination of virtual and physical inventories, coupled with express events like shipping within 24 hours and more. “We prioritise sellers who partner with us for express events. It means we work in tandem with them and they also set our requirements as high priority. Thus we enhance the whole user experience without opting for inventories,” he said.
While there could be no ‘perfect model’ for e-commerce merchants, it was apparent from these discussions that customers today would be difficult to please and they would have unlimited choices. Therefore, portals are coming up with better customer engagement models like live chat, customer care numbers, express deliveries and return policies to ensure customer retention and repeat sales. Most e-commerce merchants are targeting multi-pronged strategies but investors must be warily watching the success recipe that can be concocted without very little risk.