Indian eCommerce – Operational Efficiency


Its very interesting to hear that the top 10 eCommerce sites in India are handling several thousands of transactions per day individually. While the trend and developments are welcome it throws up a question about how viable / sustainable are these transactions from the company’s and investor perspective. The consumer has the best laugh because of the competition amongst these players to offer more discounts, goodies, coupons, etc.. Have the below analysis

1. The trend is to acquire consumers than to look at profitability.. this is slowly receding as a priority with investors and stake holder pressures catching up on the profitability

2. Indian scenario in terms of logistics and operations are yet to be fine tuned to the potential eCommerce business we are to see. The answer is neither running your own fleet for logistics nor the pure logistic companies who are yet to fine tune and tweak the model on economic efficiencies

3. The complete tight control of the costs across the value chain is not there and is loosely coupled at vendor levels, marketing levels, payment gateway levels, etc.

4. The cost of transactions impact is heavy in specific cases. Mobiles and electronics are heavily sought after products and with the payment gateways taking away anywhere between 1.25% to 3 % at best value level, how can we expect the transaction to be profitable with margin in these products being 2% to 4% at the best after discount.

5. The cost of customer acquisition is heavy and not sustainable. Consumers in India are inclined towards the combination of brand and discounts with no specific loyalty to a portal. Welcome change are the price comparison sites that make the process of finding the lowest discount website easier.

Having said this, am sure the companies that can sustain the current trend without burning out would stand to gain in the long run. Those with long term focus would stop burning money heavily and focus on sustainable model.

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