India’s e-commerce sector is at its burgeoning stage and the deep discounted model has made the e-commerce sector a sustainable growth model.
There has been huge investment by many prominent people in the market who know that this sector has immense growth potential and are leveraging their funds to sow seeds of well pocketed eCommerce retailers. For example, Ratan Tata the chairman emeritus of $100 billion Tata Sons has recently invested in Paytm which is at the headlong speed and has informed to be clocking in Gross Merchandize Value (GMV) of Rs 16 crore daily and more than 3,00,000 transactions on an average per day.
Indian e-commerce giants like Flipkart, Snapdeal have a surge of investment like Alibaba, Avendus Capital, Tiger Global and on the contrary the small players have none to back them up.
It is believed that every business model has to pass their test of time and taste their own share of failure and success and there will be a time when the valuation flow will come in into the picture and the investors will ask for returns in numbers.
Hence there are some challenges which pose a threat to e-commerce retailers. Lets have a look at some of them.
Winner takes it all-No room for small players
Flipkart, Amazon and Snapdeal are deep pocketed major players making it tough for the small players to survive in the market. The mortality rate in Indian e-commerce is rising day by day as the small retailers are choking to attract investors or customers alike.
Some of the e-commerce portals like Babyoye, Zipdial, Tastykhana, Indiaplaza have failed in making it big and have made a tragic exit whereas star players like Flipkart, Bookmyshow, Zomato, Makemytrip are becoming household names as they could instill confidence in the investors and took risks from the inception and have gained popularity.
But this current scenario makes the e-commerce very vulnerable and the bubble will unfortunately burst for the small to medium e-retailers.
Succumb to hurdle in Indian e-commerce value chain
Reminiscing from one of my experiences, I was trying to send a gift to my friend studying in Raebareli (a small district in UP), but was shocked to see that it declined to send the item and it surely made me believe that what e-commerce retailers boasts holds untrue.
Big players are facing issues in delivery, personalisation, cyber security and payment issues which has made their chain of command weak and fragile. It is seen that the plethora of e-commerce value chain is posing as counterproductive for free-flow of e-commerce delivery.
The delivery boys are pricey and there is reliability issues during COD which undermines the profit. Also, many companies in online marketplaces rely on fees from sellers and not own sales.
They do not hold inventory and rely on the distributors for it and which leads to fall in standards.
Digital literacy and consumer connect
With Narendra Modi’s digital india campaign,ecommerce market is showing signs of boom but when we compare it with the digital literacy of the consumers it fails to show the same sign.
There is a major chunk of population i.e 147 million who are still using feature phones. The stalwarts of online marketplace should try and tap this sector by bringing out easy access to websites and helping in digital literacy.
Also try to fix the loopholes like fast customer service, return policies, payment security and to lure more customers for the website
No profits in sight
Flipkart, Snapdeal and others have infused immense capital from investors and are burning them with customer acquisition and heavy discounts.
As projected in the picture the amount of loss incurred by top players and the gap between the valuation and the funds raised in the market. So the profits which are not in sight will pose threat to the overall business model if the break even is not met.
Sooner or later the profits will be required to be projected. Also investment in holding inventories, infrastructure have to be made.
So to rise above all the shortcomings in the Indian e-commerce sector the retailers and government need to join hands for working on increasing penetration of internet. Also the credit card diffusion should be emphasized so that the perilous cash on delivery mode can be restricted.
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