The biggest question surrounding India's fledgling e-commerce companies is how to make a sustainable venture out of a big business opportunity. But experts, who gathered at the fifth edition of Techcircle Ecommerce Forum in Mumbai, were of the view that building traction remains a bigger target in the short term (read: rather than thinking of making profits).
Here are some key takeaways from what speakers like Sundeep Malhotra (CEO of HomeShop18), Nitin Bawankule (director, e-commerce, local & media, Google India), Prashanth Prakash (partner, Accel Partners) and B Muralikrishnan (country manager, eBay India) shared in the session titled E-Commerce In India: Discovering The Path To Sustainability & Profitability.
Customer acquisition is the sole focus, for now
Acquiring customer is the first step for any online retail shop and for that, they have to literally jump through a lot of hoops of SEM, SEO, ads, discounts, coupons and more. Customer acquisition cost of any e-commerce firm also gives a fair idea as to how popular the brand is. Richer e-commerce players like Jabong are said to be spending thousands on acquiring just one customer.
Google's Bawankule had an interesting insight to share. "Once the customer comes to your site, that's the time the cost of customer acquisition actually starts." He was referring to the fact that once the customer lands on the portal, what the portal actually puts in to make him transact is the actual acquisition cost.
"We are at a stage where customer recruitment is the sole focus and right now, it needs to stay there," said Sundeep Malhotra of HomeShop18.
According to Accel's Prashanth Prakash, more technology is required for merchant sites to acquire the customer once he/she lands there. "There is very little technology imbibed at the merchants' end today," he said.
Baby products, health & nutrition and furnishings: Top 3 niche categories to watch out
Based on shopping queries trends, Bawankule shared that baby products, health & nutrition and home furnishings and furniture will grow phenomenally in the next 2-3 years. "Currently, all three contribute to 15 per cent of total shopping queries," he said. He also stated that apparel and accessories would surpass electronics in terms of queries this year.
Bawankule also urged the market to give e-commerce some time and not write the sector off yet.
Marketplace or inventory-led model? Doesn't matter, customer is the king
The most debated topic for sustainability of the e-com business in India is whether the marketplace model is critical or an inventory-led model can still make for a profitable venture. "Customer acquisition is where we will have to spend the money; inventory is not an issue," said Prakash of Accel which has investments in a bunch of e-com majors like Flipkart and Myntra.
"As long as you are giving great customer experience, it doesn't matter if you are a marketplace or an inventory-led merchant," said Bawankule.
One last tip from Prakash to e-commerce startups: Do not go all out on couponing and offers. "Do not fall in the trap of heavy couponing in the early days. It can't be the basis of customer acquisition. You can't really discount 80 per cent of the goods and build a profitable business," he concluded.
(Edited by Sanghamitra Mandal)