Today the situation of e-commerce websites is disturbing. The multi-billion dollar war that is being waged by leading e-commerce players can have serious repercussions on the rest of the market. With people expecting the e-commerce bubble to burst soon, several prominent players have shown signs of giving into pressure with frequent policy overhauls, causing troubles to buyers as well as sellers. Let us analyse how exactly this situation developed and how to ensure the interest of consumers and sellers is kept safe in the promising world of online commerce.
The e-commerce sector in India has expanded rapidly. As the population of Internet users increased year after year, shopping websites popped up through the last decade and started registering massive sales. The convenience of shopping from one's home with a single click attracted thousands of customers and brought fresher dimensions to the retailing sector in the country.
This benefited merchants, too. Being assured that all the hassles of day-to-day business such as logistics, payments, on-time delivery, cataloguing and commissions will be taken care of by the marketplace, offline sellers began coming on board on e-commerce sites with great alacrity. This, in turn, helped e-tailers grow their business and significantly increase their consumer reach.
Over time, sales conversions reached a new high and many offline vendors began to experience sales figures that even exceeded their brick-and-mortar shops. But as competition grew fiercer, e-commerce websites were quick to draw their swords to battle each other with additional funding.
To become the most attractive online platform, e-commerce websites began splurging cash on customer and seller acquisition. Think heavy discounts, cashbacks, offers, contests, referrals and much more. They also began to display high levels of leniency towards their partner merchants and began luring more numbers by making headlines about the kind of services and assistance that was being provided to sellers.
The upshot? Losses registered by these hyper-competitive companies summed up to tens of millions of dollars per month. Some expected the burn rate to end soon but to no avail. Rather than focussing on cutting their losses, many top e-commerce players became all the more adamant to acquire more consumers, make news with the milestone merchant figures achieved, and enter rounds after rounds of fundraising.
As they begin to feel the heat now, these same e-commerce websites have increased their commissions. On the other hand, others have sensed this as an opportunity to slash theirs leading to a further disruption in market equilibrium.
The increase in commission is a clear indication that the e-commerce websites are beginning to search for new avenues to decrease their burn rate and increase revenue. Aiming to book higher margins, policy overhauls are an easy way out for the e-commerce players pressing various costs on the sellers who had previously been mollycoddled.
While this paradigm seemingly doesn't affect buyers, the increased expenses on the part of sellers directly results in a spike in prices. A dispute with retailers directly affects the consumers of the website, as either the prices surge or the quality of products depreciates. Further, as the consumers get accustomed to shopping on a particular platform, the price hike or low quality hurts their sentiment and diminishes their loyalty. Discontentment amongst sellers can also lead to a greater chance of counterfeit products and substandard or expired goods being sold.
E-commerce websites have to check the rising discontent among retailers by relaxing their new stringent policies. They need to recognise that their approach of making lofty promises to merchants and buyers at the onset was flawed and have to look at other ways to bring in revenues than going back on their word. They must also create a level-playing field for retailers and eliminate biased practices from the e-commerce sector.
With the risk of the e-commerce bubble blowing up, only the platforms that are more transparent and value the sentiments of consumers along with sellers will be able to stay. Many e-commerce marketplaces frequently change their policies that directly affect their consumers and sellers. A transparent mechanism must become a prerequisite to combat the present-day turmoil in India's e-commerce sector.
E-commerce players have to take the seller community into confidence and focus on their interest while implementing policies. This has to be done without diluting the consumers' and the sellers' experience to bring back that feeling of trust, ebullience and growth that was associated, until very recently, with this very promising sector.
Sachin Goel is the CEO at HomePunch.com, an online store for home and kitchen appliances.
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