Inside India – Ecommerce in a 3rd World Country!

Being fully aware of the disputable term “3^rd World”, Wikipedia is confirming the same for India, but the business world might call it emerging Market and the locals would rather refer as THE biggest democracy in the world. But this is not the topic of today. Today I would like to throw some light on how I perceive the booming ecommerce market in India.

In the Social Media world, India has already emerged as a leader and counts the second largest user group on Facebook, only behind the USA. On Twitter, Instagram, Pinterest, LinkedIn etc. the situation does not look much different. A true case of leapfrogging demonstrates also the maximum use on mobile devices, rather than computer.

 

In the hierarchy of Tech Companies, the leading India ecommerce company Flipkart figures at the top of the pyramid with a valuation of $ 15 billion, in good company only smaller to Facebook, Uber, WhatsApp and equal to companies like Pinterest or Snap Chat. Last year the first platform went pure mobile and shut down its internet ordering presence www.myntra.com after researching that 80% is ordered on their mobile application.

The main strategy of all ecommerce players in India seems to be identical, to grow active customer base, which in turn will increase their valuation! So far so good, investors, venture capitalist and private equity is flocking as there was no tomorrow. Articles appear daily to report foreign investments, only in multiple of $ 100 million per investment round. The majority of these funds are used to discount products and attract more customers to increase customer base and therefore the valuation of the company.

At the same time investments into a sustainable business model seems to be entirely absent. The platforms / applications are below par from a user experience perspective. Product searches often land in a jungle of similar products offered by multiple vendors and delivery preferences are not welcome. Given the consumer friendly option of cash on delivery is adding fuel to the return rate. Here an example: A Rs 200/- ($ 3) pair of socks will be delivered overnight on cash on delivery. If the customer is not at home (or doesn’t carry cash), second delivery will be attempted. If the customer does not like the socks, they will be returned immediately without payment. This is a very expensive approach and the cost of the transaction is for sure higher than the product value. Given the big number of such players fighting for customer base, the customers are not loyal and only go for the kill. Often the products are of substandard quality, maybe used or defective and Social Media is reporting many cases of counterfeit or hiked prices to allow bigger discounts (which would be illegal in India).

I do remember very well the dot-com bubble from 1997 – 2000 in the western world, where investors would not ask any question and beg entrepreneurs to take their money as investments for internet based business models. The bubble burst during 1999 and 2001. My memory is well intact because I graduated from my Executive-MBA in New Media & Communication, which was later re-named Media & Communication.

Keeping the entrepreneurs in mind, their model has already worked as they became rich overnight. Keeping the investors in mind, their model will work, as long as they exit before the burst. He that comes last makes all fast.

Unfortunately offline retailers seem not able to fill the gap of quality and service oriented shopping and therefore retail experience remains an issue rather than a pleasure in India.