E-commerce Strategies – How Should the Next Six Months Work?
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As we are half way down 2016, it would be safe to say that it has not been a "pleasant" six months for the e-commerce section in India. Changes in FDI policies, investors’ pressure, drying of funds are few of the many problems Indian ecommerce sector have to come to terms with. Adding to these issues, U.S. retailer giant Amazon’s ambitious plans in India have only made competition more gruesome in this sector.
On asking a couple of industry experts, here’s what they had to say about what should be the immediate steps taken by this domain players to mar competition and fix business models.
Control on discounts
Time and again, investors and industry experts have warned companies against the idea of splurging on discounts. The forthcoming festive season should be the litmus test for these companies battling it out during the season.
“Both Snapdeal and Flipkart have turned their attention towards reducing burn and extending runway. The rationalization of discounts could be one of the fallouts of this change in strategy. While the widely-reported stagnation in GMV could be a cause of concern it is necessary for the top players to consolidate their positions and prepare themselves for long-haul,” Sivaramakrishnan V, Director –Finance at Venture Factory said.
“Discount based customer acquisition is not a sustainable business model. It is finally accepted by the ecosystem and reflected in the challenges for fresh funding and valuations. With Amazon and Alibaba getting more interested in India, the next 12-18 months are going to be very critical for the ecommerce firms in India,” Fazal Ahad, Director at Merisis Advisors.
Focus on high-margin products
Fashion portal Jabong cracked the trick this year by reporting a gross profit in Q1, a rare phenomenon in this sector, by re-assessing its operations. One of the key steps taken by the fashion e-seller was to eliminate on low-margin brands on its portal.
The Indian consumer today is willing pay more for additional facilities like faster delivery, exchange or alteration facilities and others. It is important that companies understand the psyche of the customer and offer new features.
“There is an increased need to understand the customer needs better - like alteration of jeans for length before delivery is a great feature which will build loyalty. Similarly loyalty points based on frequency of purchases, or private labels by e-commerce companies are other differentiators which will drive retention,” Anubhav Sonthalia , co-founder & COO, Sokrati.
"Giving more control to sellers to grow their sales by providing data on customer demand and tools for efficient fulfilment will help ease the burden. We see the recent slowdown as a temporary phenomenon. Businesses should use this as an opportunity to think through their long term strategy for online marketplaces," Venkat Potluri, CEO and Co-Founder, Sellerworx.
Offer Both, Online and Offline experience
Talking about offering additional features, a key facility that shoppers, especially women, are keen on having is the experience of both online and offline retail. Consumers today are very particular about feeling the product, specially apparel, prior to buying it. Startups like Zivame, Lenskart and Pepperfry have already opened offline brick and mortar stores to facilitate this process.
The final and penultimate advice from investors for e-commerce companies is to get those scissors working on the costs. Even though six months is a short span, industry experts believe it’s never too late for e-commerce to lower their acquisition costs and other expenses. In an effort to do that, companies have cut down on hiring and lowered merchant commissions.
“Optimizing on Cost Per Acquisition is another way, using cohorts to understand and acquire related customers who are more likely to buy from their site. As a general strategy, Marketing communication should be focused at user groups, different for different audience cohorts, cookie cutter or spray ’n’ prey approach often results in a lot of spillage,” Anubhav from Sokrati said.
“The current situation warrants to work on unit economics where each transactions results in positive cash flow and that’s what currently companies are doing resulting in somewhat stagnation but with time this will change. Consumers have started understanding the importance of ease of doing ecommerce shopping and once this trend establishes I am sure investments will start and situation will improve,” Anil Joshi, Unicorn India Ventures.