The challenges of an Indian ecommerce entrepreneur..

3:04 AM Suvir Sujan 15 Comments

Ecommerce is here to stay in India. There is not a single person I have spoken with in recent times who doesn't believe that ecommerce will be an important channel of consumption for Indians within the next decade. Given infrastructure challenges with physical retail, ecommerce has the ability to do to shopping what wireless did to telephony - allow a new technology to leapfrog traditional industry and bring access to the entire nation. However, the challenges that face an ecommerce entrepreneur in India are non trivial, and agruably different and more difficult than ecommerce entrepreneurs in many parts of the developed world :


1.  Payment and Logistics

India will continue to be a cash economy for a long time. Various factors contribute to this including cultural aversion to debt, fear of misuse of credit or debit cards, inability to qualify for credit, lack of merchant trust (would prefer to see the product before you pay for it), and availability of cash at home driven by a cash driven economy all around.

So this requires meeting someone in person to collect the cash.  This can complicate the delivery as this could now entail multiple contacts with the customers, a communication/interaction with the customer beyond just packet drop off , etc which many third party couriers are not equipped to do in a consistent, professoinal and scalable manner.  Plus outsrourcing this to a third party can be an expensive proposition as the third party courier needs to factor in their own margins, etc.  So an ecommerce entrepreneur has to now think about building in house logistics to be able to collect cash at the point of delivery cost efficiently and consistently.

Credit card penetration in India is still very low.  Many consumers have access to debit cards which are primarily used to withdraw monies from the ATM.  So while cash will remain an important payment method,  an ecommerce entrepreneur has to figure out the best way to convert payements to digital both at the point of purchase and at the point of delivery . So tied to logistics is not only cash payments, but also ability ot accept other modes of payment which an ecommerce entrpreneur needs to focus on.

2. Supply chain

India's supply chain has its challenges.  The systems that track inventory at the vendor's side are either non existant or antiquated.  Many categories have fragemented vendors and a long tail of unknown brands which can increase sourcing complexity.  An ecommerce entrepreneur needs to work with and develop this complex supply chain.

3. Value Buyers

Many of India's buyers are value conscious.  Discounts and deals are expected. So maintaing healthy margins while offering affordable shopping (good prices, low delivery charges, etc) is a challenge that an ecommerce entrepreneur has to tackle.

4. Awareness and Trust

Many Indian customers are suspcious about the products and goods being purchased online as they are used to a fragmented, unorganised buying experience that focuses on making a quick buck over  customer satisfaction.  To overcome that perception, ecommerce entrepreneurs have to work extra hard on brand building, customer service, generous returns policy, etc.

5. Access to Capital

In order to be able to successfully address the challenges in building an ecommerce company in India, an ecommerce entrepreneur will require capital. Lots of it.   Many growth investors with large cheque writing ability are trying to understand the economics of ecommerce before writing that cheque.  The  question on the minds of many of these investors is "how much capital is required to get to profitability?" . An ecommerce entrepreneur needs to make a growth investor comfortable that they understand the economics of the business and that they are utilizing the funds in the right way with the focus on path to profitability. Not a trivial task when you are focusing on the various infrastructural building blocks that sucks capital  and are still in the early days of the life cycle of the company to really understand true lifetime value of a customer.


Being an ecommerce entrepreneur in India myself, I salute all those ecommerce entrepreneurs who are braving the extreme challenges above in the effort to build world class scalable ecommerce organisations.  Kudos to all the efforts being put in to create a new paridigm of shopping in the country!!

15 comments:

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Sandesh said...

Good one Suvir

Wow, Excellent post. This article is really very interesting and effective. I think its must be helpful for us. thanks for sharing your informative.
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