E-commerce has seen an unprecedented rise in business in the past year, with Paytm joining Flipkart and Snapdeal in the eight-member unicorn club. A report by Bank of America Merrill Lynch in 2015 stated that the e-commerce market in India will be worth $220 billion by 2025. But as it is said, All that glitters is not Gold. Same is applicable to e-commerce industry.
Enclosed below are few challenges faced by them in India.
Survival of not the fittest but of the most funded
Players with deep pockets like Flipkart, Amazon and Snapdeal are making it really difficult for the smaller and newer players to subsist in the market. Seed funded startups are finding it increasingly difficult to raise a Series A round as investors are more than eager to see some profitability at a seemingly earlier stage. Till a year back, the same investors were fine with a supposedly loss making KRAs of aggressive customer acquisition.
The discount model needs to change and companies should start focusing on unit economics. With a billion plus population and everyone seeking convenience and free delivery, the ecosystem is more than ready to run without excessive discounting.
Big players are plagued with issues in delivery, personalization of offerings, cyber security and payment issues which has affected the value chain adversely. On ground challenges like the previously unheard of salaries for delivery boys and unreliable COD issues have made them take a drastic hit on profitability. Quite a few ecommerce ventures subsist on the fee obtained from sellers on their platform and not their own end customer sales.
This is not a sustainable practice as this leads to more reliability on the distribution network for holding inventory and logistics which ultimately leads to bad quality standards. Also the increasing number of returns is another area of concern for these players and needs to be tackled.
Speed of delivery is as important as the product quality for a customer. We wouldn’t be wrong in saying that logistics could be the defining factor for success of e-commerce companies in retaining their customers. Last mile deliveries account for 30% of all logistics costs & there is still no effective resource utilization by logistics service providers. Hence logistics companies are now relying on tech companies to provide them with solutions, which can actually improve the overall efficiency and support the entire ecosystem.
Gopigeon with its SAAS and IT services helps businesses connect with logistics partner and enable’s them to avail these services at a click of button.
For more information, log on to http://www.gopigeon.in