Flipkart acquires LetsBuy - and shutters it. SnapDeal acquires eSportsBuy - and shutters it. So what's ailing the Indian e-commerce industry?
Five things, I think.
The top 5 issues Indian e-commerce companies are facing.
1. Discounting the discounts:
The Indian customer has been spoiled rotten by every e-com firm out-doing the other when it comes to discounts and even selling at a loss. These discounts were justified as "marketing cost" or "customer acquisition costs". It's obvious that discounts may have bought trial - but not loyalty. Firms such as Flipkart have been facing trouble trying to get prices back up again to sustainable margin levels, what with loss-leader sites like Jabong and comparision shopping sites like Junglee entering the fray and giving consumers greater choices at lower prices.
2. Everybody delivers on delivery:
A couple of years ago, a site could have claimed dominance by following the Amazon playbook of investing in rapid and reliable delivery. Amazon did that for many years before anyone else got the idea in the US. Indian sites have been far more competitive. It just takes days for rival e-commerce sites to catch up with innovations in India. Cash on delivery? Everyone does it. Cash before delivery? Many do it. Same-day delivery? Many do it. Online tracking? Many do it. The delivery and returns experience with the odd exception here and there is now largely the same across most e-commerce sites - indeed they all mostly use the same vendors. So one less factor to build loyalty, or a premium.
3. I'll be you and you be me:
Once upon a time, things were clearer. 70mm sold and rented movies. BigShoeBazaar did shoes. PepperFry did furniture and furnishings. Today they all sell tee-shirts, watches and clothes. It's not clear to the consumer where she should shop for what - and as a result, she feels she can shop anywhere for anything, at any price. Even less brand differentiation.
4. The curious fact that India is not China:
Many VCs and PE have it in their heads - and Excel spreadsheets - that India will be like China, with its own local internet successes. The Google of China is Baidu, the Facebook of China is Renren, the Twitter of China is Weibo, the eBay of China is Taobao, the YouTube of China is Youku and the Amazon of China is Dangdang.
But India is NOT like China. The Google of India is Google, the Facebook of India is Facebook, the Twitter of India is Twitter, the eBay of India is eBay, the Youtube of India is YouTube and I believe that, given FDI opening up, the Amazon of India will eventually be Amazon.
Sites have been funded with blind obeisance to China-like spreadsheet models, as opposed to on-the-ground Indian smarts about what will work here and why. As they're finding that their Sino-Indian models aren't working, that these companies will not make it to scale to exit in the Indian markets, that the US markets aren't in a good place right now - the investors are beginning to panic.
5. Shouting instead of using word-of-mouth:
It's a curious fact, even for comparison-obsessed VCs that global leader brands like Amazon, eBay, Facebook, Google and Twitter were not built using television advertising. Indeed, large-scale TV and print advertising proved to be the downfall of sites like Toys.com and nearer home, Indya.com. The world's top brands in the online world are built around offering a delight-inducing service, and then generating and accelerating positive word of mouth - while focusing on digital solely as the medium of communication.
High spends on television and print advertising will only make TV and print media owners rich - a repeat of what happened in 2000, for those who remember Indya, IndiaInfo and HomeTrade. It did nothing for those brands then - and it will do nothing for these brands now.