It was so heartening to read about Avnish Bajaj talk about how the Indian ecommerce is over-invested (in the short term). I have maintained that a large part of the reason why ecommerce is nothing but a subsidized sales industry right now, is the investing world. A lot of institutional money has flown in, with unreasonable expectations. And due to this built the philosophy that transactions are the only metrics that matter. Acquisition costs, servicing costs are secondary.
India is a market with atbest 10mn online shoppers. Let’s assume 20Mn. I can get that ENTIRE base registered on my site, by spending no more than Rs 50 CPL or a total of INR 1Bn (or $20Mn). Most companies have got funding higher than this amount. What happens then?
1. You start commoditizing your products, to gain these customers faster (in the hope that they will be yours forever).
2. You start ignoring costs because you have a buffer to play with
Basically – you create a shit hole for yourself.
So what does this mean – dont get in ecommerce? That would be foolish!
1. Raise money cautiously and through investors who have a long-term view. Ofcourse, always raise more than you need. That Capital Raising 101! But figure how much is much!
2. Get into categories with lesser competition, if your value prop isnt distinct. This lowers your CPL/CPA because you are not fighting against similar offerings on google! There are atleast 15 categories I can think of consisting of no players and scale of 100 Cr and upwards
3. If in the same category, focus on creating a brand that customers love (before that, get an investor that can spell brand with a B). Not become a sales setup. Flipkart has done it really well. Rest others are experiencing transactions ONLY because they advertise. You should advertise for scale, not for survival!
Well done Avnish, for being the sole glimmer of hope for your industry. It is obvious that you have been an entrepreneur yourself! :)