The Indian eCommerce Story
I have been around people who are starting up their businesses in India recently. I speak to them about the decisions they take, have dialogues about the capital funding they require and mostly tell them they’re doing it wrong.
Most of them actually decide to startup because they’re out of options and they can’t essentially find a suitable job or they just can’t work for somebody else. Sounds fun, doesn’t it?
However my problem is that for different reasons most of them choose to be exclusively online, stating that the eCommerce market is where it’s at right now. And that maybe true globally, but not in India.
I have different theories for why we don’t as a country shop online, one obviously being the debate of the internet penetration level, the literacy rate and poverty levels of any developing country like ours, the other which is only applicable to India is that we as a country don’t trust anything until we see it. And that’s generally the reason why you won’t see people ordering pillows from an online retailer, combine that with the fact that most of the population doesn’t have a credit card or any other way to facilitate online payments and those who do won’t trust it to just “give it away online” for their purchases. Boom! You already have a twisted market to tackle.
And companies have swooped in and tackled it, some better than others, we have Cash On Delivery and localizations of these websites along with mobile versions and price guarantees and 30 day return policies, spending millions of dollars on commercials which run on TV every 10 minutes and banners across metropolitan cities to get the people talking about online purchases in general. And that sounds good, sounds like companies have done a great job with tackling the issues at hand.
But there are something’s you just can’t fix. One of the biggest online retailers which has been around for a while now has apparently never had a quarter where they actually made money. What happened? They claim they sell a lot of things. (From Apple MacBooks to handwash. They sell everything.) but it just won’t end up reflecting in their books. And if you dig deeper to the root cause is the fact that since the infrastructure of the still-developing nation is in shambles. It’s really hard to get from Point A to Point B. And it’s obviously hard to manage the inventory. The other point is since they’re still VC funded (Insanely valued, I might add) which in a way means they don’t have to care anymore. Crappy infrastructure, prank orders, competing on the pricing with the zillion other online retailers who jumped into the business and the expenses of spending millions of dollars on marketing, it just sounds disastrous as soon as you start dissecting it.
The others have decided to take somewhat of a questionable approach to the whole thing, eCommerce websites have been found guilty a number of times for sending out products which were fakes, expired and empty boxes. When blamed and shown evidence, the eCommerce company usually sets up their Twitter dork to figure it out and settle the matter in an extremely quiet manner.
Our Airline Industry is currently in deep shit and online travel websites have to compete on pricing and since brand loyalty doesn’t exist at least as far as online services are considered, they’re suffering too. Consider the fact that the second largest travel website in India had to launch a Cash On Delivery service just so that they could “sell” their product/brand in a more mass-market way. Cash on Delivery for airline, train and bus tickets. Some have decided to start issuing credit cards along with international consumer banks. The competition is so fierce in this particular segment of eCommerce that you see them signing celebrities for brand endorsements. eCommerce in the travel industry has gone to the dogs, it’s absolutely bullshit.
People in my family have finally come to the conclusion that eCommerce is a sham because when they decided to buy a holiday package from a website and the the hotel didn’t honor the discount promised by the website, my family stopped purchasing anything online. That was it. One bad experience and people will give up and trust me, I have met a lot of people who’ve had similar incidents and they just stopped and said “I can buy it at a real store. Why should I even consider buying it online?” Practically speaking, one of the main selling points of an online store was that it’d cost the consumer less to buy products from it, because the cost of your fixed assets as an online retailer are far lesser than a real retail store. But for some reason which I still cannot even possibly explain and neither can the online companies, it seems that they cannot sell things for a cheaper price as compared to a retail store. So why bother?
The other theory, the most controversial one about why eCommerce won’t work here is the fact that we as a country have been accustomed to something referred to as black money. As Wikipedia defines it “In India, Black money refers to funds earned on the black market, on which income and other taxes has not been paid” and since it’s obvious that any purchases done from an authorized retailer will have an invoice and thus you won’t be able to use black money, people tend to avoid them and prefer to buy their products from a local retailer. That sadly, is the hard truth. The un-accounted money transactions and the stashed money in tax havens (India has 1.4+ trillion $ stashed, making it the #1 country as far as parallel economy is concerned) is if you look at right, one of the reasons why an online business would never work here.
My point has always been that exclusively online is stupid idea specially in this country. A country where decisions for every product is carefully made, a country with more dominant parents who have more purchasing power than most of the younger generation. It’s obviously not all black and white though, eCommerce has helped in many ways in certain sects of this country, a number of villages, helping people to get something which isn’t available around them, it may all work out eventually. But for now, even for all it’s pleasantries you see, stay out of exclusively being online in India.