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Indian e-commerce in search of fundamentals

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Indian e-commerce in search of fundamentals

Flipkart’s story makes for a fitting case study on the many start-ups in India. It is surprising how despite tasting success in consumer acceptance, rewards seemed to flow in the opposite direction

Last few weeks have been a jubilant time for the Indian e-commerce sector. US giant Walmart acquired Flipkart for $16 billion. Flipkart’s founders, viewed as the poster boys of the Indian dotcom era, secured a neat pile from the deal. Cheerleaders of the industry celebrated in anticipation of more such salivating deals and foreign funds flowing into the country.

On the other hand, critics wondered about the rationale of the valuation even as the business was not viable and was not even in sniffing distance of making profits all these years. The e-commerce sector is accused of being a giant money guzzler without any business fundamentals.

From a marketing point of view, Flipkart, as we know, became synonymous with heavy discounts and promotions. The platform drew millions of buyers on the back of the Internet revolution, mobile phone penetration, discounted sales, great customer service, ease of payment options, convenient door delivery system and most importantly, hitherto an unknown feature in the Indian retail scenario: A no questions asked refund and return policy.

All this instilled trust and built confidence in the minds of the otherwise wary customers. Metros and even small towns joined the gravy train in hordes and took advantage of the mouthwatering discounts and irresistible sales. It is remarkable to see millions take to online shopping without any doubt or dilemma.

Flipkart played a key role in revolutionising the acceptance and spread of the online retail environment in the country.

However, in spite of tasting success in consumer acceptance, it could not make profits and continues to elude even today. So, what’s going wrong?

Interestingly, from a business point of view, we are told that it is a strategic decision to not chase for profits. But to many critics, it seems like an absurd choice where you have to sacrifice either growth or profits. As if both are mutually exclusive and jointly impossible to achieve.

It is a two-legged race at the end of the day for any business to run successfully. Many e-commerce platforms today are still handicapped. They have no clear vision to turn into a profitable venture.

While many flush with venture capitalists funds, the prevalence of cash-bonfires seems to have become some sort of a competitive sport in a bid to garner ‘growth’ sans ‘profits’. The ultimate goal seems to be to accumulate numbers, aim for big-ticket valuations, then sell stakes and exit the game.

Those who zealously bet on the online and e-commerce industry as the de-facto way forward, have been proven wrong. If anything, the e-commerce trend has only strengthened the case of co-existence and h-commerce or ‘hybrid’ commerce.

Debate about who will survive largely seems to be a pointless now. Mom and pop stores are not going anywhere, the malls may struggle, but the A category malls will still draw crowds.

E-commerce platforms are opening their brick and mortar stores. Similarly, the brick and mortar retail brands are pulling up their socks; are investing in digital platforms and bolstering online presence. Evidently, it is becoming an O2O environment ie, online-to-offline and offline-to-online, seamlessly integrated in an omnichannel environment.

From a customer point of view, Flipkart made some unconventional moves but a few initiatives undertaken by it turned out to be against the grains of time and logic. Remember the cute television spots with kids enacting like adults. The television advertisements charmed their way into the hearts and minds of the customers and made a huge impact to drive home the point that it is a child’s play to transact online.

These advertisements were refreshing, entertaining and clutter-breaking. They successfully convinced the viewers to shop online with mega deals thrown in to further sweeten the deal. To this day, these advertisements are riveting and entertaining.

Flipkart became both a gateway and a getaway for the Indian middle class to indulge in guilt-free retail therapy from the cozy comforts of their homes and in turn created a new class of conspicuous consumers.

However, Flipkart stumbled on few occasions. The ‘Big Billion Day’ with eye-popping discounts and deals ended up with server crashes, agitated customers and apologies from the prompters. Backend planning for such a big blitzkrieg was apparently not in place. For the end customer, there was no room for such trust busting gaffes.

The other self-inflicted fiasco, most likely authored by the wishful thinking of the engineering talent, was to abruptly kill the web platform and go for an app-only platform. The move seemed preposterous, hare-brained, arbitrary and intriguing.

It was obviously a contrarian move when, at the same time, customer-centric organisations were moving towards an omnichannel environment to achieve scale and embrace and engage customers anytime anywhere, through multiple channels and touch-points. Flipkart’s app-only approach seemed like a big, bold and odd bet. Surely, it ended up as a disaster, resulting in customer defection.

The e-commerce sector in India boasts of premier management resources like the Silicon Valley, technical and engineering talent, but it beats a common man to understand why the puzzle to turn profitable is still a riddle. It would have been an icing on the cake to see an Indian trailblazer e-commerce company set an example by achieving a viable business model.

It could have acted as a fitting case study to the many budding start-ups and online entrepreneurs to emulate. Alas, what we see is an irony of the most-celebrated and historic deal for a yet to be profitable online marketplace. Surprisingly, the rewards seem to flow in the opposite direction.

(The writer is a communications and management professional with cross-sectoral experience)

 
 
 
 
 

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