Sunday, September 23, 2012

India Ecommerce - Finding the sweet spot

So FlipKart has raised another 100 Million! This news is probably spurring entrepreneurs in India to start another rash of ecommerce sites in the hope of making it big!  However, I would advice caution here.

If you are looking to start an ecommerce venture now, think carefully and understand the environment thoroughly before giving up your day job. Some food for thought:

1.  A few biggies have got a lot of funding - FlipKart, Jabong, Infibeam, IndiaPlaza, FashionAndYou, Myntra, HomeShop18,...  In all probability, the VCs who have invested in these companies would continue to pour their money into these companies rather than look at new entrants, so raising funds for new ecommerce ventures is likely to be difficult.

2.  Even these biggies are struggling to get out of the red.  The fresh funds that FlipKart has got, for example, is likely to help them move towards break even. So, the path to glory is anything but easy.

3.  Check out the 100s of ecommerce sites already out there that are languishing or dying each day. Just look at the number of  * sites out there in the market already. How are you going to be different?

4.  Diesel prices have sky-rocketed (by at least Rs. 5/- per litre) and this is going to have a significant impact on cost of delivery, which is going to further eat into the already thin profit margins

5.  Even small retail outlets are getting into the ecommerce space through up and coming market places such as Tradus, Shopclues, SnapDeal and others.

Despite all this, if you still wish to enter the ecommerce space, choose wisely and find something (at least one thing) that gives you a significant advantage.  For example,

1.   Find an product area that is under-served.  Easier said than done, I know.
2.   Find something that does not require physical delivery or at least is light, small and inexpensive to deliver.
3.   Find a new product range that gives you 40%+ profit margins (after accounting for costs relating to packaging, delivering and collecting payment).
4.   Find something people will be willing to subscribe to or buy regularly.
5.   Find a product range whose market is not huge enough to be attractive or appealing to the ecommerce giants and yet large enough to make it viable for you.
6.   Invent a completely different business model.
7.   Find a demographic that is under-served and serve all their needs
8.   Be the sole manufacturer of the product or find a product that is unique.
9.   Provide faster delivery.  Can you say "We will deliver within 1 hr"?  You don't have to cover all of India obviously.  Think local.
10.  Operate in a geographical area that is under-served.  For example, delivery to the north-east of India is the most expensive, so many companies do not cover north-east.
11.  Find a narrow niche (ok, ok. I know a niche is already narrow, now you know what I mean) and be the best in that area.
12.  Crack drop-shipping.

Examples and ideas to follow.  Share your ideas in the comments.