E-commerce or online shopping, the new way of buying products from anywhere, will take time to gain consumers' confidence. It is also coping with several business risks. Unlike offline shopping mode, when a customer refuses to accept any product in online shopping, it might end up as dead inventory and negatively impact the company's profitability.
Ankur Mehrotra, Chief Executive Officer of Noida-based e-commerce outlet Deliveryoncall.com, in an e-mailed interview with this citizen journalist , gave his views on the risk factors associated with virtual shopping.
Is e-commerce investment witnessing a downward trend in India?
Ankur Mehrotra: The industry is in a consolidation phase, where we are talking about mergers and acquisitions. I expect the next wave of investment during mid-year, post consolidation.
Many e-commerce ventures in India are coping with operational issues that affect margins such as defective products, and delivery costs. To what extent will such issues affect growth in 2013?
This is the nature of e-commerce industry, and it is very different from brick and mortar. As the payment term and product delivery terms are different in brick and mortar as compared to e-commerce. In brick and mortar model, you select a product, make payment, and then delivery happens, where as in e-commerce you select product, delivery happens and then you pay. So the actual cost is already incurred. Product, Packaging, Placement, Parcel and now the Payment is at consumers disposal. The last “P’ Payment, which was prime before starting all Ps, is more of destiny than planning. It would take some more time for industry to mature and gain consumer confidence in buying products online. Everyone in the industry is trying to build that confidence in consumers that e-commerce is a convenient option to buy.
Presently, e-commerce in India is dependent on high initial start-up capital, and frequent cash infusion. Is this a disincentive for venture and private equity investors in India?
E-commerce is definitely high risk and has a tough return proposition. But venture or private equity investors have their calculations in place for the industry. It would surely be difficult for startups to get high capital into their venture at this stage until and unless the bios of the company are very strong and well-connected.
Millions in India purchase via face-to-face interaction. Many products are not bought and sold in bulk. Will these two realities affect e-commerce growth in 2013?
Bulk selling definitely boosts sales, and reduces cost of deliveries, but simultaneously chances of larger payments getting stuck is also associated. With regards to offline purchases, this is India, where consumer buys when he picks up a product in his hand and feels it, and if he doesn’t like it, he has an option to keep it back on the shelf. The highest cost associated in e-commerce is keeping back that product on shelf and someone has to bear that cost. The product might end up as a part of dead inventory attaching more cost on the company. The factor is affecting e-commerce and would continue effecting as there is no alternate at this stage.
How much of buying on e-commerce websites is impulsive in nature? How long will it take for Indian consumers to become automatic shoppers - with shopping online being their preference instead of a physical visit?
E-commerce is a convenience, and convenience can never be impulsive, as when you are buying on your desktop there is no queue behind you on the cash counter, nor are there eyes watching you to make it fast. Since you have not moved out of your house, so there is no hurry of returning back home. It's only convenience which can become habit and then need. This is a long process and would take its own time.
There are many bottlenecks specific to the e-commerce industry in India such as after-sales service, transportation, quality assurance and supplier-side issues - especially in tier 2 and 3 cities. Given these issues, is e-commerce growth in India dependent on too many variables?
E-commerce is boon for the consumers in tier 2 & 3 cities. There it is part of the need, as big brands do not have their stores in every city, hence waiting for the product and paying cash on delivery is the best one can get. This is the biggest market in India which e-commerce companies are exploring and innovation in this field can do wonders. If e-commerce players start opening up small service counters in these places, then these service counters can work as virtual shops for them as well.
E-comerce companies like Flipkart buy at discounted price and sell at discounted selling price, and can't take the risk of jacking up prices to improve margin or to adjust to infaltionary and rising input costs. How will this affect Indian e-commerce strategies in 2013?
This is only workable for the players who are deep-pocketed and have assured back up to run the show. The strategy can only stop a consumer for a shorter period only for that offer but not for the long-term.