eCommerce Blog

eCommerce Blog – Opportunities in US and India (by Darpan Munjal)

5 things to consider when starting an eCommerce venture

Posted by Darpan Munjal On September - 18 - 2007
1 Star2 Stars3 Stars4 Stars5 Stars (10 votes, average: 4.60 out of 5)
Loading ... Loading ...

The other day, I met someone at a conference who mentioned to me that he was planning on starting an online retail venture in India. He said he has already begun the software development for the platform and one of his friends is a great SEO person so marketing should not be an issue. Is there anything else critical that he should plan for, he asked? Although his level of planning (or lack thereof) didn’t give me a lot of confidence in his venture, it did give me few ideas for topics that I should write about in my Blog.

 

Although technology plays a critical role in building an eCommerce operation, just focusing on a technology platform without careful planning of other factors is a recipe for failure. I have heard a lot of people say that successful eCommerce companies require a strong technology orientation and should therefore, be led by a technology team. Although a technology leadership can certainly help, having a strong technology foundation doesn’t obviate the need for traditional factors that make a retail business successful. Customers don’t buy products in an online store just because they love the technology. At the end of the day, it comes down to having the right mix of products, at the right price, coupled with a strong execution and end to end experience that is difficult for other competitors to copy. No doubt that technology can and should play a key role in all above factors. However, one must remember that technology is like a foundation of a house, it is a necessary component, and if poorly designed, it can destroy the house. However, a house requires a lot more things than just the foundation for it to be livable.

 

This is a great time to begin an eCommerce venture in India, however, if you are thinking about getting in before the mad rush begins, you should consider a few things to maximize your chance of success.

 

Categories

There are certain categories which will always be better positioned to sell on the internet. This is especially true in Indian context where eCommerce adoption is still in its embryonic stage. Categories that have a larger concentration of well known brands, such as Home electronics, cellular phones are likely to sell relatively easily, compared to unbranded or private label products (such as apparel). You must make a conscious decision on how broad you want your assortment to be. You could offer a broad set of categories, or you may chose to go after a vertical niche such as cosmetics, groceries, books, electronics etc. Both of these options have advantages and disadvantages. However the one thing you should consider is that the overall eCommerce pie in India is still very small. Going to the market with a very narrow assortment could limit your ability to scale up. On the other hand, focusing on smaller set of vertical/niche categories may be a good long term decision – because when the market is flooded with a large number of broad based online retailers, focusing on a niche may help you establish the right positioning for your company and it might also give you a better control over your suppliers.  

 

Target Customers

Although this may seem like a text book exercise, one should always spend some time in defining the target customers. No, I am not talking about demographics such as age, internet usage, income level etc. It is easy to define that. Instead, I am talking about psychographic questions such as – Are we targeting customers who are looking for low priced merchandise or are we targeting customers who are willing to pay a small premium for a great end to end experience or are we targeting customers who are looking for good gift giving options. The initial reaction that most people have is – lets target all types of customer.  This is definitely understandable, especially if you are in a startup mode; however, it is necessary to establish a focus. I am not suggesting that one should go out of the way to avoid customers who do not belong to their target segment. However, every decision you make about the business strategy must be based upon who you are targeting. For example, if your primary target is customers looking for low priced products, it may be ok to give up control and outsource certain functions such as call center. On the other hand, if your core value proposition is around a great customer experience and quality, you may decide to have an overall control over CRM and order fulfillment.

 

Inventory Decision & Vendor Partnerships

Whether to stock your own inventory or to leverage 3rd party vendors to ship products is probably the most critical decision you will be faced with. There are significant risks and opportunities with both the options, however, if you chose to go with 3rd party vendors, the biggest trade-off is about the level of control you are willing to give up in the end to end customer experience. On the flip side, you don’t have to worry about carrying inventory costs and be faced with out of stock or over stock situations. This also speaks to the fit with the overall strategy – if your goal is to offer the biggest size of the assortment at the lowest price point, you are probably better off going with 3rd party vendors who can source the products at a larger scale. On the other hand, if your mission is to build the best customer experience, then you would probably require a tighter control on the end to end process and it might make sense to limit your vendor partnerships to a smaller set of vendors who can execute better.

 

Technology

Technology is a critical foundation of any eCommerce venture. There are a number of options available ranging from Open Source (e.g. OS_Commerce) or licensed software (e.g. IBM Websphere Commerce) or managed eCommerce services arrangement. Although I would probably leave the detailed comparison of these options for a future post, it comes down to the overall objective. If you are looking for a strong differentiation in the end to end experience, it is better to build your own technology platform in my opinion. However, if you are looking for quick time to market, and if your goal is to differentiate among other dimensions such as pricing or assortment, you are probably better off leveraging a licensed eCommerce software. In any case, you should consider investing in a robust site analytics software (e.g. Omniture or Google Analytics) and a parametric based search solution so that customers can easily find what they are looking for.  One thing that usually gets ignored the most often is the automation in the back-end order management. Most of the smaller eCommerce players focus on building the front-end capabilities and rely on a lot of manual processes and adhoc reporting to fulfill customer orders. I believe by putting an equal emphasis on backend automation and robust order management solution can help you build an environment that can improve the overall predictability in the end to end customer experience.

 

 

Marketing Strategy

Even though there are limited number of eCommerce players in the Indian context, it is extremely important to carefully determine the go to market strategy and allocate enough funds to execute it. You may have the best assortment and a great customer experience, but you still have to convince the customers to come to your site and transact with you. I personally know of atleast 2 eCommerce ventures who had built a great technology infrastructure but didn’t have a well thought out marketing plan. They were hoping that the word of mouth alone will give them the desired number of eyeballs. Well they waited too long for these eyeballs to come, and in that process, took their eyeballs off the cash flow projections. They ran out of money too quickly, and then had to offer a fire sale of their equity to get bare minimum funding so that they could keep the venture afloat.

 

Although a lot of these factors may seem very obvious, thinking through these factors upfront can help minimize a number of startup and execution related risks associated with an eCommerce venture.

Like this post? Share with your network:
  • Twitter
  • Facebook
  • LinkedIn
  • Google Bookmarks
  • del.icio.us
  • Digg
  • Blogplay
  • Add to favorites
  • IndianPad
  • StumbleUpon
  • Technorati
  • Reddit
  • Sphinn
  • Tipd

20 Responses to “5 things to consider when starting an eCommerce venture”

  1. sarath ks says:

    Hi do believe that an e-commerce ventures can success only if it is build with good technology and have good marketing strategies to reach their consumers.With out a good marketing strategy no e-commerce venture can survive.I have found a new online shopping portal in bangalore named http://www.storrz.com which is doing really good.They introduced selling groceries online which is a good concept to reach the consumers.They are selling only branded products.The exciting payment option is sodexho meal pass on delivery although credit/debit cards are also accepted.

  2. Mike says:

    This is a great restatement of a huge problem that seems to be getting worse. Instead of asking “what do I want to do?”, then looking for technological solutions, people are asking “what technology do I have?” and then looking around to see what problems they can solve with it.

    It’s not an inherently bad situation, but often very critical things get overlooked because the choice of technology doesn’t address problems that exist.

  3. idris says:

    Excellent and very informative article. Sir, u bang on target u have given the minute details which would help netpreneurs to make strategic decision…I’d give rank 1 to Marketing Strategy then category.

    Just want to ask one question, as you said e-Commerce pie in india is very small, what will be the future of ecommerce in india, will it remain the same or will it boom?? any such predictions

  4. Rajiv says:

    Like to share about my site http://www.progressiveidea.com going to be launched soon.
    About ProgressiveIdea
    ProgressiveIdea(www.progressiveidea.com) is launching a unique concept for consumers to share the profit of our company online. In return, we need your precious time and efforts to transform ProgressiveIdea into a money making and information source for all of us. ProgressiveIdea success entirely depends on the individuals who will become part of the next big revolution in e-commerce.

    • Earn money on every advertisement you receive.
    • Know about the latest offers and discounts in your town, state or country.
    • Maximize your earnings by referring ProgressiveIdea to your friends.

  5. Prasad says:

    Hi Darpan, I Came across your presentation on Slideshare (http://www.slideshare.net/dmunjal/future-of-ecommerce-in-india). It was very educative. This encouraged me to visit your blog. The article: 5 things to consider when starting an eCommerce venture, is very educative. Will read other articles on your blog. Thanks for sharing your knowledge.

  6. Mohit says:

    Hi – I am on starting an online retail venture (designer T-Shirts) in India. It will be a community based apparel company for all art enthusiasts.
    Can you please help in marketing as i dont have much funds to go through conventional source of advertising (like TV, newspaper etc.)
    Any help from your side will be highly appreciated.
    Thanks

  7. Hello Mohit,

    You can Optimize your website easily without paying any extra charges.You will just need to understand the basic tips of Online marketing.For help you can view:seobook.com website.

  8. Kalpesh Patel says:

    Hi,

    My name is Kalpesh and am currently looking to expand my venture capital business into India.. I am looking to also expand some of my ideas into India via 3rd party service providers. Telecoms is one key business that i want to exploit in India as well as back here in the UK.

    If you are looking for either funding, willing to help as a 3rd party service provider, please contact me on PatelK03@googlemail.com . I am particularly interested in hearing from any one with telecoms experience in India..

    Regards

    Kalpesh

  9. Nick Kandola says:

    Hi

    Great article, well structured. All round good reading. Impressed. Will be coming back to read more on india ecommerce market.

    Please can you provide figures on what the current market is i.e china has over taken the USA (200m) in terms of internet user, how many in india an wha do you predict in the future.

    Nick

  10. I think Darpan saying on starting the website is of great relevance.

    Also Consider:
    - Unique product showcase on your website
    - Strong Logistics: Tie with Bluedart or DTDC for the same for faster shipment to customers
    - Strong Customer Care Base: Have options available for customers to call you not just write email where it take time to respond back.
    - User friendly website and easy checkout for making the payment.

    We see today internet being bombarded with the same kinds of website with similar product availability which are other 1000 websites. In future e commerce sites will survive on the basis of product uniquness, better pricing, fast delivery and quick response customer care

  11. Nice information, I have created my first non-voice BPO company (http://www.dataentryatindia.com) here… but after reading your information I inspire to start a new e-commerce store for teens special.

  12. Ajay says:

    Yes E-commerece in india is yet to boom with the internet awareness in the country it will be really successfull to do online business. Take the success of bazee now Ebay.com they are doing good business. I am launching a new website named onlinedukan.com next month for my fellow indians. This website will provide platform for buyers and sellers who want to buy or sell their things for free without any commisions being charged. it will be a good platform for companies to showcase their goods and sell it for free. onlinedukan.com will be launched next month and we are expecting an overwelming response & suggetions from our countymates.

  13. Vimal says:

    Hi

    Realistic insight in to the critical factors for online ecommerce entrepreneurs.

    I have recently started an online webstore for children books and learning tools http://www.kiboo.in

    Though the site offers differentiation and is focussed on a niche vertical of children books, I feel that marketing and fulfillment of customer need are very crucial to drive the targeted customers to the site. Since the cost of customer acquisition being high, there should be a community effort to help the customers looking for a range of different products. One probability for newcomers is to come together to create an umbrella with product themes that complement each other.

  14. Jibitesh Mishra says:

    Nice Article in the Indian Context. What about the investments ? The Indian banks will look into the the customer’s credentials not the business prospects. We can have a check list for the banks. May be they will go for some products like books, CDs, but they will not go for gaming sites.

  15. Googlee says:

    Great article ! Thanks for sharing.
    And probably another one where I read that selling apparel is not so easy over the net. Are there any suggestions on how to tap apparel market online?
    May be I reading to too alte… not a single comment in 2009 : (

  16. Not that I’m impressed a lot, but this is a lot more than I expected for when I found a link on Delicious telling that the info is quite decent. Thanks.

  17. Diwakar says:

    Hi Darpan,

    I have been working in biotech instrument sales to most of research institutes & R & D units of govt. as well as non govt bodies. I would like to start any online business for research customers for institutes down the line. Would you please help me any kind of work model, which would finally be established.

    I was thinking of providing research ref. book online to all of them, but it seems they prepfer to purchase in cash price or that too on lower price system..

    Do you have any idea what would be any idea or plan fo these customers.

    Diwakar

  18. Lesya says:

    Good e-commerce should be based on good e-commerce platform i.e. shopping cart. Sometimes the shopping cart that works good for some business maybe not that effective for other one. Another instance is when you want to switch to different shopping cart that meets the needs of your particular business.

    In case you face this problem – you may switch to different shopping cart easily with the help of cart2cart web service. It automates data migration and makes the process more simple. You may check http://www.shopping-cart-migration.com for details

  19. Suresh says:

    Based on my extensive research (online) on eCommerce in India, finally launching series of stores. It’s the right time to start an online business in India. People got money, credit cards and high speed internet at home. What else do you need? Internet usage is booming and next two years every middle class home will have a computer with high speed internet. The buying power has increased several folds. I was surprised to see Ebay India’s last year statistics that Jewelry is a No 1 selling category in India. 70% of buyers are between 21 and 35. Significant % of them are NRI’s ordering items for their loved one’s in India rather than sending it from their country. One challenge in India would be the Shipping (Courier) companies. No one is up to the mark and not very reliable and responsive. Shipping is most important part in this business. Speedpost by India Post is the best service based on many people’s reviews. If India Post can improve the quality and customer service little bit more, then eCommerce in India will take the retail industry to next level. I tried to reach out many top brand companies to check if they can do dropshipping, but I dont know they are bit allergic to eCommerce concept. May be the the people who are incharge not much aware of what’s going on this area. Three years ago, there was a huge billboard in John F Kennedy Airport British Airways terminal, the billboard had India map on it with a message by Nokia saying “One Billion Handsets going to be sold here”. I think now it’s a reality. So no wonder if eCommerce is the next big thing in India in 2 – 5 years from now.

    So cheer up guys, start your venture. Let’s not just talk, start with what you have and align it well on the run.

    This is a great article. Keep posting and encourage others.

  20. Aslam Yousuf says:

    I share the same emotion as the rest of the group. I truly believe that e-com will take off big in India.
    I am currently pursuing the idea of having a customized gift portal where you can create your own gifts.My current target market is the B2B segment. I am currently assessing the market feasibility of the project. Given the competition from offline vendors and Indian customer mindset do you think this venture would be profitable?

Leave a Reply

Get Adobe Flash playerPlugin by wpburn.com wordpress themes