The Hard Truth: Is Your Business Going to Do Well Online?
There is a lot of buzz around e-commerce and online selling. And though a few retailers are trying to fight the e-commerce giants, the reality is that brick and mortar retail is slowly moving over and giving way to e-commerce. Market research and advisory firm Technopak estimates the Indian e-commerce market to grow from USD 1 billion, or about 0.2% of overall market, to USD 56 billion, or 6.5% of the total market by 2023.
So, you have decided to take your business online and have raised or set aside a capital for the same. But, is taking the e-commerce route going to guarantee profits and business growth? To answer this question, you will have to answer the following 6 questions:
1. What are you Planning to Sell?
Whether you are a retailer trying to expand your business online or a potential entrepreneur who is thinking about building an online only business, the first thing you need to figure out, is the product you will be selling and hence, the category you will be venturing into.
If you are already retailing a product, start by understanding if your product will do well online. While niche products like gardening tools and even diamond cutting blades are being sold online, products like Floor tiles and washbasins might not have too many takers online. Fashion is the fastest growing brand online, with over 400% growth expected by 2016 and electronics and mobiles together contribute over 53% of the total Indian ecommerce GMV. So if you are into apparel or electronics and still not online, hurry up. Competition is mounting.
Kids products, books, jewellery, health and personal care products and home décor are other popular categories online. If you are not already a retailer, look at your options. Are you looking at importing products from abroad? If so, have you got your import license yet? Can you strike a good deal with a manufacturer or distributor in your network? Are you a product creator yourself? Give this question a lot of thought. Your entire e-commerce strategy will have to be based on the category you choose to venture into.
2. How High Up in the Food Chain are You?
Are you a manufacturer? That’s good for you. This means you have direct access to your product and the leverage to price it the best. If you are a wholesaler or distributer of branded products, even better. If you are the dealer or end retailer, you might have a bit of a problem in being able to price your product competitively while being profitable.
Online selling is very much about scale at the end of the day. As a manufacturer or wholesaler, you might have access to more stock than a retailer. This also plays to your advantage, when you participate in deals and offers run by the marketplaces. Hence, the higher up the distribution chain you are, the better for your online business.
3. Where are you Planning to Sell?
Are you looking at getting your own online store or want to start selling on multiple marketplaces like eBay, Amazon, Flipkart, Snapdeal, etc? If you are just getting started with e-commerce, it might be a good idea to start selling on different marketplaces before starting your own online store. This will save you tons of money on the marketing front and also expose you to the millions of customers these marketplaces already have.
The right marketplace mix is not a one-size-fit-all. You need to work it out based on the category of products you will be selling. If you were to go by recent trends, luxury goods and highly priced desi products don’t do too well on mainstream marketplaces.
Some brands like Chumbak and India Circus are doing quite well on their own e-commerce stores, but smaller brands seem to be getting more sales through niche marketplaces like Craftsvilla, Itokri, Jaypore, etc. While apparel and accessories do very well on Myntra, Jabong, Fashionara and Snapdeal, electronics sell well on Ebay and Shopclues. It will take some trial and error to figure out which mix works best for your brand. Be patient and keep trying.
4. How is the Competition in your Product Category?
If your chosen category is unique or niche – like power tools or women’s lingerie – and has very few merchants, you might have a better edge at the marketplace. If you have exclusive distribution tie-ups with international brands, you might even get some extra promotions and push from the marketplaces.
However, categories like electronics and accessories are very popular in India due to ease of access and low price. Due to this, Hundreds of sellers end up competing for the same product undercutting each other, even if that leads to minimal profit.
The only way you can survive this amount of competition is if you have the leverage to price your product very low. Which brings us to the next question.
5. How Low Can You Go with the Pricing?
How you price your product is the single most important factor in driving sales online for your brand. According to Boston Consulting Group’s recent report, over 30% online buys are driven by best prices and discounts. The recent success of Diwali discount sales also go to prove this point. With over a lakh sellers in the scene, the only way for any merchant to stand out is by giving the best price. Marketplaces also give extra promotions and home page real estate for people who are open to giving better deals and discounts.
While it might not make sense to sell products in a loss, a low margin high volume strategy might work better in your favour.
6. Do You Have a Dedicated Team to Handle E-commerce Operations?
Let’s say your product category is good, your pricing plan is rock solid and your marketplace strategy is near perfect. You will still need an experienced, dedicated team to handle your e-commerce operations. Your products need to be photographed well and be given good product descriptions. They have to be listed on various marketplaces and be monitored from time to time.
When orders come, the products need to be packed the right way and shipped through a good logistics provider. It is impossible for one person to handle everything effectively. If you have the budget, it is a good idea to invest in building a dedicated team that can run the operations for you.
Another way to go about this would be to take the help of professionals who know how the e-commerce market works. Goa based startup, Browntape, is one such company that providesend to end solution for enterprises who want to take their businesses online with a limited budget.
So here it is, the straight forward and hard truth. Your business definitely has a chance to do well online. However, it is not as simple as plugging and playing. Selling online takes dedication, patience and a lot of hard work. With the right strategy and team, your business can succeed online. Even if you have no knowledge of online selling, you can successfully ride the e-commerce wave by partnering with the right solution providers. Go on and take your business online. It is about time.
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