This article first appeared as a Linkedin article I wrote on March 4th 2016.
Flipkart was devalued by 23 % recently. A significant hit for one of India's brightest unicorns. Many people have expressed shock and awe at this move. On the other side, we have a team of smug individuals who claim they knew all along that the bubble was to burst, the end is near etc. etc.etc.
I have observed e-commerce with more than a passing interest since Flipkart launched it's first TVC pitching itself as an online bookstore. The day the first book that I ordered came through successfully, I knew our ecosystem was about to change. Soon enough more and more startups mushroomed in an attempt to become a part of the e-commerce boom! In a bid to capture market share, every E-commerce site went hammer and tongs on discounts and offers thereby creating a complete buyer's market. As a consumer I was happy but I always cringed on the inside thinking of the sheer losses that these companies were incurring in an attempt to gain market share. With everybody vying for the customer's attention, the customer became a spoilt brat. Despite what most marketing people would have you believe, most e-commerce customers have no loyalty whatsoever. The customer began looking for the cheapest deal. With easy returns, he began ordering the same product from rival websites only to accept the ones he received first and rejecting the other thereby setting in chain the process of RTO(Return to Origin) for that shipment. The offer to return products if you didn't like it gave the customer the opportunity to order multiple products and then only take one out of five if he so wished. This is turn made bigger dents in the companies' coffers as they had to bear the cost of these returning shipments as well with zero revenue out of it. Countless number of attempts made to one address due to the customer not being available at that time added to unproductive costs. Now these costs were not transferred on to the customer out of fear of losing out on future business. Since one competitor didn't charge the customer for this, no one else did either. E-commerce companies are now stuck between a rock and a hard place.
E-Commerce companies have been surviving on rounds and round of venture backed funding. It is only a matter of time before the money runs out. (The valuation cut is but one sign. Another sign is major organisations sacking large number of people to control their cashflow.) Not only are most of the big players not profitable, they're bleeding cash hand over fist. If they have to build on the foundation that they have worked so hard to build, they have to become profitable and they have to do it now. We're no longer talking about a very distant future here. At the end of the day, the best of CEO's are judged on their ability to impact profitability.
Innovation plays a key role here. New ways have to be found to ensure the product reaches the customer on time, customer satisfaction goes up and which simultaneously helps improve the E-Commerce company improve profitability. Turning profitable will take time. A luxury not too many companies have.
We at DTDC Express Ltd. are working on projects that perfectly suit the need of the hour that will help E-Commerce companies not only survive the financial hurdle that is coming upon them but also thrive in the future. Combining our strength of the biggest network after India Post along with our passion for embracing technology we are building products and services for the future.
The future is now. We are here. What are you waiting for?
Shomik Roy is a second year MBA student at Schulich School of Business, Toronto specialising in marketing. Shomik’s area of expertise lies in marketing strategy and scaling up sales and operations networks.