E-commerce: It’s time you get your Onions right!

09 Mar,2016

 

By Jaisurya Das

 

It may just be a coincidence but just a few weeks after I questioned the future of online shopping ventures and their dangerous losses, Flipkart has been downgraded by Morgan Stanley.

 

What is worrying is that, if this is how a key investor is reacting, it won’t be time before we see more toeing the line.

 

I wonder if the exit of Mukesh Bansal created a void of sorts, or possibly fear of a possible mass attrition. Well, I am no expert in e-commerce but write I will, from my own perspective.

 

Honestly I think it’s a lot to do with the model and the inflated expectations from the serviced audience. Let us examine a few of the premises used for loyalty prediction.

 

Acquire a customer at any cost. Service is above all.

Brilliant. I tested this with two separate ventures:

Test #1.  Order : Buttered bun: 1, delivered in 1.5hours from well-known bun outlet : Prompt, courteous service , coupled with sms messages and mail confirmation, payment gateway etc. Transaction Value: Rs 25 .

 

Test #2. Grocery and daily needs. Order: 6 eggs and 500ml of coke. Order placed, payment gateway confirmation (2 mails, 2 messages) received in few minutes. Order delivered in 2 hours. Transaction value: Rs 56.

 

Our customers believe in repeat purchase.

Not true. Customers browse like there is no tomorrow. Whoever attracts their carnal instinct, wins! The more you pop right in their face, the more chances are that you will get a clickthrough.

 

The more the customers, the more the revenue.

Rubbish. There are classic examples of huge companies who have the highest volume and value market shares and yet are unprofitable. Let’s take the classic example of the erstwhile music mammoth HMV or Bata (till very recently) for that matter.

 

Remember, profitability is about managing overheads well and how much your yield is per transaction. Volumes bereft of sensible yield mean nothing more than a bunch of Excel sheets!

 

Average transaction value per customer will be Rs 500/ 250 minimum.

Test: Leading e-commerce venture:

Order : One landline splitter. Ordered , 8 text messages, 6 emails , a well-wrapped parcel and a well-spoken delivery man all within 48 hours. 2 mails post delivery. Transaction value: Rs 32.

 

If customers can buy at this cost, it is almost certain that the site will only end up fulfilling the necessity and immediate need of its audience. The “I must have this” segment will slowly move away to another shopping destination which is all about their persona and their exclusivity.

 

The wider the range the higher the sale.

In fact, today’s customer is highly impulsive and tends to take purchase decisions fast. Hence too wide a range can in fact be detrimental since the customer is forced to go through pages and pages of options before hitting the Buy button !

 

The lower the price, the higher the sale.

This is the famous belief that everything cheap sells. What wasn’t factored though is the propensity of our neural networks to reinvent themselves. Price is a deciding factor and yet not the critical ruling factor in a purchase decision.

 

Brand familiarity, peer confidence, persona etc are all significant drivers of purchase. Indulgence is often way beyond price barriers. Its about carnal satisfaction. Its about fulfilling an immediate desire to own….

 

No matter what, valuations will only go skyward.

Well, I guess the proof of the pudding is in eating it.  As Isaac Newton discovered: “All things that go up will come down “. Tragically this seems to apply to even fictional valuations!! We just had one example to show things can go wrong…. No, this isn’t the bubble we saw years back. This is for real and this time with much, much more money!

 

Unfortunately, even the mammoth Titanic sank…Was it an iceberg of overconfidence?

 

Time will tell. This mystery will be unravelled for sure.

 

The market is rocking. People buy any idea. We have it sealed!

How I wish this were true. All of us would be millionaires by now. Yes, a lot of us have seemingly bright ideas yet, not all of them sell! I may think idlis and gun powder delivered in real-time worldwide is a bright idea but when it comes to the consumer, s/he may demand it hot and fresh from an outlet s/he is familiar with!

 

We can exit anytime and get our pound of flesh. From the day we take off, we are only valued higher and higher.

How I wish entrepreneurship is as simple as jumping on a good horse and riding it into the horizon of success. No, you can’t exit anytime, nor can you expect valuations to soar. If you don’t have a winning product and later a brand to reckon with, it’s unlikely that you can exit with any wealth.

 

Venture capitalists and angel investors are not as dumb as they may look. They know their onions well and monitor every rupee that they invest. Some give more rope but believe me, they know when you to tie that fateful knot!

 

When the basic premise of a business and its success can be questioned (no matter how absurd the questions may be!) you can be sure that there is problem somewhere.

 

Consumers aren’t idiots. They are human beings with a well-developed brain that can seamlessly skim through millions of data bytes to arrive at one quick answer;  Buy or Skip!

 

Entrepreneurs and start-ups underestimate the consumers capacity to think and rationalise since all inferences are based on their own imagery of what is good and what isn’t.

 

Today’s consumer isn’t a reflection of anyone. Each individual has a unique capacity to emote and connect, be it with a brand or a peer. This enables them to gather infinite pulses from the marketplace that most people cant imagine or decipher.

 

What triggers purchase? What enables a decision? What prompts someone to leave one site and go browse through the other? What prompts a consumer to stop just before s/he hits the Buy button and abort the purchase ?

 

This is just a glimpse of the unexplored terrain of the human brain. It takes much more than a great idea and an over enthusiastic bunch of youngsters to build a company and brands that will stand the test of time ….or the human brain!

 

Today, if I may take the liberty of quoting Galileo…

 

“ I do not feel obliged to believe that the same God who has endowed us with sense , reason and intellect has intended us to forgo their use ”

 

Be sensible. Please do take instructions if you are in unfamiliar territory.

 

Jaisurya Das, the maverick media-evangelist, eats, sleeps and romance’s brands. His cerebral consulting interventions are aimed at making brands powerful and sustainable. He is also the Contributing Editor of MxM India. The views expressed here are his own.

 

The views expressed in this article are his own.

 

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