How not to start your new e-Commerce business

 

 

An assortment of United States coins, includin...

An assortment of United States coins, including quarters, dimes, nickels and pennies. (Photo credit: Wikipedia)

 

Most of us know at least a few facts about Indian e-Commerce Industry (e-Tailing industry in specific) that 2013 is a tough year because of a few facts:

 

#1. There would minuscule investment coming from institutions for e-Tailing industry. And hence each and every player needs to operate on shoe-string budget.

 

#2. And since many players would not be able to comply and hence default. Some would want to get bought by other existing players, and the unfortunate ones would have to completely shut down the business.

 

As a matter of fact, I clearly know at least two e-Tailing companies which were struggling since the last quarter of year 2012, and now after failing in all their attempts to survive, they have decided to shut down. It hurts to see such harsh developments in the nascent phase of this industry.  However, I personally believe, the blame lies with the people who started these businesses with a set of biases, and hence such outcomes were always bound to appear.

 

Most of the people from e-Commerce industry I have spoken to have already had certain things reserved in their mind, and when the industry dynamics didn’t like those biases, they ran short of ideas and ultimately collided with the wall. Some of the most popular and hazardous biases which I have come across in past few years can be summed as below:

 

#1. An e-Commerce company is all about selling it to someone else at some point of time. These times must be one of those crazy times when people start their businesses with an exit already planned. When times are good and investors have very limited avenues for investment, you could have an exit option readily available. But building businesses with a exit option is much like getting married with a divorce plan ready. The biggest demerit of such a thought process is that – you business runs in an impatient manner, you want some quantifiable results/outcomes each and everyday while completely ignoring the long-term impact of those results/outcomes. To illustrate an example of the impatience – All the funded companies spent massive amounts on Customer Acquisition, without even considering the fact that customer remains loyal till the time discounts are deep, because they were chasing just one target – Increase the number of registered users. [Long Term Impact - Every portal acquired those registered customers, but they do not return to the portal anymore.]

 

#2. ‘Copy’ instead of innovate. Recently I was speaking to a Fund Manager (who is a new-comer into the Venture Capital industry) about his investment selection criteria. I was aghast to hear that he was so much in favour of copying things from other successful models that he has discouraged all his companies from ‘wasting’ time over trying to do anything new. His exact words were – ‘Since those models are working properly, copy and deploy the same. No point in innovating and making the making the delivery time longer.’ This whole conversation left me surprised because – #a. The investment companies do not care about innovation, they just need their money back with some multiplication happening over the set time-line, So it makes sense for them to suggest copying and exceeding;   #b. When you copy businesses to build your own, you always remain a laggard, you will always have to wait for the new market moves to offer something new from your end. And this can not be a long-term strategy of any company.

 

#3. Organic Growth? Whats that?  Most of you would have come across the joke which is popular among software engineers – “My Project Manager believes that if 9 females collaborate, a baby can be delivered in 1 month.” Now the same joke applies to e-Commerce companies in India. Every new company believes that by buying their revenue, bombarding the market place with advertisements, TV Commercials, emails, and other affiliated marketing they can not only retain customers they can get a spike in their usage patterns. However, they have forgot just one thing – Unless you grow organically, you are bound to be forgotten as soon as your marketing budget takes a dip.

 

#4. Serving Investors, instead of customers. My experience with most of the e-Commerce players reveals just one thing – They all serving their investors instead of serving their customers. In a strange experience, one of the managers came to me and asked to make a list of things their competitors were doing. When asked the reason for such a list, he totally surprised me – “We will pick up 5 things and implement them in our model and then show the same to the investors during the next months meet.” That manager was least bothered about the customers or anything else, he just wanted to put a face saver in-front of the investors.

 

All the above might look like I am trying to speak to academically, but my experience and observations say that these academic sounding statements have been turning businesses, and at least letting them sustain respectfully. And that is any day better than seeing the business shut down.

 

 

 

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