The real eCommerce revolution

Indian ecommerce

Had an interesting conversation with an investor friend yesterday, who is really active in the start-up/seed stage. We were talking about the many niche plays that are coming up with the well funded steep growth we are witnessing in the ecommerce industry.

While there is no doubt, that Indians have started buying/shopping/ordering online and in a big way, what can also not be debated is the uniqueness of the Indian model, which throws up its own set of challenges. Lets look at a few of them:

  • Almost 70% of our ecommerce transactions areCash-on-Delivery (COD)
  • Many big portals have seen return-rates upwards of 30%
  • Current ecommerce growth is happening predominantly from tier 2 and tier 3 towns

What all of this translates into, is some serious logistics issues namely, collecting payments from COD customers, inbound logistics for returned goods and finally having an efficient distribution network, which is spread out really far and wide.

A few interesting plays are being introduced in the Indian economy

  • Players like Chhotu.in who are focusing only on ecommerce logistics including cash collection. This company has a simple pitch that it will help reduce the return rates and also ensure higher efficiency on the COD segment.
  • Niche players who are focusing only on the cash management for COD piece. One such player is riding on the positioning that it will enable ecommerce players to get sales proceeds into their accounts within x days. A payment guarantee that allows the ecommerce player to do what it does best- focus on demand generation and driving transactions.

If these challenges are very unique to our economy, it could mean the difference between the success of a local experienced player vs the success of a global ecommerce giant like Amazon.com.