“Why have you never thought of venturing in this business enterprise and minting money using your digital marketing experience and expertise?”
I’ve been asked this question every now and then while working with premium brands, large organisations and start-ups. Ecommerce is such a buzzing catchphrase in market these days! Many established businesses are modifying this model based on their product offering and disrupting the market.
I have chosen NOT to get into this market. Let me first break the code – the code that I have learnt based on my own experiences in the industry so far.
I have had a unique professional experience over the last 15 years. Seven years in core supply chain in IBM coupled with a decade of digital marketing experience, most of it as the CEO of OMLogic, which we have lovingly, passionately built into one of the top social media and communications agencies in India. I have worked with at least 25 ecommerce brands over this period.
Fundamentally, I disagree with the way most e-commerce companies look at ecommerce. Ecommerce is not about user experience or ease of shopping. Yes, that is a value proposition but ecommerce needs to be more than that.
Lets first look at the rationale and the principle of commerce. A product gets created by a manufacturer, assume for a price X. By the time it gets into the hands of the consumer, the price is 8-10 times of price X. Depending on the product, the multiplier may change a bit.
Fundamentally, ecommerce is simply about optimising value in this supply chain. The main motive behind ecommerce brand is investing all the efforts to reduce the 8-10 times margin to a 5-6 times of a product’s price. This enhances the value proposition of consumer’s offering in terms of reduced cost and enough of a profit margin to sustain a business. Everything else including user experience, ease of shopping, etc are just add-ons.
The only ecommerce company I have seen that gets it is Amazon (and Walmart, but they were experts in supply chain before they got into e-commerce). And this is what Flipkart, Snapdeal, Jabong or Myntra have NOT been able to replicate for the profitability of their ecommerce ventures.
Most brands I have met in India don’t even understand this concept. Ecommerce in India is a fad. Most people are starting it because its easy to get funding in. Don’t get me wrong. I am sure some of the smarter players will break this code and really get to true supply chain optimisation. But none that I see now.
Now the question is how can you achieve that?
Well, this is the beauty of the ecommerce business model. It provides ample bandwidth to e-tailers to reduce costs and provide value to customer experiences.
So, how do you optimise it? Well, the factors are fairly simple and basic ones:
- Save on rent since you may not have a store
- Save on stock inventory, so maybe there are savings you get in a transaction
- You are going to have lesser middlemen, which may save your distributor costs as well
- Save on logistics
- Save on direct product sourcing
- Save on marketing since you get digital well
- DO NOT squander money on offering unaffordable discounts
- Last but not the least, hire an expert supply chain professional
Having worked with ecommerce ventures, I know what works and what doesn’t in this booming business model. And this is where my real reason for not starting an ecommerce venture comes into equation. I, personally, am not the guy who can get my hands dirty in a product’s supply chain. Hence, instead of working on an ecommerce venture, I participate as a marketeer and continuously try to add value with them in supply chain optimisation, although most of them are only interested in scaling, getting funded or getting more funding in. The day I meet a product expert who has a supply chain for a product well figured out, I will partner in an ecommerce venture. In the current scenario, I would love to partner with Big Bazaar. They have a Godzilla of an opportunity to have a successful e-commerce venture twice the size of Flipkart!