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Are Indian E-Commerce Companies Stretched Too Thin?

23/08/2015 8:37 AM IST | Updated 15/07/2016 8:25 AM IST
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Woman using tablet computer for online shopping with parcel delivery

In India these days there is a start-up fever. From just graduated students to NRIs returning from abroad, everyone is looking to roll up their sleeves and become entrepreneurs. The activity is mainly concentrated in the online and more specifically the online retail space - an area where barriers to entry as yet are low, incumbents weak or non-existent and government interference in the form of licenses and approvals minimal.

It isn't hard to see why online retail or e-commerce (pardon me for using these terms interchangeably during this blog) is seen an ocean of untapped opportunities in the country. B2C online sales generated $10bn revenues in 2013 in India. This figure is only 3.3% of the online sales recorded in China in the corresponding year. 70% of India's online trade happens in the travel segment leaving e-retailers and other niche players with an open frontier in which to establish their first mover advantage. The market trends are positive as well - the industry grew at a Compounded Annual Growth Rate (CAGR) of 34% since 2009. India's online customers are young (75% in the age group of 15-34 year old), have rising disposal incomes and are increasingly willing to use their 3G connections to shop online. India's endemic broadband penetration means that firms are now moving solely to the mobile platform in a bid to tap a market where mobile penetration is at 140% in urban areas.

"[I]ncreasingly there is evidence that operational capabilities for e-commerce companies are struggling to keep pace with growth."

Amidst all this growth and excitement though, is the question asked in the title of this blog. I hate to make generalizations based on a couple of personal data points but as I researched more in this space my experiences resonated with what industry experts say.

A few weeks back I placed simultaneous orders for separate books on both Amazon India and Flipkart. I have been a loyal Amazon Prime customer in the US for the last two years but this was my first try in India. On the day of the scheduled delivery, Amazon emailed me that they could not locate my address and needed detailed directions. This was a bit surprising given that most of my package deliveries have never had trouble locating my place. Nevertheless over a quick phone call with customer care, I shared more specific landmarks and was promised that this would be passed on to the delivery team forthwith. Two days later Amazon sent the same email about not being able to locate my address and asked me to contact them again. When I called back and mentioned that this was the second time that the same conversation was happening, I was met with apologies and promises of a quick delivery. The next day Amazon did deliver but turns out they were using the speed post services of India Post (the government controlled Indian Post Office service) - either their customer care ops failed to transfer the information or the delivery guy was too lazy to care.

I have been using Flipkart frequently in India over the years to order books. This time around the routine was the same - order placed, payment made and confirmation received. A day before the scheduled delivery, Flipkart wrote to me that the order had to be cancelled since the book was not in stock with the seller. This was a surprise to me, given that when I placed the order the book was appearing in stock and such a lapse has never happened in all my previous dealings with Flipkart. To their credit, Flipkart were quick to issue a refund and send an apology email, yet I was left wondering whether to take their website's word at face value going forward.

"Poor customer experience will dissuade customers and make them retreat to their tried and tested options."

As I said above, two swallows do not destroy a summer but increasingly there is evidence that operational capabilities for e-commerce companies are struggling to keep pace with growth. A recent KPMG report points out missing supply chain links and poor last mile connectivity as hindrances to the growth of the industry. Flipkart itself suffered a fiasco last year when its Big Billion sale was marred by operational glitches and received negative feedback on social media from customers frustrated at not being able to find the 'promised deals'.

Of course, India isn't the first e-commerce market that is looking to marry operational maturity with growth exuberance. The big daddy of retail in the US, Amazon, often gets panned for its glitches or unsatisfactory 'deals' on big sale days. The key issue for Indian players though will be not so much around offering as around fulfillment. Indians are as yet not wedded to the idea of shopping online - they are only just warming up to it. A vast majority of the market lies yet to be tapped. Poor customer experience will dissuade customers and make them retreat to their tried and tested options. In the Flipkart case, I eventually ended up buying the book from a bookstore in Central Delhi.

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