11 December 2019

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Do the E-Commerce Sites Really Make Money?

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Internet has revolutionized almost every aspect of trade and commerce and created great new avenues to mint money by harnessing the power of seamless connectivity at your fingertips. In this connection, credit should be given to Michael Aldrich, the inventor of online shopping, nowadays known as e-commerce which has really changed the way business is transacted. In broader sense, e-commerce can be dissected into e-tailing on websites, compiling and use of demographic data, electronic data interchange and business to business transactions.

The Present Scenario & the Indian Experience
Global trends indicate that the growth of e-commerce industry is on the positive axis with United Kingdom and USA being the leading countries. There would be no doubt in saying that the sedentary lifestyle and increasing urbanization with less time for offline shopping means more clicks on online shopping sites. It is estimated that the internet user base of India is 100 million which is expected to increase in the years to come and out of this strength currently in India there are 10 million people who opt for online shopping. To get a clearer picture it would be prudent to have a look at the growth rate of online shopping which according to estimates comes close to about 30% CAGR (compound annual growth rate) while the corresponding global growth rate is around 8-10%.

These estimates clearly show that the market is surely expanding with the consensus that the growth is at an infection point that results in significant change. According to reports, the Indian e-commerce market worth was nearly $2.5 million in 2009 out of which 75% market is related to travel whether air ticket or railway booking, mobile recharges and hotel bookings. With increasing modernization, changing life and taking cue from the figures, it is self-evident that the market surely is progressing. In this connection, Forrester says that the e-commerce market in India would be the fastest growing within the Asia-Pacific region with a CAGR rate of over 57% by the turn of the next decade as India’s e-tailing market touched the staggering heights of six hundred million dollars in 2011 with an estimation to touch the $70 billion mark in 2020. These figures show that there is some serious business that the e-market companies are undertaking and making a mark for themselves in the Indian market.

The Right Focus
Cash on Delivery and Direct Imports are two factors which make the e-commerce unique to developing countries like India with market research showing that nearly 80% of the business is carried out through the former. The key catalysts behind the Indian e-commerce companies that make give us an idea that this market has much more to offer are the following:

  • Increasing broadband connectivity and introduction of 3G.
  • An expanding middle class who have a higher standard of living.
  • Easy availability of a wide range of products at ones disposal
  • Busy lifestyle, increasing urbanization and less time for offline shopping.
  • More views and clicks on online classified sites where people can not only buy but also sell products.

Social Media, E-Commerce & the Future Inter-relationship
In spite of such optimistic figures and trends, the recent economic meltdown also held sway over e-commerce and they were no exception to the rule when it came to incurring heavy losses leaving them wheezing for survival. This means that a large chunk of expenditure that was earlier spent for e-commerce marketing would have to be curtailed. Social Marketing sites are a blessing for these companies as they can effectively use this platform to generate sales and at the same time ensure that their out reach is broadened.

Common Pitfalls in Indian Conditions

  • Increased competition in last year.
  • Wrong perception that E-commerce is completely technology based and not related to physical customer satisfaction.
  • The negative propaganda on dissatisfaction on the web is ten fold as compared to the real world.
  • The high rate of COD failures that the companies have to bear with two way courier cost.
  • Lack of experience in web shop management that results in disruption of the E- Commerce fulfillment cycle.
  • Failure to integrate website with local vendor inventory management system leading to a high rate of undeliverable orders that casts a doubt on the capabilities of the company.
  • Short term outlook of investors in a business that is a primarily a long term proposition.

In conclusion when it comes down to answering whether e-commerce companies really make money, the answer surely comes in the affirmative with a graph line showing a positive trend with some special attention that should be paid when it comes to the context of Indian markets. However it is but evident that no gold rush sustains itself forever as the competition increases and the margin of profitability gets squeezed. While the E- Commerce sites in India are currently making great business the future may not be so bright given the conditions typical to the Indian consumer who can hardly be satisfied.

Do the E-Commerce Sites Really Make Money?

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