When 'startup' becomes a dirty word - why e-commerce websites are failing in a bad economy
15th May 2013

The news is grim for the e-commerce industry in India. Every day we hear about another e-commerce shop folding up. Those that are too big to close are laying off employees, a precursor to winding up. Its truly sad as the industry has a lot of potential to truly change the face of shopping in the country. But before it achieves its potential it must surmount some formidable obstacles.

The 'Startup' mentality must give way to a 'Business' mentality.

As a person running a business for 10 years I don't like the term 'startup' as it is used today. It seems to be used as some kind of license for mediocrity and experimentation. We get many calls a week from ' start ups', which is simply their way of saying, 'Hey, I don't have a big budget so don't quote me your normal rates'. Not a very motivating way to approach a vendor.

The 'startup' mentality affects everything from planning to execution and the general attitude is a 'hail mary' effort. If it works great, if not, too bad. As a serious business owner who has been busting his hump for the last 10 years, the idea is revolting.

If you want to do serious business with serious people then let go of the 'startup' mentality and take on the 'Business' mentality. Raise serious funds, work on our business concept, avoid shortcuts and gambles and plan for the long term.

The Facebook effect - the one in a million shot - is it a business or a lottery?

The media celebrates those successes who get bought for a zillion dollars for less than a years work. However it fails to mention that for every one idea there are millions who have tried and failed and lost. Sounds alarmingly like a lottery. Everyone dreams of having the next Facebook. But the odds are severely against them.

VCs are mudding the water with their money and large investment spreads - the new age gamblers.

Investors in more sane times used to invest where there was some kind of physical or intellectual assets present. That seems to be a old idea.

VCs operate on the principle of spread a little money over a lot of ventures and see which clicks. Then cash in on the one that clicks. No matter how much due diligence they say they are doing, most VCs are investing in second rate ideas and very chancy teams.

The VC money creates a kind of feeding frenzy among the young techno savvy crowd but the end results seem to be either me-too ideas or mediocre gambles at best.

Nothing to fall back on when the economy goes to sleep

A lot of my clients who have brick and mortar businesses next to the online ones. They could fall back on them when markets tanked. Their physical shops and loyal customers (created over several years of painstaking work) are worth something. No such luck with the dotcom crowd.

When the economy goes to sleep as it seems to have done right now, there is nothing to fall back on. The same people who cruised by during the good times are realizing that they have neither created loyal customers or any kind of infrastructure worth something. In a nutshell - when times are bad, they are not worth anything.

A Me-too mentality has to be replaced with a truly unique approach to the market.

Recently a prospective client was not getting sales from his e-commerce website. He had subscribed to this web portal that allows for the fast creation of the e-commerce sites with a common interface and a generalized catalog and shopping cart. The problem was that all this person did was pile on his products and created a e-commerce website that looked just like the hundreds of others from the same web portal.

No differentiating factors. No unique approach. No sales.

From now onwards, unless they have a very deep pockets, each e-commerce player must approach the market with a truly differentiated creative approach. One size fits all is suicide.

Purse the 'Long Tail' - create and exploit niches within your target marketplace.

If you don't have the ammo and deep pockets to fight for the head of the market than go after the 'long tail'. There are many many niches in each market that are being under served. Find them, dominate them with creative offers and preferential treatment and go smiling to the bank. You might even be able to get a great margin in these niche markets. Remember, no big battles, just small skirmishes.

In conclusion I would say that the Indian e-commerce market has a long way to go in terms of professionalism and maturity. However considering the size of the market and knowing us Indians, i think its a market with tremendous potential.

Cheers,
Ron