The Indian e-commerce market has attracted investors and analysts alike for its sheer dynamism and magnitude. However, the journey for e-commerce companies is not all buoyant as the market is riddled with a few impediments too.
COD (Cash on delivery) as preferred mode of payment: Privacy issues, inefficient payment getaways, poor connectivity and lack of trust are the main reasons why consumers go for COD instead of credit/debit card or internet banking that ultimately leads to less business margin.
Infrastructural issues: Supply chain and logistics pose an obstacle when products have to be delivered to remote areas or due to the sheer size of the market i.e. about 1,000 million populations, over 37 million households and about 6, 04,374 villages and 5,000 towns and cities. In such a scenario, last mile delivery can be a huge challenge.
Customer acquisition methods: Customer loyalty in rapidly expanding customer base is a major poser for the e-commerce companies looking to grab more of the market pie. Only 2% of website hits translate into action. Although offering heavy discounts seems to lure customers in the short run, the e-commerce players would eventually have to go beyond discounts if they have to enhance brand loyalty. Upping the customer satisfaction ante is a serious issue with companies today.
Tax compliances: Evolving regulations and varying taxes in different states is a hindrance to smooth sourcing and vendor management and the general growth of e-commerce industry. The operations are difficult to manage in an ambiguous tax environment whilst staying compliant to the laws given the large cross-section of populace.
Rise in SMAC technologies (Social, Mobile, Analytics and Cloud): Multiple touch points by consumers calls for increase in advertising, enhanced customer’s user experience and upgrading to changing technology.
Operational scale in a dynamic market: Stressing the need for mergers and acquisitions, Kumar Rajagopalan, Retailers Association of India’s CEO opines, “The Brick & Mortar (B&M) retailers have to do things to achieve scale and amid increasing consumption and competition, there is a scramble among serious players to increase scale through M&A.”
Despite the challenges prevalent in the e-commerce industry, there are dynamic possibilities to be explored ranging from the upwardly mobile middle class and growth in internet penetration to a young population and spread of market to tier II and III cities. The onus is on the e-commerce companies to stand up to the hindrances in this vibrant market.