Key Metrics in an Ecommerce Business

Having started up in ecommerce, I feel that it is a very complex business which requires a lot of effort, resources and patience to become sustainable.

The business is a lot about tracking key metrics and how they evolve with the growth of the business.

Customer Acquisition Cost – The CAC is a key metric to check whether the business is spending more on acquiring customers than what it is making from them. This involves minimizing the cost of acquiring website traffic and optimizing conversion rates.

Ticket Size – Since most ecommerce businesses lose money on smaller orders, increasing ticket size is a strategy used by most ecommerce players to become profitable.

Operating Profit – This is the key metric which is tracked to see when and how the business will become profitable and sustainable. Ecommerce in India has matured from an Industry which is focused on growth to one which is now focused on sustainable growth.

Startup Model – Discount Ecommerce

THE MODEL: A platform which offers its users the best prices on fashion and lifestyle merchandise by tying up directly with the best producers and manufacturers all over the world. It sources in demand products from factories and provides the same to customers at discounted rates.

STARTUP: Lesara (German startup)

WHAT I LIKE

Core Idea – Providing users with better prices by cutting the middlemen.

Benefits for Customers – Customers get the best prices and a secured transaction platform. Also the startup offers easy returns within 30 days.

Curation – The startup select the best products offered at the best prices and offers them to customers.

CONCERNS

Business Model – Ecommerce is a difficult model to sustain. Also buying directly from factories will require more capital and will tend to increase logistics costs in purchasing.

Competition – Big ecommerce players have existing relationships with a lot of companies and can implement this as an extension of their existing businesses.

Startup Model – Platform for Ecommerce Support

THE MODEL: A platform for entrepreneurs looking to start an ecommerce store. A bundle of back-end services are provided to ensure smooth functioning of the store. Services include legal formalities, sales and promotion assistance, payments and security infrastructure, customer service modules and an accounting system.

STARTUP: Incir (Turkish startup)

WHAT I LIKE

Core Idea – With a rapid rise in ecommerce stores, a support platform is a good business model.

End to End – Providing a comprehensive list of services is key to ensure the best experience for the customer and higher retention for the startup.

CONCERNS

Competition – Established players pose a big threat to local players like Incir. Certain services like legal and accounting formalities cannot serve as a sustainable differentiator.

Dogspot – a Delight for Dog Lovers

Dogspot is a portal where you can buy the widest variety of dog products in India. Also they have a community where you can discuss anything related to dogs. I have been tracking this website for a while and have seen it grow from stage to stage.

They started out as a community for very long and then got into ecommerce a few years back. Initially they were selling products of various brands. With the big horizontal ecommerce players entering this space, they are moving towards creating a private label.

WHAT I LIKE

Speciality Store – They are sticking to a niche and have emerged the leaders in that space.

Strong Community – It is the biggest and strongest community for dog lovers. It serves as a great tool for engaging users.

Very Targeted Market – Dog Lovers & Owners. They are building tools for them and hence the engagement is higher.

Private Label  - Dogpsot has a big user base and is now pushing it’s own private label. The good thing here is that the margins are higher and a private label is sustainable in the longer term. They are also selling their products on other websites like Amazon.

CONCERNS

Small Market – The market size is quite small for dog products in India.

My Suggestions

Demerging – They are currently running 2 businesses, a community and an ecommerce store. They should demerge both of them as both have different growth potentials and challenges associated with them. This will help them unlock value in the future.

I feel that Dogspot has created a strong place for itself in this niche and is currently in the process of pivoting it’s business model into one which looks more at profitability and sustainability. 

3 Ways Whatsapp Can Help E-Commerce Companies

Innovation is the key in today’s e-commerce space, where the competition is getting steeper by the day. New techniques to improve customer experience, reduce costs and increase the top line is always on the minds of the upcoming e-commerce companies.

Here are three ways in which Whatsapp can help solve some of these issues for these companies: 

1. Improvise the delivery system

E-commerce companies are looking out for new delivery mechanisms to reduce their cost, optimise spends and decrease the total order delivery cycle. Various new techniques are being adopted: some are taking the kirana route to deliver the goods, setting up pick-up stores and others are tying up with the already existing delivery systems like the Indian Post network and the famous dabba-waalas of Mumbai.

Whatsapp can also help improvise the delivery system of e-commerce companies. Customers can be encouraged to share their location on Whatsapp. Getting the exact coordinates of the delivery location can help the companies in faster delivery by choosing the shortest route to optimise their operational cost. They can plan multiple deliveries along the route to further optimise the delivery mechanism.

2. Faster grievances redressal

Whatsapp is immensely popular among the mobile users and has an active user base of 800 million and it is increasing every day. With Whatsapp’s user friendly chat and call facilities, e-commerce companies can reach out to the customers faster and in an efficient manner. Customers can share the images/pictures of the damaged goods without having to go through the hassles of the current procedure which includes writing an email to the support team, calling customer care innumerable times and waiting for your turn to express the pain point. With Whatsapp, it can be effectively communicated over the chat.

3. Groups can be created for push marketing

Groups can be created on Whatsapp on the basis of customer segments defined and targeted marketing can be achieved at minimal cost. For instance:

: Discount coupons can be sent to price sensitive customers and brand conscious customers can be informed about the sale, discounts and promotional offers applicable on their favorite brand.

: Groups can be created on the basis of geographical regions and location specific information can be shared on the group. Such as, discount coupons on electronics exclusively for people residing in South Delhi

Email-marketing is losing its effectiveness as the customers today are bombarded with promotional emails from restaurants, online stores, banks and even recruitment companies. New avenues to catch the attention of the ‘ever-mobile’ customer needs to be explored and Whatsapp definitely has the potential to be exactly that in the coming months.

(article written by Anamika Singh, Associate Consultant at Mindtree (India).)

The Business of E-Commerce

Ecommerce includes any commerce which happens on the internet, be it buying and selling of any products and services. This includes a host of online business industries like online travel, retail, business/consumer services etc. Also the business can be conducted between 2 businesses (B2B), a business and an individual consumer (B2C) or between 2 individuals (C2C).

During my work in Beveragewala, I have seen multiple models of ecommerce existing in the market.

Inventory Model: The seller buys and maintains inventory and sells it online. The benefit is that the seller controls product/service quality and all logistics around it. On the other hand, it also means a higher capital infusion required to buy inventory. Private labels of goods/services, online travel tend to work on this model.

Marketplace Model: The seller simply acts as a platform for commerce between buyers and vendors registered on it. It provides all logistics and payment support around the sales which happen on it’s platform. The benefit is lower capital required as no inventory is maintained. Big ecommerce companies like Amazon, Flipkart etc. tend to work on this model.

Drop Shipment Model: The seller takes an order and passes it onto the vendor. The vendor directly ships the product directly to the buyer. The benefit to the seller is no inventory and logistics required. However, the buyer’s experience, and hence the seller’s brand, is totally dependent on the vendor. This model has not found much acceptance and has been replaced by the Marketplace Model in most cases.