To FDI or not to FDI in E-commerce: Sandeep Murthy Lightbox

Wednesday June 25, 2014 , 3 min Read

But maybe that’s not the question. There is a lot of talk nowadays about FDI in ecommerce – who is for it, who is against it and why. I would suggest that rather than debate the merits of FDI, we should shift the discussion to how to effectively offer consumers the best services. This is ultimately what matters the most. The discussion about FDI policy should start with what drives customer value and how impactful policy could be in facilitating that. The most salient contributors to customer value are:

– Great prices

– Great user interface

– Great customer service

If you can nail these three things, you are well on your way to creating something that customers will fight to protect. If your customers are fighting for your service, you can be sure that policy will be structured in a way that allows you to continue to deliver that value.

Internet based business models leverage technology to remove inefficiencies and shift that margin (value) to customers. In certain verticals of ecommerce, companies have the ability to source in a unique manner thereby disrupting the conventional margin structure. Data, technology and sourcing are the main drivers of customer value creation – not policy.

Sandeep — Policy does have an impact on how entrepreneurs approach the delivery of customer value, but it is not a major driver. In a fair and transparent regulatory regime, policy should be viewed as an externality that will be based on what is best for the customer. **Entrepreneurs should focus their attention on driving a large and loyal customer base that will in turn ensure that policy is delivered in a manner that supports their business.**

One of our portfolio companies has been doing just this. GreenDust has remained singularly focused on delivering customer value by leveraging its unique sourcing skills, technology and data. By focusing on nurturing its relationships with customers, it has quietly built a solid business based on the sale of refurbished products. The company repairs products and sells them at unmatchable prices to consumers who may not have otherwise had access to these products – a market need that has been rewarded by a 40% repeat purchase rate. This is a customer value proposition that will survive no matter what policy changes evolve and one that our customers will fight to protect.

While the policy debate is interesting, entrepreneurs and investors should focus on what they do best –innovate and deliver a scalable, sustainable customer value proposition. If they do this well the customer will be their best policy advocate.