Why you should love a downturn in e-commerce
In last 10 years of being in India, both as an entrepreneur (Founder Craftsvilla) and as a VC (Nexus Venture Partners), I have had the opportunity to see few of the downturns starting with one in 2008-2009, 2012-2013 and now 2016-2017. As an individual, I have started to love both of the startup seasons: downturn winter ‑ so that fundamentals of business can be built stronger ‑ and upturn summer ‑ to ride the wave up based on all the good work done in the downturn. If you are one of those who hate downturn, following are the reasons to cheer up and start loving it.
- Lesser competition: As the heat goes away, so are all the frivolous competitors. You suddenly are blessed with lesser competition. Best entrepreneurs use this time to sharpen themselves rather than worry about the competition overpowering them. In these times, your biggest competitor in You! You need to become better than yourself and only You can bring yourself down in these times - not your competitor. So the best thing is to focus on your gaps, deficiencies, weaknesses and use this time to fill those.
- Lesser cost: Downturn is the best time to find your Least Cost Footprint (LCF), which is very much needed if you wish to succeed as a business, especially if you want to become profitable in e-commerce. LCF is the cost structure where you sustain through your cash flows. We (Craftsvilla) found our LCF in 2012-2013 when we ran out of money and survived the downturn then. You can arrive to your LCF either by gradually trimming down the costs if you have enough cash or by quantum reduction in cost if forced by cash crunch. The good thing in downturn is that your HR/marketing costs should reduce at least by 50 percent (in e-commerce context) because of lesser cost/employee and lesser cost of acquiring a customer. Use this time to optimise your costs.
- Better employee retention: Employee churn is the biggest disadvantage of upturn summer as lot of employees leave for better pastures. This reduces a lot in downturn winter, which gives the organisation a lot of stability to complete their long-term goals and projects, especially in technology. Use this time to bring the best out of your employees and use that energy for the right actionable goals.
- More time for business analytics and experiments: The best thing about downturn is that it gives you more time to analyse and experiment, which are essential for any startup to succeed. We (Craftsvilla) have used this time to analyse all our funnels, operational efficiency and marketing efficiency. As a result, we have improved our funnels in some cases by 2X! Use this time to become champion of data and make that as an effective tool to build business in all seasons.
- More focus on long term goals: Downturn forces you to be more focussed in your approach. It allows you to think more long term and therefore steer your actions towards clearer long term goals. We have defined our long term goal as profitability and IPO. We have aligned everyone to that and everyone knows that only good things we do will get us there and there is no short cut to it.
To exist is to win - is a fundamental mantra of e-commerce. So you need to absolutely survive the downturn winter however harsh it may seem to ride and win in the upturn summer whenever it comes. To survive, you need to absolutely love this downturn winter and keep your spirits high. This is not the time to whine, but this is the time to shine!
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)
