80 : 20 Rule can help to reduce losses & profitability can be achieved .
October 14, 2017
Everyone knows about the Indian e-commerce business journey and its breathtaking losses who keep themselves updated about financials . There are thousands of articles and reports publish everyday about e-commerce but my point is slightly different .
70% Indians lives in rural & tier 3 cities where currently no infrastructure to supply online goods . Amazon is leading and profitable player because it has managed to supply and deliver products to every corner of USA and mostly there are urban and developed area, where people have got good amount of disposable income and received basic understanding of technology .
Another & biggest area is advertising , marketing and Infrastructure & technology . Company like flipkart has invested million rs into setting up technology , hired people who are managing all department and processes . Here is the catch , for example to cater 10 MN people flipkart developed a website where people can buy products online and all the processes are automated , to do so flipkart invested 100 mn rs . Now the question is after adding up other fix cost and advertising cost your total spend to serve 10mn people is approx 200 mn. and your total revenue is only 150 mn so you had burnt 50 mn .
Now how to cover this 50mn and start to make profit .
You have infrastructure , people and process just try to add more customers from this 70% untapped market , dont expect your same customers to buy more it from you, it is bad idea . Forget loyalty a dynamic website where you have manged to get people's subscription or get him logged in to your website does not make anybody loyal . If one get good deal some where else people will buy it from there any point of time . Wait i might me wrong for a moment , flipkart giving amazing services so people are stick and loved but this has cost attached to it and so on i will stop once capital runs out .
Summary : Indian E-commerce player really needs to come out of advertising war and discount bleeding propaganda . The best part would be add few more small towns and cities in their network and churn out more business . There are small towns in Gujarat & rajasthan or major states where potential exist .
Sincerely regret if i have not been correct in any of fact .