3 Major Challenges Faced by E-Commerce Companies in India

by Manish Porwal, AVP— Business Development
 

“E-commerce has seen an unprecedented rise in business in the past year, with Paytm joining Flipkart and Snapdeal in the eight-member unicorn club. A report by Bank of America Merrill Lynch in 2015 stated that the e-commerce market in India will be worth $220 billion by 2025” as highlighted by YourStory. Having worked closely with Indian e-commerce giants like Paytm, Myntra, and Amazon, I would be sharing some of my observations w.r.t the challenges faced by E-commerce companies in India.

 

Survival of not the fittest but of the most funded

Players with deep pockets like Flipkart, Amazon, and Snapdeal are making it really difficult for the smaller and newer players to subsist in the market. Seed-funded startups are finding it increasingly difficult to raise a Series A round as investors are more than eager to see some profitability at a seemingly earlier stage. Till a year back, the same investors were fine with a supposed loss making KRAs of aggressive customer acquisition.

 

The discount model needs to change and companies should start focusing on unit economics. With a billion-plus population and everyone seeking convenience and free delivery, the ecosystem is more than ready to run without excessive discounting.

 

Operational Challenges

Larger players are plagued with issues in delivery, personalization of offerings, cyber security, and payment issues which have affected the value chain adversely. On-ground challenges like the previously unheard-of salaries for delivery boys and unreliable COD issues have made them take a drastic hit on profitability. Quite a few eCommerce ventures subsist on the fee obtained from sellers on their platform and not their own end customer sales.

 

This is not a sustainable practice as this leads to more reliability on the distribution network for holding inventory and logistics which ultimately leads to bad quality standards. Also, the increasing number of returns is another area of concern for these players and needs to be tackled.

 

Core Logistical Challenges

Speed of delivery is as important as the product quality for a customer. We wouldn’t be wrong in saying that logistics could be the defining factor for the success of e-commerce companies in retaining their customers. Last mile deliveries account for 30% of all logistics costs & there is still no effective resource utilization by logistics service providers. Hence logistics companies are now relying on tech companies to provide them with solutions, which can actually improve the overall efficiency and support the entire ecosystem.

Some of the logistical challenges can be solved by technology companies who have solutions to the following questions:

How do I locate the shipments in real-time across line haul and last mile?

How do I measure my service levels for same-day/next-day deliveries?

How long do my shipments remain unscanned even after arriving at the hub?

Is there a trend in delivery delays?
 

There aren’t too many companies in India that have been lauded for answering the above questions in entirety and with accuracy. LogiNext is one of the few who have been successful in this space and answered these questions for more than 200+ enterprises and 50+ countries. The aim is to achieve organized logistics by reducing the challenges faces by E-commerce companies in India. Click on the red button below to talk to an expert.

 

 

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