eCommerce companies in India are planning deep discounts, exclusive merchandise, cash-back schemes, and other product promotional offers to attract customers. eCommerce software solutions, if used wisely can streamline the digital business models of enterprises.
Given that the Indian economy is a proven consumption driven engine and that the Indian consumers love to shop till they drop ahead of the festive season, there are certain elements of e-commerce software solution development that need to be borne in mind.
A look at the macroeconomic fundamentals offers an overview into the Indian e-commerce scenario that exists. These macroeconomic fundamentals are likely to remain unchanged and at best expected to enhance going into the festive season.
- First topography and geography play significant roles in the Indian e-commerce market. While tier one cities have always been lucrative markets for e-commerce companies in India, the good sign is that tier 2 and tier 3 cities are emerging as markets of the future. This positive trend notwithstanding, internet penetration and mobile connectivity are issues that may undermine growth prospects.
- Second, India is moving fast on the learning curve with regard to technology. The adoption of 3G and 4G internet connectivity is likely to grow in the near and immediate future and thus likely to add to the online consumer base. With the doors to enter the market being open, the threats of new entrants are likely to persist for the established players. New entrants are likely to bring price warfare and disruptive innovations to the forefront.
While profitability remains the major challenge and should ideally be seen as the key performance indicator, a drive towards luring investors and venture capital firms is forcing e-commerce enterprises in India to focus on gross merchandise value rather than profit margins.
Some of the established e-commerce companies in India are working on scaling up their business models. This means that those companies that are scaling up are building business models for sustainability. Companies that fail to scale up quickly are likely to be acquired. There is a strong indication of merger and acquisition activities gaining momentum and this shall consolidate the industry into a more stable one in the immediate future of a year and a half.
Yet another feature that is fast emerging is the swapping of online and offline channels. Companies that focus on both these channels are essentially working on deploying a multi-channel sales system where the online and offline segments complement each other strongly. Keeping these macroeconomic factors in the background, e-commerce companies need to use e-commerce software solutions in a coherent and strategic manner so that the above mentioned challenges can be addressed while making use of the opportunities.
Micro-economic Challenges Facing e-Commerce Companies in India
eCommerce companies that are aiming to get a strong foothold in the Indian market have to address the following challenges that are unfolding rapidly.
- First, even as e-commerce companies in India continue to expand aggressively in search of new clients and customers, customer loyalty is a yet to be addresses. A low rate of customer loyalty leads to high customer acquisition costs. In order to achieve a high return on investment made on the marketing campaigns, companies need to address the issue of customer loyalty. This will enable them to sell more and sell better while reducing or stabilizing customer acquisition costs.
- Second, as tier 2 and tier 3 cities emerge as new markets for e-commerce businesses, issues of poor infrastructure and last mile connectivity will continue to trouble them. Looking at the issue from a closer angle, companies need to focus on streamlining e-supply chains and work on building strong models of e-supply chain management in order to derive economies of scale.
- Third, India happens to be a highly cash driven economy and the penetration of digital wallets is on the lower side. On the flip side it means higher instances of reverse logistics and thus erosion of revenue. Moreover cash driven economy also means that revenue realization happens at the door step of the customer. As population pressures in cities increases and traffic snarls and logjams persist there may be serious challenges to promises of instantaneous delivery of merchandise.
The Strategic Path for eCommerce Web Development
eCommerce Web development companies can produce solutions to many of these challenges in a very cost effective manner. To begin with as customer loyalty continues to be a big issue that will probably define customer acquisition costs and thus hamper profitability if left unaddressed, ecommerce software development needs to be aligned with the product and market strategy.
Companies need to focus on using ecommerce software for a full proof digital experience across platforms and devices. In fact ideally there is a pressing need to harness platform agnostic ecommerce software that cuts across the web and mobile segments. Faster loading times, powerful search features, a supremely easy to use navigation and user interface add to the comfort factor of the customers. This when backed by an aggressive loyalty rewards program shall pay rich dividends.
Trial offers of cash back and purchase volume based discounts for making use of online payments will further enable companies to fight the issues associated with cash on delivery, last mile connectivity and customer loyalty. An ecommerce portal with a fast loading time ensures lower bounce back rates for companies and thus aids customer loyalty.
The second avenue for growth based on ecommerce web solutions is ecommerce payment gateway development and integration. The strategic shift from the cash on delivery model to a more robust model of online payments shall be accelerated by the development and integration of ecommerce payment gateways. A safe, secure and fast payment gateway with minimum probability of breakdowns will offer added confidence to customers to use online payments as the preferred mode of transaction thereby saving companies of the cost, time and resource engagement involved with last mile connectivity.
As regards the development of an e-supply chain, the usage of big data to segment customers geographically can lend great support to strategic planning and marketing efforts. Lastly ecommerce companies need to focus proportionately on the segments of web and smart phones in order to scale up their business models. This will allow them to build robust business models that will enable them to penetrate low cost markets emerging in tier 2 and tier 3 cities. Cost conscious customers in these cities are more likely to shop on smart phones than on the web, owing to the relative cost proposition that smart phones have in comparison to personal computers.
Thus it makes enormous good sense for ecommerce enterprises to embrace ecommerce website development with responsive designs.
A Final Commentary on Profitability and Use of eCommerce Software Solution
As stated in the initial briefing, ecommerce companies in India are emphasizing on gross merchandise value rather than profitability. The economic factor of private equity and venture capital funding has a large role to play in this.
For enterprises to consolidate their profits they need to focus on reducing explicit costs by switching to the revenue collection strategy of online payments and streamlining implicit costs of customer and revenue churn by embracing ecommerce web development and software solutions to address recurring issues. Synchronization between back end and front end infrastructure holds the key to strengthening profitability prospects.
Images: “ concept of e-commerce or ecommerce, electronic commerce, with message on computer keyboard./ Shutterstock.com“
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