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June - 2012 - issue > Entrepreneur Talk
E-Commerce Players are on a High!
Ravitej Yadalam
Founder & CEO-Pennyful.com
Tuesday, June 5, 2012
Wilmington Delaware headquartered Pennyful.com, is a pioneer in online cash back shopping. It works on a simple model: every time you purchase through its website store links, the respective stores pay Pennyful.com a commission, which it simply splits with you, thereby giving a win-win situation to both. Ravitej Yadalam, Founder & CEO, Pennyful shares his insights into the state of e-commerce sector in the industry today.

Hot trends in the industry today

The e-commerce market in India is growing at an incredible rate. Shoppers are slowly but surely beginning to trust the Indian e-commerce merchant. Just a couple of years ago, the mindset of the average online consumer were a lot more averse to transacting online. Today, one is a lot more comfortable in spending money on the internet. Broadband penetration across the country, recognizable online merchants, skeptic-friendly payment methods like cash on delivery, wide product choices, and unbeatably low costs are some of the factors that are driving this change.

Riding on this wave are a growing set of increasingly savvy shoppers who will leave no stone unturned to find the best bargains and offers on the web. These shoppers save a lot of money on their shopping, but also spend a lot more than the average online shopper. Merchants are taking advantage of this and offering a lot of ways for shoppers to save money in the form of coupon codes and cashback through websites like ours.

We are seeing the launch of new e-commerce players every day, and everyone wants in on selling to the growing online shopper community. While this is exciting news for the online shopper, investors today are a lot more conservative than last year in funding new e-commerce ventures in this crowded space. There has even been consolidation resulting from lack of funds for ventures that have been around for some time.

There is a growing opportunity for ventures with products and services that enable e-commerce in India. Such ventures help e-commerce companies streamline payment processing, shipping and logistics, or online marketing. Streamlining of these key areas of e-commerce will enable companies to focus on their core competence and also cut costs on these processes.

What's shaping the industry in next few years?

2011 saw a lot of investor interest in the Indian e-commerce market. A lot of what happens from here will probably be determined by how much this interest is sustained.

Another factor that will have an impact on the industry is the cost of customer acquisition. Currently, high customer acquisition costs make it extremely difficult for smaller players to compete with larger VC-backed ventures. Here too, online-marketing-focused e-commerce enablers will play a key role in helping to bring this cost down and improve sustainability.

Interest from global brands to open shop in India will also have a significant impact on the e-commerce landscape. In addition to bringing in more capital, these companies bring knowledge of global best practices that can improve every aspect of the end user's experience. As it has been in other emerging markets, the entry of global brands would create a whole new category of consumers which would eventually benefit the local economy and other domestic players.

Brick and mortar retailers are starting to take notice of the rising number of online shoppers. They are investing heavily on taking their brands online. If this trend continues, there will be a lot more choice for the online shopper.

COD (Cash On Delivery) is the most preferred payment method for online shoppers today. But there are a host of challenges that the merchant faces while fulfilling COD orders, starting from cost of delivery to returned merchandise to payment collection. E-commerce enablers are addressing some of these concerns by innovations such as separating payment collection from product delivery, thereby reducing probability of returns. Profitability will depend on how many of these challenges can be addressed, and how soon.

Challenges faced by entrepreneurs today

In today's increasingly crowded market, it's more important than ever for entrepreneurs to have a clear value proposition and differentiated positioning. There is no shortage of funds, and companies that are built on strong fundamentals and validated business models are not likely to find it difficult to raise angel or institutional investment.

While it is advisable to bootstrap a venture till some level of customer validation of the model has been achieved, exorbitant costs of customer acquisition make this a challenging task for internet entrepreneurs who usually work with tight margins.

Although improving greatly over the last year or so, building consumer trust is arguably the biggest challenge faced by e-commerce entrepreneurs in India today. Educating the customer about the product or service being offered, and keeping expectations real are essential in providing a good customer experience.

In spite of the all the challenges and hurdles that our e-commerce industry faces, it is still one of the more promising markets in the world for entrepreneurs today. There will undoubtedly be exciting times in the years to come.

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