The rules for successful commercial ventures are well documented and extensive. The rules for E commerce are not very different. To succeed you need to work wonders in every sphere – but make sure you get a devils grip on the 3 MUSTS:
MUST1: Build a strong consumer proposition
Think carefully about what you are going to sell. You may want to sell products that you manufacture yourself or products that you buy in and sell on. Crack the “why should the consumer buy our product/service over others”. If your business model envisages a shift of consumption from offline to online, then there must be compelling reasons – what are yours? If you are pioneering a new market opportunity (www.redbus.in), don’t expect miracles – it’s a long haul. Remember what works in USA or even China does not necessarily work in India (though VCs love seeing the connects -”Aah, you mean like Gilt!”). Your product catalogue is at the heart of both your business and e-commerce. Whatever your USP, your customer must understand (and appreciate) what you have on offer.
MUST 2: Crack your consumer acquisition strategy
Remember, your store will be one of the million unknown websites in the World Wide Web. To be in business, you will need to get a sufficient number of your potential customers to visit your shop. What sort of marketing strategy are you going to use to attract them to your shop?
This strategy usually includes a customer acquisition strategy and customer loyalty strategy.
- Customer Acquisition: Having chosen ecommerce, you lose the advantage of natural footfalls of traditional market places & catchment areas. Traditional awareness creation tools like Print & TV advertising are written off for obvious reasons. In this vacuum – social/online marketing is touted as the panacea for a low cost start – don’t be fooled by the hype. Whatever your acquisition strategy, the industry average hovers in the low to mid 4 digit numbers. So dive deep and get a first hand understanding; do the maths and figure out how you plan to finance this significant cost.
- Customer Loyalty: Having acquired a customer at such high costs, you’re now desperate to milk their LTV. You want them to come back again and again & shop till they drop. But why should they? How your consumers behave will depend on your consumer proposition:
1) Discounts: If you are a Retailer – multi brand / multi-product, then your offer is not exclusive. So your biggest bait is discounting. If someone tells you that service will keep you going, then don’t believe it. As long as you keep offering discounts your customer may come back (if they have had an otherwise good experience). To sustain this strategy, you need very, very deep pockets & there is space for just one or two Gorillas in each vertical. If this is your game, plan to be the biggest in your chosen vertical. Also loot Fort Knox.
2) Unique & Compelling Product/Service: If deep pockets are not your strength, then you have to be a genius – an innovator – a path breaker. You have to create such a disruption with your consumer strategy that the consumer is hooked; they lose their mind and heart to you – keep coming back and buying. If you can crack this, then you have a good chance to rule the world and have VCs queuing up. Do you have it in you to be this maverick? Can you Gangnam?
Make sure your consumer proposition is clear. Make this the centre of your business and build an organisation that enables it.
MUST 3: Find money & use it like it’s yours
In either case, to succeed you will need to access some serious money. Till 2011, a respectful number to reach proof of concept was $ 5 million and many were funded. But the track record of Ecommerce in India has been discouraging; most chasing scale at the cost of huge cash burns – trying to bull-doze their way to the top. Add to this, the dismal global business outlook – and we have what is called “negative sentiment” amongst investors. Today, the timing is bad for new start-ups. Money for new ventures has almost dried up – investors are waiting for some positive turn of events i.e.: a successful Flipkey IPO at NASDAQ; Myntra turns profitable, Snapdeal’s finally decides what business it wants to be in..
So, if you are depending on VC funding, it’s not impossible, but doubly tough. Your best chance is to roll out your business with your own funds / help from F&F. Establish a working model and build a portfolio of extra ordinary matrixes. If you can demonstrate your plan in reality within 6-12 months of launch, then you have a compelling story and VCs will be competing to invest in your venture.
(Vijay Kumar Misra is a seasoned fashion & retail professional. As Co-founder &, CEO of TCNS Clothing, Vijay conceptualized, launched and built W – the women’s wear brand to national leadership. In his new avatar, Vijay is a Founder Director of DONE BY NONE, the new on-line women’s fashion brand. An innovator at heart, he is passionate about the business of fashion; enjoys the challenge of launching pioneering business models in emerging markets.)
Meet Vijay at Internet Retail Expo 2013)