The most common mistake people do, is to compare E-Business to the software industry/market and hence assume the dynamics are same. The dynamics and challenges of e-business are far more similar to retail industry, since it is RETAILING!
After talking to few small players, I felt operating capital is the single most challenge. Big players backed by VC funding (Flipkart raised $20 million in third round, Snapdeal raised $12 million in second round, LetsBuy raised $6 million, FirstCry raised $4 million and a few more) manage it better. Since the VCs are eyeing the Indian e-commerce market for their portfolios, most entrants are throwing huge discounts hoping to grab the market share, which ultimately gets their bottom-line thinner and leads to a longer time to breakeven and choking for operating capital. Over a period the focus is purely on managing the working capital than growth.
Considering the current growth drivers and internet buying pattern, there is confidence on Indian e-commerce ventures. e-Commerce players should look at the entire chain; right from great platform and delivery model to the post sales support. Work on building an identity. Fight the initial teething problems. Old players are creating solid infrastructure to support the rapid growth and leaving benchmarks from their learning for new players. So learn from their mistakes.
1. You’ve to have patience for initial years to taste the breakeven. To be profitable over the longterm, plan carefully/meaningfully.
2. Sustaining for the long term, It is important to manage the entire show efficiently and consistently delivering value to your customers. Recent survey shows that customer visits minimum 5 portals before they make any purchases online & therefore look for the total value (NOT limited to the price but also the quality, delivery, support etc. matters).
Remember, it took SEVEN years for Amazon to see profits 🙂