The most significantly visible, most strategically placed and most thought of when a customer visits a product page on an e-commerce website, he momentarily steps on, is the PRICE. Customer was, is and always will be price sensitive and what has changed in today’s offerings is that they have less to do and more to achieve. You can just do a google search for your product with a search query “blah blah blah best price online” and you will be blown away by the variety of websites doing nothing but a search of their own to rank the websites offering same product at price from low to high. Websites like PriceDekho.com, CompareRaja.com and many such funny named are doing nothing but providing hyperlinks to websites like Flipkart.com, Amazon.in, SnapDeal.com, etc. so that you can get the cheapest price (obtained via coupons, cashbacks and credit/debit card schemes). Now, the only way to attract customers is by offering lowest price possible for which they need to have best possible relation with the sellers, sell private labels, sell counterfeit products (and loose customers) or do what everyone seems to be doing nowadays- fool a futuristic Venture Capitalist.
None of the e-commerce website or business models like that of OLA, UBER or TaxiForSure (a past now) have never seen profits and neither are they looking at any profits in near future. At the best, we have Myntra claiming to achieve profits by the end of 2016 (again a futuristic talk). I came across an article a day before I wrote this piece, saying that the only reason TFS (TaxiForSure) failed was that Ola cabs got a venture capital which allowed them to offer heavy discounts to customers and incentives to drivers and the same day when TFS had meeting with its own set of venture capitalist, an Uber driver raped a woman in Delhi and Indian Govt. planned to ban these taxi services, so TFS was at loss of confidence by its funds sources and had to sell off to competitor Ola. Now what interesting here is that both of them- OLA and TFS, were following the same business model but the one which acquired funds from Softbank 1st and continued to offer more discounts won. Ola was losing Rs. 200 on every ride while TFS was losing Rs 150.
Flipkart, Amazon and cashback kings like Paytm are luring customers by offering discounts thinking that they are building a loyal customer base and are investing in future by spending the money of Venture Capitalists and Private Equity Funds to offer discounts. While the only thing they are doing in this process is balancing the money in the economy- taking out money from the rich and offering to customers, which is the reason I gave the name ‘Robinhood’ to e-commerce websites. Everyday we come across news like ‘amazon to invest $2 billion in India’, ‘Flipkart is on the verge of closing a funding round of $550 million’, ‘After snapping up $50 million, Myntra’s now in talks to raise $40 million more’, and ‘Paytm plans to raise funds of value $375 million’. We should infer from these news stories is ‘Amazon, Flipkart, Myntra and Paytm raised sums of $50 million, $40 million $550 Million and $375 million respectively which will be given away in the form of discounts and cashback schemes’. Their business is such that too much of infrastructure or manpower investments are not required, so they simply transfer the money to the customers while incurring more losses in the process than they can actually recover.
Many might contradict that loyalty is actually there in the picture and customers will still remain loyal to their favourite website (which changes every time they come to shop online), therefore idea of investing in the future by these players is justified. I don’t really object to their idea and doing an empirical study too on ‘Customer Loyalty in E-Commerce’ to test their hypothesis but I can’t really imagine that why will a person buy from his so called favourite website if he can get it from the competitor website at less price while it offers the same product, take almost same time for delivery and has same credibility. Business models just can’t work if they keep on fighting on only one factor- Price. We have ‘Diwali deals’, ‘Onam Deals’, ‘Eid celebration deals’ and now ‘Independence day deals’ are also on their way for which the players are heavily investing in marketing and trying sellers to reduce their prices and sometime forcing them too (SnapDeal actually told its sellers to reduce their price or they will be barred in the next sale).
Now, Venture Capitalist groups, private partners and Foreign banks like Soft Bank may believe in the business models they are being presented and continue to invest millions of dollars everyday into these businesses whose mission is just to offer discounts and vision to obtain profits in some far-fetched future to come, they should not raise their hopes high for at the end they might just get some customers who are shopping at their website for a 50% cashback or using their car service just because they were offering a ‘Rs 600 off on your first ride’ discount.