MBA schools have always emphasized that businesses must overpower consumer’s might over products and services. While some industries have that, the ones increasingly disrupted by tech are becoming more favorable for the consumers and e-commerce is one of them.
Goods delivered at your doorsteps for free with lenient return policies??, this is what every consumer would want.
Sellers are having a hard time keeping up within the e-commerce space. And when we see this in the Indian context, where buyers expect cash on delivery(COD) for their order, it becomes extremely frustrating. But the inevitable fact is, marketplaces (who are driving the e-commerce revolution) have made it extremely hard for sellers to avoid the online path.
So what are the most challenging aspects of e-commerce business in India?
In this post, we will go through some of the major problems sellers face within the e-commerce domain. While I have included general examples, the post also highlights an Indian context of the problem as well.
Manual inventory update using spreadsheets-
Believe it or not many sellers still use an excel sheet with no automation whatsoever, to monitor the inventory. Indian SMEs are worst in the lot. Most of these small-medium companies were started or carry forwarded by entrepreneurs born before 1970s. These people lack basic literacy in computers, let alone understand the concept of cloud computing and app penetration.
At best, they emulate the bookkeeping format of inventory and reproduce it in excel sheets.
This is not the way you lead in today’s business of e-commerce. Selling on multiple channels calls for a robust inventory management and inventory sync. Only when you have the inventory management automation in place, you can sync your inventory across multiple channels so that you avoid overselling or underselling of goods.
Sellers who are selling on multiple marketplaces deal with exclusive challenges with respect to the marketplace and storefront. Each marketplace generates its own type of invoice. This is frustrating for the seller. Browsing through all type of invoices and coming to a consolidated figure is possible but consumes a lot of time and extremely prone to error.
Apart from invoices, listing on different channels come with differing requirements. Naming conventions vary with every marketplace. Combined with computer illiteracy, this becomes a major problem for Indian sellers. In fact, Amazon and Flipkart (two major players) are providing training to sellers to accomplish all these smoothly.
Due to fierce price wars on marketplaces, sellers are often compelled to price their products lower than their competitors. This created a plethora of prices across all channels. This needs to be closely monitored and updated to remain in the competition. In fact, sellers are in dire need of tools that do that for them.
Another important administrative factor that annoys sellers is order management. Selling on six channels mean six different formats of order numbers, six address layouts, six pickup lists and so on. This is a real mess.
While we conceptualized Orderhive, order management was one of the things that ruled our priorities. Orderhive’s order management module takes care of these challenges and makes selling extremely easy.
Product Damages, Reverse Logistics, and Cancellations-
Marketplace policies are highly favorable for buyers. 30 day return period is a lot of time and often buyers send used products back to the sellers in that time frame.
Products can be damaged and sellers still pay the commission to the marketplace. Sellers can claim damages, but the entire process is not smooth either. Mostly, it is the seller who pays for the return charges.
While damaged or used items being returned can be less common, receiving returned items with damaged and unusable packing is frequent. The problem is, once the label graphics and the pack are significantly damaged, it is difficult for the product to be resold.
Another problem with this entire marketplace model is the commission. Sellers pay the commissions despite cancellations. This includes paying marketplace entities such as Amazon, Flipkart, etc. The sellers also need to pay the commission to entities like Paytm and Paypal. If sellers get a lot of returns, it becomes demotivating.
Order volume and Logistics Issues-
Sellers should always aim for higher volumes. Even if you are selling on marketplaces such as Amazon, Flipkart or eBay, the more products you ship, the lesser average costs you incur. But the hard truth is, not many sellers can attain the volume. This is more common at the start when sellers are selling online for the first time and lack proper strategies.
With low volumes, sellers often pay a higher price per unit for shipping. In India, If sellers are fulfilling the orders themselves, they often tie up with a courier company. The problem is, if you do not give them enough volume, you might have them visit you may be once or twice a week. This delays the shipments and agitates customers. The trick lies in expanding volumes and minimizing returns as much as possible.
The communication between the courier companies and sellers is not automated as well.
Taxation principles are not clearly defined or understood. Chartered Accountants in India do not seem to have much knowledge about e-Commerce taxation and its dynamics. This issue also goes back to the multiple formats of invoices that creates a lot of troubles to file returns. However, things have finally started to change for good.
The leading marketplaces in India have a payment settlement period. This can range from 8 days to 30 days. Shopclues, a popular marketplace settles payments 30 days after the product reaches the consumer. This is a long time period. While Flipkart has an average of 15 days, Amazon fares a little better with 10 days.
Cash on Delivery-
This one is imperative to Indian e-commerce. Customers do not trust paying sellers before they get the product in their hands. Hence, marketplaces and sellers have to abide by the Cash on Delivery (COD) model. Here, the payment is made once the shipment is delivered to the customer. This means that the person delivering the shipment receives the cash. When sellers are not using Amazon FBA or any fulfillment service provided by marketplace entity, they depend on the courier people to handle the cash. The cash needs a lot of time (more than 10 days) to travel from customer to the seller. In case of returns, you can imagine how complicated things might get.
The Price Gamble-
The Marketplace management tries to maximise sellers and maximize sales so that sellers stay motivated. However, if you are a seller, they are not doing it for you alone. The moment a buyer stumbles upon a product that is sold by five other sellers including you, expect a continuous price war. The marketplace will make you compete and shrink your margins. While a cheap product can be a steal for the customer, this ruthless shrinking of margin affects customer service negatively. As a seller, if you are fulfilling your orders yourself, it becomes extremely difficult.
Fake Reviews by other Sellers-
Many times, seller accounts are suspended at marketplaces due to unethical activities. Marketplaces can very well distinguish fake reviews from the genuine ones. This happens due to many types of activities. One of them happens to be online reviews.
Often times, competitor sellers would post fake reviews on products posted by any particular seller. Marketplaces can identify this and may ban the account. This is a serious problem as a seller might get suspended without even doing anything.
Many sellers are not familiar with Photography Skills
Bad Pictures are detrimental to sales. On to that, product photography can be tricky. In fact, Amazon’s seller team in India are teaching this skills for free to the sellers in order to maximize registration for FBA. It is a fact that pictures are important and one needs to think about a clear visual context before any photo shoot. It is advisable that a seller should seek professional help in this area and learn the tricks with time.
Misusing e-commerce services-
India is a complicated country. While people of Indian origin are running top companies in the bay area, back home you may find a lot of jobless dorks. These people may post just-for-fun orders with fake addresses and names by exploiting the COD feature on a product. You may figure out the logistic costs and cash flow problem associated with it. It is up to you to avoid such orders altogether.
Overall, e-commerce brings a lot of challenges for online sellers and while designing Orderhive we have worked a lot to understand these problems first. The features, UI, and layout are all derived from these. Every day, we are getting increasingly better on handling these challenges and reflect it back on Orderhive. If you are a seller facing these challenges, have a look at Orderhive and try the starter pack.