It seems that past 6-9 months have played out a full boom and bust cycle as far as ecommerce in India is concerned. Where as in july-august timeframe, 10 million dollar fundraises were being inflated to 40, and investors seemed to be willing to pay 5-8 times the gross merchandize value as premoney valuations, suddenly the world seemed to turn cold over past three months. What does this mean for entrepreneurs?

  • Customers continue to buy: Not unlike 1999/2000 experience, customers seem unaffected by all the kolaveri around. Keep the focus on customers and deliver great consumer experience – that is the essence of building a great business
  • Build a business, not transactions: The only currency of a good ecommerce business till now has been transaction volume. Now is the opportunity to answer more fundamental questions – why would customers buy from you (apart from getting products below your cost price), what really differentiates your business from the guy next door (no, really!), what will drive profitability in your business, which customers do you want to target and who do you want not to, etc. “Internet is cheaper than retail stores” is not enough anymore.
  • Time for innovation: Premium will shift back on great teams with propensity to innovate, rather than the best search engine marketer. If you do have a customer proposition that goes beyond discounting, can you run the business at 25%+ gross margins (including logistics costs)? How can you build a business without investing $100M in inventory, and still ensure great consumer experience? Whats uniquely Indian about ecommerce?
  • Investment is still available: Ecommerce in India is not a space that investors can ignore (even Mahesh is investing in ecommerce now :)) – they just seem to be correcting themselves to look at the right things.

Lets get back on the roller coster. The party has just begun!

Alok Mittal

Alok is a first generation entrepreneur, now in the venture capital business. Alok heads up venture operations for Canaan Partners in India, with focus on internet, technology and BPO space. Alok is also a founding member of Indian Angel Network - an organization comprising successful entrepreneurs looking to invest in seed stage businesses. Prior to this, Alok cofounded JobsAhead.com, a leading job portal which was acquired by Monster.com. Alok is an active charter member of TiE Delhi. Alok is a computer science graduate from IIT Delhi and, postgraduate from UC, Berkeley.

The views expressed on this site are personal views of Alok, and do not constitute an offical opinion of any company or organization.

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