 (This post was triggered by Alok’ s recent post about  new capital efficient, profitable models of ecommerce)
The current crop of poster boys of ecommerce ventures in India – FK, Snapdeal, FnY etc are all horizontal – sell everything to everybody.
They have built a business which has scaled – they have served millions of transactions.
They have generated scale with VC money, but profits have to be generated with customers’ money. How will they do that?
What is the new model of business that Alok is talking about?
Could it be the newer ecomm ventures will be –
- Vertical sites – means focusing on a one or a set of product categories or customer segments. Vertical means that more information on site about how to use the product, etc. Vertical also means that they will offer more products per category compared to the general ecomm store.
- horizontal sites based on made to order/just in time purchasing instead of made to stock/buy to stock models
- focused on building targeted relationships with customers using technology which ensure repeat purchase.
These also require eco system in place including logistics, payment systems, analytics and reliable partners who will supply merchandise just in time.
What do you think?
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what i have seen is the transition of business model from inventory based to market place and i think snapdeal was the first one to do this .. now with the new FDI policies these marketplace model is going to be big hit … seems the hard days are coming for the eCommerce companies ..
I think more than the fact that it is vertical or horizontal, it will be based on doing things profitably … that means no cash on delivery and lower customer acquisition costs. Scale may sound like a beautiful thing but COD customers dont have much loyalty. One remembers the brand only if there is upfront payment.
Link to Alok’s previous post: http://www.venturewoods.org/index.php/2012/02/24/dont-let-the-ecommerce-bust-fool-you/
I think the ecosystem is going to be a mix of everything (vertical sites, horizontal sites, different technologies etc) but the bigger players would always be selling across multiple verticals.
There are going to be some players focussing on a single vertical and some of them would do really good, but logistics would always be a problem for such players stopping them from achieving their true potential.
Also newer innovative selling models would also crop up. Right now, we have the direct selling, bidding and group buying systems. I think there will be more innovation in selling world and we’ll get one big player doing well in each of these new selling system.
PS: Even though I’m a regular reader I think I missed Alok’s particular piece referred to here, a link to it would have been nice.