6 secret ingredients to bake a successful e-commerce business

With much of the fluff in the Indian e-commerce flaked out by consolidation over the last two years, the industry has seen emergence of some big boys. They are not just loaded with VC money but have reasonable traction which may just make their business model sustainable if they can ride out the gestation period and hit break-even point.

Techcircle E-Commerce Forum 2014, in its sixth edition, saw a packed house of over 200 participants in Mumbai this week, with top notch industry heavyweights, investors and e-com enablers sharing their insights on the business.

Here are some jottings from the opening session of the event which was moderated by Nitin Nayar, managing director of global private equity firm Warburg Pincus. These are just half dozen (and there are many more) highlights based on what speakers felt were the key factors to build a successful e-com venture.

Explore the unexplored

Being just customer centric was enough to be a successful e-tailer about two years ago. But today, with the presence of hundreds of players, it is become a common hygiene factor. Peyush Bansal, founder and CEO, Valyoo Technologies which has a string of vertical e-com sites including Lenskart.com, said that it is best to target categories that are unexplored in the e-commerce business.

"We found a way to enable filing prescriptions (given by optometrists) on our portal and tried to provide solutions to the reasons why people were not buying lenses and spectacles online and realised that there was a huge market in serving the eyewear category," he said.

Once the e-tailer starts giving solutions to road blocks to a category in the e-format, the business becomes a hit. Bingo! Bansal's company, in spite of aiming to target complex categories including eyewear, has not only been able to churn out choices but says it now ships as many as 1,000 spectacles per day.

Add a personal touch

When Bansal started his business in 2010, he personally went to deliver the first 100 products and gathered crucial feedback. Encouraging criticism from initial customers and improvising the platform helps generate a lot of clients through referrals. While it is cool to be an e-commerce entrepreneur, you can't be a CEO from day one, says Bansal.

"Reaching out personally, helped gain a conversion rate of 6 per cent as opposed to the average rate of 2.5 per cent on most e-commerce portals," he says.

Focus on core product, tech is just an enabler

Sachin Oswal, co-founder and COO, Infibeam, said that the dream of building fancy technology can sometimes take you away from your core business. "The entrepreneurs, thus, have to be very focused on developing wide selection in the portal, hitting the right pricing points and making sure that the product is delivered as soon as possible. It is not necessary to delve deep into developing algorithms to have the 'perfect' portal. These activities can be outsourced," he said.

Also, in the initial years, having an ERP system on cloud (and not tech servers) could be an expensive proposition. The focus has to be on best sourcing because the margins are shrinking.

Valyoo Technologies' Bansal observed that in the e-commerce business, technology is not the core but a very important enabler. "We had to hire the best talent to make codes which allows you to serve multiple orders. Ultimately, being successful in your venture largely depends on the complexity you can build in the business," shared Bansal.

Rely on multiple partners

Sometimes the strategy should be to create and connect the network. For instance, when your scale is small, you can deliver on the same day, yourself. However, as you grow bigger this becomes a challenge. But same day delivery is possible even when one has hundreds and possibly thousands of shipments a day with more than two dozen logistics player ready to become part of your network.

Innovative businesses often take several years to take off. Instead of building in-house competencies, you must leverage on strong partnerships with multiple partners and build processes, felt the speakers.

Build a strong team

This is a no brainer. It takes more than just one owner to make a business successful. Getting the right people is the foundation of your company. "The initial team who you think will be around for at least five years can be your co-founders. The members of the company must know their core strength and complement each other. Employees who are passionate about their jobs are a true asset," according to Bansal.

Choose the right investor

"One of the crucial mistakes that most entrepreneurs make is that they end up raising small initial capital which is not enough to scale up and prove beneficial to the VC or entrepreneur. When you raise initial capital, make sure that you know what you can achieve with it, else the company completely fails to make a point," said Bansal adding that building a defendable business is crucial to be able to get the right amount of funding.

Besides, finding an investor who gels with your model is also important, according to Srinivasu MN, co-founder and director of BillDesk, which manages electronic payments. When Srinivasu started his payment and remittance service venture in 2000, e-commerce barely existed in India.

He says that most VCs believed that e-commerce can never be a 'business' in India. But he was quite sure that e-buying will take off very well in 10 years. To him, finding an investor who was up for a 10-year-old story was a challenge.

Importantly, the problem doesn't end with the first round of funding as the second round of funds you raise is based on pure data, present team, numbers you've achieved, amount of capital deployed and efficiency, the panel emphasised.

(Edited by Joby Puthuparampil Johnson)