Tag Archives: E-commerce

amazonin

How E-commerce companies are digging their own grave in India?

It was late but expected entry of Amazon in June 2013 in India with a business model of market place due to government restriction of FDI in retail in India.

Few E-commerce companies fommy.com, gadgetguru.com, mirchimart.com etc in India have listed their catalog products on Amazon.in which means these company want customers to buy there products from Amazon.in and only push themselves to a bucket of omly sourcing and shipping retailer but not building there own brand with excellence in customer service and product offering.

In the commission on sale model retailers pay approximately 10% commission to comapanies like Amazon or flipkart.

Loss of margins: If gross margin of an e-commerce company is 20% approx (industry standards), it is going to get reduced to 10% after paying commission on total sales to Amazon. In addition 7-10% will go towards shipping/handling (at an average ticket size 1000) and cost of operating self owned ecommerce store.

Loss of brand value: If customer once buy from Amazon.in will always buy from Amazon.in due to the huge variety of products and world class operation/customer service. Selling products on Amazon.in for and e-commerce company is like digging their own grave.

In maarwadi language- An e-commerce store is a dukaan opened to make money. Here KARMA is buying goods at Rs 10 and selling it at Rs 13 (example figure) at his dukaan (online store). But if a dukaandaar (online store owner) plan to sell the same product at Rs 13 but at some one else store and give away his share profit is not a wise business call and is actually funny to expect customers switch to merchant from Amazon for next shopping.

Thanks for reading this article, do share your thoughts in comments.

Featured image source: Amazon.in