Top 10 e-Commerce Challenges for Startups in India

E-commerce is raging across the globe including India. Coming to the scenario in India, there are limitations and challenges that these businesses face and they are more with startups, and not without reasons.

Big names in e-commerce are a huge success in the country with millions of orders going through every month. But when it comes to newer brands and startups, the scene fails to appear so bright. This can be seen as one of the reasons why Walmart acquired 77% of stake in Flipkart in 2018 and Myntra acquired Jabong on 2016.

A thread-bare analysis reveals the top 10 reasons responsible for slow growth and success of e-commerce startups in India.

1. Low digital penetration

Despite all efforts, digital literacy is still a big challenge in India. It is mostly the urban population that are inclined to carry out online purchases with bulk of the rural population still preferring brick-mortar stores for making purchases. The reasons range from the masses not having the knowledge to use the internet from not being able to afford to shop online.

If India has to reach its target of online businesses raking in profits, it surely has to upgrade its digital literacy efforts. Digital India drive launched in 2015 though has had an effect in urban belts, still need to make its mark in the rural belts. Penetration of smartphone devices and personal computers is still very low in these areas. With a chunk of the population still living around the poverty line, internet and online shopping do not even exist in their dreams.

However, efforts are on with the launch of programs like National Digital Literacy Mission (NDLM), to make at least one member of every family digitally literate in India by 2020. This will hopefully boost e-commerce business even of startups in India. 

2.  Low trust and high fear factors

Majority of Indian buyers both in rural and urban belts still prefer to buy products after checking them out physically rather than relying on virtual images and descriptions of products. There is the fear of the product being different or not as good as when bought from up-front stores. This fear is sure to deepen further when it comes to buying from startups that are unknown names.

Big names like Amazon, Flipkart, Myntra have overcome this hurdle to a large extent, but people are sure to be more skeptical when it comes to newer and lesser known names. The lack of trust is further fuelled by chances of fraud and insecure online money transactions. A lot of people are still not comfortable sharing their credit card and debit card details online or carry out online banking because of the slew of fraud everywhere in the country.

One-on-one presence in brick and mortar stores and physical checking of articles ensure more peaceful shopping for most Indians even today.

3.  Well-developed and innovative e-commerce storefront

The internet is a furiously competitive marketplace and any startup aiming to setup successful online shop needs flexible and intuitive e-commerce platforms. These should have the right design and functional components that can lure customers and sustain them catering to their interests to convert them into hardcore paying customers.

An e-commerce shop is a website with an attractive appearance having smooth operational abilities. It should leverage the latest technologies to offer a smooth browsing and shopping experience to target consumer groups. In short, it should be able to deliver all that customers expect and go even beyond.

Startups especially need robust platforms that are capable of establishing a smooth 24x7 presence. It requires a fine understanding and analysis of target customers in the urban and rural belts to give them options of doing easy purchase online without much of guidance. Building e-commerce business sites from experienced and updated developers is important – a step where a lot of startups go wrong right at the beginning.

4.  High competition & customer acquisition

Marketing and acquiring customer base is a huge step towards ensuring successful e-business. With the presence of giants like Amazon, Walmart and eBay, things only become more difficult for e-commerce startups in India. Only those startups that offer unique and out-of-the-box products on sale have emerged successful as e-commerce stores. Governmental or reputed organizational backings have also proved immensely helpful for these platforms.

Starting fresh and building up a reputation against formidable opponents is a huge challenge that requires fine planning with a definitive roadmap. This is a step that most startups fail to recognize that leads to them facing success challenges. Also, establishing a formidable network of customers with commendable services and after shopping support are undeniable factors for success. All of these require competence and organizational infrastructure that most e-commerce startups tend to overlook and ultimately face success challenges.

5.  Marketing and large-scale funding

Marketing and branding are essential components of any organization’s success story and more so with e-commerce startups. Branding, its recognition among target customer groups and subsequent scaling of business all shape success of any startup. These require two important components – effective marketing strategies and large pools of funds.

A lot of e-commerce startups fail to realize that bootstrapping is not the be-all and end-all of all successful business. Startups face challenges from larger and established brands that they need to take on their face to become successful. Most startups fail to secure funds for these factors when setting up an e-commerce platform, adding to their woes of initial survival and subsequent success. 

Statistics says that under the current e-commerce eco-system, the average cost per customer for this is between Rs 500-1000. This is often not sustainable for most small and medium-sized e-commerce throwing up huge challenges of survival.

6.  Incorrect budget allocation & less digital marketing

Most e-commerce startups either do not allocate funds for advertising or overlook the aspect of advertising on the right digital platforms. When the market itself is digital, there needs to be a large fund involved for marketing on appropriate digital platforms according to the right buyers persona.

It is crucial that entrepreneurs partner with experienced digital marketing companies that can adjust budget constraints and yet produce effective results concentrating campaigns only on relevant digital platforms.

Apart from print marketing, there is huge impact of digital marketing on the success of any portal and more so when selling online. Overlooking budgeting for this area has always proven to be a big challenge when it comes to survival of any e-commerce startup in India.

7.  Lack of proper market research and knowledge

A big challenge that Indian e-commerce startups face is that of lack of buying from the online store. A major reason for this is lack of proper research and sales planning of products.

Market research in regards to choice of products to be sold according to geographic location and demography is huge determining factor for e-commerce startup success. Proper analysis of customer profile and making selection of products should be the foremost task when setting up any e-commerce startup.

Given that India has a multi-cultural and pluralism of economic strata, selection of the right range of products can make a huge difference to it success story and ultimate profitability. 

8.  Inefficient resource management

When customers are far away, they need more care and attention than those standing right in front. Smooth resource management by way of providing quality products and keeping up promises made online go a long way in retaining existing customers and acquiring newer ones.

High quality and timely manufacture of products and ensuring smooth delivery encourage customers to continue shop from the portal. Several startup e-commerce portals fail to live up to their promises and customer expectations leading to their downfall.

Behind the brand work is as important as portraying the brand upfront before consumers. Continued customer support and service is yet another area that a lot of startups overlook. The highly competitive e-commerce market thrives by wooing customers with appropriate after-sales services. It is important that entrepreneurs place themselves in the shoes of potential customers to gauge their reactions. Overlooking this important aspect can definitely challenge any e-commerce portal, more so startups.

9.  Unreliable logistics and supplies

Logistics and supply chains should never stand as a hindrance when handling customer orders. Once orders are accepted, it is the prerogative of the company to ensure fulfillment and product deliver on time. With so much mistrust about online buying already playing as a major psychological deterrent, inability to deliver quality products on time are sure to hurt brand credibility. The tendency to take small buyers lightly is a big mistake that a lot of e-commerce portals make thus paying for it dearly in the long run.

It is important to check supplies and maintain their quality before ensuring proper fulfillment and their timely delivery. Failing these, any startup is sure to face the huge challenge of maintaining its credibility and thus survival in the long run.

10. Pricing and discounts

Faced with stiff competitions from e-commerce giants like Amazon, eBay or Flipkart is surely a daunting prospect for startups. Standing up to their pricing and discount schemes is surely a big challenge for any small business.

Passing on maximum benefits to customers in terms of price, putting up flash sales and giving huge discounts is a big draw to Indian customers. This is surely a big challenge for startups that are looking for immediate profitability. But this is the mistake to avoid.

Startups need to realize that in the face of stiff competition they will do well even if they are breaking even. To establish themselves alongside big names means giving customers something extra like the bonus of free delivery.