Profit, and the Online Marketplace model

Posted on: 3 February 2016
by: Arul Mony
Posted on: 3 February 2016
by Arul Mony

Profit, and the Online Marketplace model
Online commerce has transformed the buying experience for most day to day and discretionary purchases. Yet what does it take to be truly disruptive in this bubbling industry?
It transpires, a fair bit of economic foresight.

Initial online growth is often taken at the expense of profitability – and the big players for Indian Marketplaces know this only too well. For every $1 of commission, the three big Indian Marketplaces make a loss of $2.23, $1.90, and $1.72, for Flipkart, Amazon, and Snapdeal respectively.

The overall investments by the big three, and the associated funders, indicate two clear messages about the global eCommerce industry – bearing in mind that investments by these giants are in the order of billions of dollars:

 

1) Scale is key – success is likely to be determined by the ability to use technology and marketing execution to become a users’ default “go-to” site.

 

2) eCommerce is here for the long-haul. The billions of dollars invested by the funders of the ‘big-three’ above, demonstrate that despite the massive short-term losses incurred, the opportunities afforded by surviving this disruptive growth phase are greater still.

 

So what is the implication for individual retailers?

  • Simply launching an ‘online store’ is not enough – a clear and evolving plan of how to use the technology ecosystem to disruptively grow is key.
  • Think long term. Truly transformational eCommerce retailing requires an approach that seeks to develop a brand, a revenue trajectory, and a portfolio strategy across 5, 10, or even 15 years.

Your plan must include BOTH strategies for disruptive growth, and its ensuing path to profitability.

 

As ubiquitous internet access, smartphone penetration, and big data continue to drive this industry, it is likely we shall see a sharp retail evolution.

One aspect is certainly guaranteed – the next few years will be anything but dull…

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