Because of my long association with the Online world, with eCommerce, Website, Web applications,… for nearly a decade and a half, I have come across many different people, clients, vendors, friends and strangers, who think that setting up an online business is like setting up a shop on an upmarket street or CBD. The truth is you are really far from it.
With the current on-line shops raising funds in millions and billions every other day, everybody is eying a share in the market. Flipkart, SnapDeal, Myntra, BigBasket are all raking in money left-right-and-center, albeit from VCs and not profits. Online makes it look easy to go from zero to hero in just a few years. It’s a snap from the outside, but a trap from the inside. Most of the entrepreneurs trying to jump onto the bandwagon have all their basics wrong. My view is the Online Shop or eCommerce Stores are the eCom bubble right now, just as in the dot-com bubble that we saw during 1997 – 2000.
A whole bunch of these online shops are already online, a few dozens are joining everyday, soon you will have hundreds and thousands. By 2017 – 2019 we will see all that collapse or consolidate to the survivors. This is when the separation of sheep from the goats, or wheat from the chaff, or men from the boys will happen. Understanding this, if you still think you have a great idea and a good value proposition that will sell, you will have to consider these questions.
So “What does it take to setup a successful on-line shop?“
Well, for one the, the question itself is flawed. What you should be asking is “What does it take to run a successful online shop?“, for setting up an eCommerce website is easy, but running it successfully is another ball game altogether.
Firstly, you need to understand that this is a valuation game. You are not going to be profitable for atleast 5 years, many would probably be loosing money even after 8-10 years. As is the case in many of these online poster boys, i.e. FlipKart, SnapDeal, etc., So be ready to pump in money, sell yourself to Angel Investors, then to Private Equity and then VCs and then to the general public themselves.
That apart, if you are still keen on starting a venture, consider these fundamentals;
1. eCommerce Shop – The IT aspect of it
2. Vendor Management – The procurement part of it
3. Warehousing and Packaging – Getting things ready to send out
4. Logistics – Sending it out
5. Support – Customer Relations and keeping them happy
6. Sales and Marketing – Strategy, Go-To-Market
7. Retention – Value adds, loyalty programs, referral programs
Without any of these thought through and worked out meticulously, your most likely to fail even before you start. Each of these require different skills and expertise. Ideally your team should consists of experts in each of these fields, how you get them on board is a call you need to make.
Many a times, setting up the eCommerce Shop is the easiest part, however if you don’t intend to just put up any other shop, you will have to work hard on this aspect as well. This, I believe, is a differentiator that could really make or break sales. A plain Vanilla Online Shop is longer appealing to the masses, they have seen it and done that.
Above and beyond all this, make sure you have deep pockets to bootstrap the venture, and sustain. You should be able to run the show until the period you can appeal to an Angel Investor, from there on you are on the valuation and investor roller coaster.
Happy Shopping or Selling! which ever is your calling!
