Friday, September 21, 2012

E-Commerce - Product Strategy - 2

In India, travel bookings was the first segment that has triggered the e-commerce interest. They started with reservations in trains and slowly expanded into other areas like flight and bus ticket bookings. Being one of the biggest railway networks in the world, "the need for easy availability of tickets" was a growth driver for this e-commerce site. If there is such a pull in the market, the e-commerce venture around that domain would not need extensive marketing budgets.

Sometimes the need for a category of items would not be very obvious in the market. In such cases a marketing survey needs to be conducted to understand the demand for that category in the market.

Once the domain is identified, the next step would be to identify the categories (electronics, books, apparel etc.) and corresponding items (cameras, home appliances, regional language books, T-shirts etc.).

It might not be a good idea to start with a bang and make available lot of items. It would be prudent to start with the items which have 'market pull' than 'market push'. The best example would be flipkart, which started with only books and expanded into many other categories slowly.

The other factors which can help decide on the categories and items:
  1. Where can the items be procured from? Who are the major suppliers and what kind of 'credit-support' can they provide?
  2. What is the roadmap for categories and items? Do we diversify (books, electronics, home appliances, apparel etc.) or operate in a niche area (socks, shoes etc.)?
  3. Can the items be procured 'just-in-time', which can help with 'drop-shipping'?
  4. What is the demand level for each item? This should help identify 'which items' and 'what quantity' needs to be stocked in warehouses.
  5. What is the durability of the items? Are we talking about perishable food items or long lasting books?
  1. What is the validity or expiry date of the items? We could be talking about outdated fashion items or pharmacy drugs here.
  1. In which all regions and locations is there a demand for the items? Some items might be of more interest for people in rural areas. In this case, the order fulfillment needs to be though-through for last-mile dispatch of the items.
  2. What is the price at which the items would be sold? There are certain items which can provide good returns on volume sales, while there are also luxury items which can be sold at premium. For cost-sensitive markets like India, determining items with correct pricing becomes even more important.
  3. What does it take to deliver the items to the customers? Are the items big in size and needs special vehicles to carry the goods to the end-customer?
  4. Does it need a 'call center' facility? If so, what should be the size of such facility in terms of number of people and where should it be located?

As can be noticed, the entire life-cycle of the products from 'procurement' through 'order' and 'cash' has to be thought-through before deciding on the product categories and items.

Needless to say, e-commerce play involves as much of defining good business strategy as the supporting technology. Though the end customer interacts through Internet medium and sees the e-commerce website as the face of the company, the back-end operations are quite important too.

E-Commerce is a long term play and needs deep-pockets in most of the cases.