e-commerce - an investor’s perspective

e-commerce - an investor’s perspective

Subrata Mitra, partner at venture capital firm Accel India, currently serves on the boards of several technology and Internet companies including FlipKart, Myntra, Chakpak, enStage and Perfint. The Smart CEO caught up with Mitra to chat about the e-commerce industry in India, understand the key drivers of growth in this sector and what it takes for an entrepreneur to build a successful venture.

Subrata Mitra, Partner, Accel India

Q) What do you look for in an e-commerce entrepreneur you invest in?

A) At a very basic level, we make sure the entrepreneur (in addition to the requirements for any startup) has the ability to: understand customer need build a platform to ensure good back-end processing and offer a great customer experience

An entrepreneur’s ability to bring in distributors and suppliers to ensure the supply chain can scale is critical as well. The key drivers of growth for an e-commerce venture lies in the ability to excel in each of these areas.

Q) According to you, what are the factors to keep in mind before identifying the products you want to sell online?

A) Some key factors one needs to keep in mind while identifying product categories are – selection, convenience, customer experience, availability and pricing. For example, for books, it is hard for an offline player to keep a large catalogue, whereas an e-commerce player could keep millions. If logistically operations are complex, it will be that much more difficult to offer good customer experience. Pricing is an important factor in India as well. All these factors need to be analysed before choosing a product offering.

Q) Online payments and delivery of goods continue to be a challenge for Indian e-commerce entrepreneurs. Your thoughts?

A) Clearly, it is due to these challenges that this category is also interesting. Basically, it is not an armchair business of building technology, but, really putting demand and supply together through a platform. While challenges are real, in some sense, all companies in this space are facing similar issues. The ones that execute really well will come out on top.

Q) In India, both e-commerce and organised brick and mortal retail are evolving at the same time. What challenges does this throw up?

A) This one is hard to predict, but, it could easily mean that India might skip some of the steps that others have gone through. For instance, there is a possibility that e-commerce can grow even faster since organised retail has not penetrated to the masses. It is conceivable that organised retail might remain limited to larger metros for sometime; it would be interesting to see if e-commerce companies are able to capitalise on this gap and therefore have even better traction from consumers in other parts of the country.

Q) If you look at the e-commerce market in the U.S., in addition to the large players like Amazon.com and eBay.com, there are several niche e-commerce ventures (Shopforbags.com that sells women apparel and handbags, Blinds.com that sells blinds used in homes) that sell products to a niche audience. According to you, is India ready for such niche e-commerce ventures?

A) I am less bullish regarding these in the early stages in e-commerce in India, since one needs scale to make these models work in the end. So, it is better to go after categories that have a large offline demand, reasonable margins and then optimise the operational model to take care of convenience, availability and other factors, to make the venture a success.

Q) How should e-commerce ventures approach branding, marketing and driving traffic to their websites?

A) Our companies have been successful in using some offline means to brand, as much as they have used online channels, social media and search engine optimisation. Most e-commerce startups will end up making a large investment in branding and marketing, and therefore it is important to proceed in a way, in which one can try all kinds of options, and be able to measure and track the outcome so that the strategy can be tuned.

Q) What is that one piece of advice you would like to give very early-stage e-commerce entrepreneurs?

A) They definitely need to cover the basic aspects that I have already spoken about. While they are starting up, entrepreneurs need to understand how they are going to attract early adopters. Then they need to ensure that the user experience is so great that not only do they keep coming back, they also bring others along with them.

To tackle everything from distribution hiccups to logistical and payment platform challenges, Indian e-commerce companies are merging western ideas with ‘Indian’ strategies.