How to Start an Ecommerce Business in India
How can I start an eCommerce business? This is one of the most asked questions by the entrepreneurial aspirants and most of the brick and mortar business owners. This is happening due to the exponential growth of the internet and the enormous success of eCommerce companies like Amazon.
If you are reading this you might have got tired of the job you are in. You may be inspired by reading a book or a recent business seminar you have attended. Do you feel it’s time to change your life?
Imagine - sitting at home and making a number of handicraft items you love to make. Or maybe renting an office in town and leading the whole team of craftsmen? Or busy with sourcing best selling niche products to your site?
For all that to become a reality you only need some courage and a website. So It’s all up to you!
Actually, it’s perfect timing to jump into the eCommerce train. By the year 2040, researchers are predicting that 95% of purchases will be made from the web.
So if you plan to build your eCommerce business yourself, let’s start at the earliest!
Revenues for the Indian E-commerce industry are expected to touch $84 billion in 2021 - growing at an astonishing 50 plus % on a yearly basis, the highest in the world. This kind of growth presents immense opportunities for new players to set-up shop when the growth is peaking. India’s E-commerce story in India began with fabmart.com in 1999 and it has been two decades since eCommerce gradually registered itself into our lives.
In this article, I'm just jotting down general points on starting an e-commerce business from my personal experience. I had seen disasters and successes during nearly a decade-long journey of creating, running and establishing e-commerce projects in segments like Grocery, Food, Apparels, handicrafts and plant and Agri products. I have learned many things on how to create and market an ecommerce business successful without compromising on growth, from my years of experience, especially from my failures.
It was in 1994, that the first e-commerce transaction took place when someone sold a music CD by the singer “Sting” on a website named “Netmarket.” This was in 1994, fast forward to 2020 and the global eCommerce sales are going to touch $27 trillion by the end of this year, it does give you an idea about the evolution of ecommerce as a feasible business framework.
Today, there aren’t many things that are not available online and every now and then we get to hear the launch of a new online store. Given the size of the online market, it not uncommon for new players to enter the market and succeed. But on the flip-side, there are stories of failure when the strategy and the tactics do not measure up to the market risks and the emerging conditions.
In this write-up, I seek to guide the reader into what goes into starting an online store and share my experiences in providing insights into someone serious about venturing into online business.
I - Why E-commerce?
1.1 Reasons for Selecting an Online Business Model
I believe not all readers would be accepting my ideas and there would be cynics who would be critical of an online business model because of the sheer number of online stores and the rampant competition in the online space. You may have a point, but if your strategy is based on a broad vision and has tactics to execute the strategy to withstand market risks and the competition, you should succeed eventually. Here are some of my opinions on why you must consider an eCommerce business model:
• Earning while Sleeping: An e-commerce storefront is different from a regular store and can remain open 24 X 7 on a sustained basis without the need to have opening and closing hours. You have potential access to a global audience and are not restricted by distance or time-zone.
• Impulse Buying: Ecommerce sites are high on impulse buying because all it takes is a few clicks and the product lands on your door-step in a matter of days or at times on the same day. Customers with high buying intent are likely to make a purchase regardless of the price, even if they are visiting a store for the first time.
• Fewer Overheads: A brick-and-mortar store requires you to invest in a physical space, staff salaries and other expenses like utility bills. An E-commerce store operating through indirect sellers would not require any such amenities allowing it to sell at competitive prices.
• Less Invasive Experience: In a physical store, you are forced to interact with the employees even if you are not intent on buying. In an online store, you can visit and browse through the catalogue without intrusions and choose to interact, if there is a live chat feature, which could clarify your concerns and specific needs.
• Scale-up with Ease: There are many parameters that need adjustment when you seek to scale your business in a physical store. However, if you have an online store with drop-shipping, then it is certainly easier to expand your operations with minimal effort on your side.
• Easy to showcase Bestsellers: In an online store, you can showcase bestsellers on the homepage without the need to hard-sell products as in a physical store. The customers get to know about best-sellers as soon as they enter the website, but in a brick-and-mortar store, the marketing message has to be repeated with each customer. It is not so easy to make a visitor or customer reach all your product displays as you desire. But this is very well possible with a well-made eCommerce website with perfect options for search and easy navigation.
• Personalized Experience: In an online store, technology has grown enough to accommodate and promote a personalized experience to the customer based on past purchase actions. There are better chances to up-sell & convert in an online store compared to a physical store. This may not be possible in a brick and mortar business without extremely effective communication with the customer by the store executive and it seldom happens.
• Remarketing Ads: The nature of the internet as a medium allows you to run remarketing ads to an audience familiar with your brand while they are not engaging with your brand or content. Such tactics are not feasible in a physical store, where the stress is on the conventional way of marketing.
• Capture Personal Data Easily: Most visitors to a website are averse to giving their contact information, but on an online store – the nature of the transaction makes it easy to collect such information. This information can be easily utilized to bolster your online marketing efforts. No such avenues exist in a physical store to enhance marketing.
1.2 The Indian Scenario
Through the years I have observed the evolution in the Indian e-commerce market, right from its start. We are seeing the exponential growth of Indian Ecommerce majors like Flipkart, Snapdeal and Bigbasket. Today, the online sector is witnessing robust growth due to - rising internet penetration, availability of cheap data and affordable smartphones. The “Jio Effect” had a significant role to play in bolstering the adoption of online shopping by the average Indian. Besides, there is considerable policy ‘push’ by the government to ensure the market is growing without bottlenecks. Initiatives like “Start-up India” and “Digital India” are seen as proactive policy efforts by the government to catalyse growth in this sector.
Today, the government is allowing 100% FDI in B2B e-commerce and is reaching across to foreign investors through favourable FDI policies. Till 2019, the sector has received $4.32 billion from private equity and venture capital players. Moreover, the e-commerce space is also noticing consolidation in terms of takeovers and acquisitions. The take-over of Flipkart by the US retail giant Walmart is a prime example of gradual consolidation taking place. Established unicorn brands like Swiggy and Zomato are actively buying-out good start-ups to expand their operations. Overall, there is active growth closely followed by consolidation that is shaping up the e-commerce space.
1.3 Who Should Venture into E-commerce in India?
I have been often asked about who should venture into opening their Ecommerce store. I prefer to answer by saying that the market is open for anybody, and anyone with a healthy appetite for risk should embark on this journey. There are mainly three types of wannabe online entrepreneurs:
• Salaried Employees: Individuals with a regular day-time job but seek to invest their ‘after-work’ hours in an online store as a side business. Your day job will provide the means to investment and the online store will serve as an additional income source. But a lot to learn during this entrepreneurial journey. I will be writing an article on this topic exclusively for employees who want to become eCommerce business owners in this blog soon.
• Born Entrepreneurs: These are individuals who do not believe in working for someone and always cherish the dream of being their “Own Boss.” Such individuals are actively seeking opportunities and waiting for things to fall into place. These people are capable of taking the risk on the journey to becoming an ecommerce business owner and are most likely to be successful.
• Future Entrepreneurs: Individuals with a stable job, but want to convert their online store into a full-time engagement into the future, when the store starts generating enough profits to sustain a livelihood.
. Retail Business Owners: All existing retail business owners who want to grow their business must need to go online to sell their products without barriers. The brick and mortar stores are always limited to the number of customers they can serve based on their neighbourhood. But having an online store will overcome their limitations to grow the sales up to their imagination.
II - Decision Time: About an Ecommerce Model of Business
2.1 What to sell in an online store?
I believe most individuals are hard-pressed about deciding what to sell online because there are many niches and options. But, it would be good if you select a product for which you have some experience, knowledge and interest, it will help your transition to an entrepreneur easier. Here, I want to discuss pointers that would help identify your niche or the product options for an online store:
• Solves Pain Points: In a perfect world, you should be looking at developing your own product that should remedy a common pain-point associated with the audience. When you provide a ‘solution’ , the audience is naturally drawn to the product. Alternatively, be on the look-out for novel products that are better than available ‘solutions’ in the market.
• Professional Experience: If you are someone who is closely associated with a specific industry and have hands-on experience in the domain. Then, you should consider opening an online store that utilizes your personal experience for developing and growing the business. The key is to have a set of ‘transferable skills’ that can be leveraged to start an online business.
• Leverage Trends: A trend can be something that fulfils an existing need in a new way, not to be confused with a ‘fad’ that fizzles out after some time. Someone with an entrepreneurial spirit must always keep his eyes and ears open and should remain constantly updated on emerging opportunities. You should be able to cash-in on the ‘first-mover advantage’. Going forward, you would have a product which would take less ad spend and would present enough opportunities to build long term SEO traffic.
• Read Customer Reviews: You have to be able to ‘sense’ opportunities that lie hidden in the form of shortcomings and complaints about an existing product website. These can be nurtured into strategies that can be incorporated while you implement an online store. At times, such strategies can make you stand-out in the crowded online market space. And, give due consideration to both positive and negative reviews, it will give strong notions about running an online business.
• Keyword Opportunities: Traffic from search engines is an essential component to eCommerce marketing and looking through most competitive keywords can give you clear ideas about the product(s) that can be sold online. This would be based on the volume of searches emanating in a specified time frame. In addition, you can take the help of ‘Google Trends’ and other such sites to zero-in on most recent and happening topics that can be inferred to gauge the demand of a product in the online space.
• Higher Profit Margins: While choosing a product to sell, you have to go with products with low-cost that can translate to higher-margins. All factors have to be taken into consideration while selling a product and it is known as Cost of Goods Sold (COGS). This includes promotion, storage and shipping costs. Just because a product comes at a low price does not necessarily mean a high ROI.
2.2 Basics of Product Research for an Online Business
I have included this section in the blog to get you up close with basic research that you would have to carry out in order to finalize a product:
• Product Demand: When you seek to sell, it is vital that you are aligning with a product with good demand in the market. The rule-of-thumb is that you should have a higher sales volume for low-cost items, with low sales for high ticket items. The profit margins need to be factored in during the calculations. Finally, you have to balance your profit margins considering both low and high-volume sales.
• Target Audience: Once you have concrete ideas on what to sell, you must have notions about your ideal customer. An early understanding of the audience will help you with pricing and marketing strategy along with brand positioning you seek to achieve. For example, if you decide to sell make-up products, the audience for that specific product would be much different from the audience for gaming products. You could stick with demographics, psychographics, price-sensitivity, inherent motivation etc.
• Competitor Research: Being in the online market, you will be exposed to the existing competition. Make it a point to acknowledge the phenomenon and learn from your competitors instead of seeing them as a “pain in the neck.” Conduct extensive research into what they are doing right and find opportunities where you can outclass them. Material for research can be trade journals, online product directories, email newsletters and existing online stores
• Consider Logistics: Great ideas when executed well make all the difference between success and failure. An online store has to consider an entire product life-cycle from procuring the parts to assembling and finally shipping. Have clear answers to these questions- whether you would procure parts locally and how much capital would be needed in the process? Be vigilant about staying clear of products which can be easily purchased from local stores. Next, you need to have physical space for storing the parts and the products in a safe and secure location. These points have to be considered before investing your time and effort into a product.
2.3 Types of Products Sold Online
While the above pointers would have given you fair ideas on what to sell online. Now, we come to what types of products to sell and this broadly consists of two main categories:
• Commoditized Products: These are essential and come with high demand and can be either physical or digital products. On the whole, these are products which everyone needs. These are goods sold at major websites like Amazon and Flipkart and include food, clothes, electronic items etc.
• Niche Products: These are products that are not easily available and are meant for a specific audience segment. It includes one-of-a-kind or handmade products that have become quite popular among a certain audience section. Examples could be beaded necklace, eco-friendly products, unique mobile accessories, ergonomic products and much more.
2.4 Product Sourcing Strategy for Online Business
I must stress on the fact that product sourcing is integral to the whole process of selling, without reliable suppliers your business can come to a screeching halt. And, the products/ raw materials must be supplied at a price, where you have the scope to make a profit. Product sourcing encompasses researching, price and cost calculations and negotiating with suppliers. The crux here is to get the products at the cheapest price and selling it at a justifiable mark-up price. Now, we come to the popular methods in product sourcing which are:
• Do-it-Yourself (DIY): This tactic would give you complete control over your brand, but you would have to look into how you will scale-up with the rising demand to stay competitive in the long run. First, you would have to identify where you will source materials from? Second, finalize on the packaging process, and add labour costs incurred in the making. Third, determine the shipping mechanism, whether you want to tie-up with a courier service. Fourth, communicate clearly the time-lines involved making the product to the customer. Fifth, choose either made-to-order or keeping an inventory at hand. Lastly, remain transparent and upfront with your shoppers to gain their trust and confidence in the brand.
• Wholesale Or Manufacturer: This is an option to be considered when you are not prepared to make your own product or want to scale up a DIY operation. This still gives you control over the brand and quality of the product with added assistance in production. The simplest approach would be to partner with a company already making the product which you would like to sell. Be conscious about the quality and supply chain mechanisms before you finalize the deal. On the other hand, partnering with a manufacturer to get a product made would involve digging into their credentials from others who have utilized their services. Be clear on ‘what’, ‘how’, ‘when’ and ‘why’ about the products getting made. Get product samples to get convinced before signing the dotted line.
• Dropshipping: This is a convenient method where you get listed products from a vendor on your online store and would not be dealing with inventory, packaging and fulfilment. The vendor charges you for the products sold and you get to keep the margins based on the mark-up price on your website. This practice involves very low margins and necessitates high sales volumes for generating healthy profits.
III Getting an Ecommerce Business Online
Here I have to clearly state that as a business owner, you would be required to be technically savvy to understand the tech-jargon and terminologies frequently used. You need to be technologically updated on understanding the kind of options that are available in the market today. The process of getting a website done would be as follows:
• Finding a Tech-Partner: The most prudent undertaking would be to partner with an agency, which can develop a website on your behalf and take care of associated requirements such as web hosting etc. Remain receptive to the project status provided by the agency every now and then and proactively offer inputs for the project to make it a collaborative effort.
• Creating a Website: Today, off-the-shelf website builders make it possible to create websites without any technical competence. However, it is much safer to partner with an agency to avail help during crisis situations and for intermittent needs that arise which are mainly associated with website maintenance. You can either build a website from scratch using code and developers or you can build a website with content management systems (CMS). Building from scratch takes time, anywhere between 3-6 months depending on the number of products in the product catalogue. That said, getting it done with open-source CMS frameworks such as Magento or WooCommerce accelerates the process. Select an option that matches your expectations and provides a seamless experience to the user.
IV Marketing an eCommerce Website
Once the website is up and running, you have to invest your time and effort to ensure you get across to audiences and spread the word about your website. This is vital for getting the all-important traffic to your website. This can be done by you or can be outsourced to a digital agency to handle it in the best possible manner. Check the credentials and the experience of the digital agency before you delegate your digital marketing efforts. Some of the most prominent tactics in digital marketing for e-commerce involves:
• Ecommerce Blogging: Blogging for ecommerce is pertains to the practice of developing a dedicated blog to power your content marketing efforts with fresh content updates on a timely basis on an e-commerce website. The blog will educate, inform and at times excite your audience about the latest product offerings, product benefits & features along with any promotional offers being run on the website. Create content with unique perspectives while providing valuable information will make the audience willingly sign-up as subscribers.
• Ecommerce SEO: It involves increasing the quantum of traffic to a website through organic SEO for eCommerce, paid search and paid ads to bring greater brand visibility. SEO involves many aspects to it and covering that would be beyond the scope of this blog. Traffic can also be created either organically or through paid means with paid search and ads. The former involves creating content aligned to keywords normally used in a specific domain. Alternatively, you can also create traffic to the site by investing in paid ads on Facebook and other social media platforms.
• E-commerce Social Media: Focussing on establishing a presence on all social media channels by creating and sharing content on a regular basis is important in as Ecommerce Social Media promotion. Here the effort is more skewed towards growing organically to reach an audience. Although, paid ads are made use of initially to get attention and build an audience. Once you start getting regular traffic, it is all about catering to the expectations of your followers through regular and timely content updates that are both informative and engaging. Facebook Marketing is one of the best ways to promote may of the product segments sold online. Runnung Facebook ads also brings immediate sales to a newbee. Marketing on Instagram is the best way to attract young audience for the specific products being sold among the youth.
• Ecommerce Email Marketing: If you are somewhat sceptical about remaining dependent on social media platforms, then you should invest in building your email list through promotions on the website, newsletter sign-ups and blog-updates. Ironically, this would involve a certain dependence on paid-ads to get the necessary traffic to your website or blog. Once you have a critical number of subscribers in place, you can start sending direct mails to the inbox of your target audience. By then, there would be a regular inflow of new subscribers opting-in. Email Marketing For Ecommerce is one of the best way to drive traffic and sales to an ecommerce project. With an expansive email list – you can indulge in various actions such as audience segmentation, personalization and much more.
V - Customer Support
I feel I have covered all the important aspects of starting an online business in India except the legal part. That is not covered in the scope of this article as it is almost the same as any business in India and a straightforward process. Any business practitioner can help you in this matter and it is almost similar to any business registration process. This will be covered in another article in detail in this segment.
The above listed points would give you clarity on various aspects in one place without the need to visit various websites online. In this last part, I would like to share the importance of having reliable customer support for users utilizing your website services. Keeping channels of communication open is always in the best interest of business and adds to the transparency and credibility of a brand when it remains open to both positive and negative reviews. In addition, answering queries about dispatch and parcel status would make you a reliable service provider. For starters, it is recommended that you start small before adopting a large team for customer support.
• Automated Support: To start customer service on a small scale, you take the help of vendors who can offer chatbots that solve the most mundane queries from your customers. This would only help with basic queries and anything complex would require human intervention.
• Dedicated Phone & Email Support: When the business has the means, it can outsource customer support to professional call centers which are adept at offering such services. Instead, you can also develop a team in-house who can readily attend queries from customers on phone or email. By hosting it on site, the team remains in the loop about all the regular happenings, while an off-shore centre would have to be briefed on any major occurrence.
It's here to stay
In my opinion, the e-commerce model of business is here to stay and nobody seems to have any doubt about it. It represents an immediate opportunity for anyone serious about entrepreneurship. The best option for a potential entrepreneur is to start now without delay and get a head start over others who still have to figure out the entire process.
Once you are in with a broad vision backed by practical strategies and tactics along with a sound understanding of the risks involved, your chances of success remain imminent. On the other hand, if you are conservative by nature – start on a small scale before scaling up your operations to accommodate a larger customer base. Whichever model you choose, marketing will be the most important factor to make it happen.
By remaining active in the space, you would get first-hand experience, it will refine your understanding and offer better perspectives to improve your planning and strategy. I recommend all individuals with entrepreneurial instincts to start as early as possible.