Why investors should worry about their investments in e/m-commerce
For those who know me, my strong belief in the new models of business that are now becoming all pervasive is well known. While this belief still persists, what worries me is the amount of slack creeping into these businesses.
So what is worrying me?
It is the experience and delivery standards that are now becoming a part of the standard service. This is clearly not anecdotal as the example shows that it is very much part of the service and policy.
Recently, I ordered a few items on a site and paid with my credit card (not a cash on delivery order). Here is what happened since, the promised delivery dates given was 10 days (10 days for an e-commerce business?? and we are talking about domestic delivery).
At the end of 10 days, the delivery of only 1 item was executed in 6 days, 2 items have been cancelled for reasons of vendor inability to deliver(ink jet cartridges and cookware) information for this cancellation comes 3 days and 7 days after the order was placed with a promise to refund the amount. The last item – A wrist BP measuring device arrives exactly 10 days after the order was placed (need it now even more after the experience). Btw another order on a competitor site got a delivery commitment of 7 days and delivery is awaited 3 days later.
So what was I thinking – I should buy on e-commerce to get quicker delivery ? to reduce my stress level of driving to a store ? or to save on the price ? or maybe all of the above ??
Yes that what it was – all of the above. The result :
1. A 10 day delivery as a commitment, nothing less (to make you feel great if you get it in 6-10 days). I guess the philosophy of ‘Under Commit and Over Deliver’ is the belief that drives this promise of 10 days delivery. There goes my first reason for buying on the net. Expecting a quick delivery of within 48 – 72 hours is not realistic today, maybe the operators are lining up for a special charge for speed deliveries.
2. The cancellation and lack of effort to replace the item, is indicative of the number of customers (and orders) that are probably slipping through the cracks. As for the customer it makes the whole experience of shopping online even more stressful – now not only do I have to ensure I get a refund, and track it, but they expect me to go back to this site to find the replacement and buy more items. The consolation that Rs 100 as an inconvenience reimbursement will please me (I guess that’s the cost of Customer Acquisition for a Credit card paying customer).
3. Finally the price argument – this is clearly out of play currently with the physical brick and mortar offering a Rupee for Rupee deal to fight the loss of business from e-commerce. The fear is that this equation will change to be able to command a premium for immediate delivery, touch and feel experience and stress free transaction.
Is the new business model working? Are we creating new solutions/solving problems or creating new problems for the customer? Will customers come back if you drive them away? Is the experience great or traumatic?
One of the significant reasons for the high valuations in the e/m-commerce space is the large number of Customers transacting and number of GMV sold – Right ?
Customer Churn and the cost of retention along with customer acquisitions costs and creation of new value propositions to the customer, will increasingly make marketing costs and operating costs difficult to manage within budgets. Both are increasingly being challenged by the lack of Customer Centricity and poor Operating Standards.
The choice is to wait for competitors to come in and force the issue of improving Customer Service standards and reduce margins or become the best practices organisation yourself and improve margins. Investors would be wise to increase the focus on measuring metrics that will provide indicators to sustainable profitability and leadership in addition to the GMV and number of Customers.
If you agree say yay if you don’t tell me why…