NB: This blog post is NOT directed against any company, person or group(s) in particular. In fact, I myself have purchased over 25+ items from Jabong.com in the past 4 months. Customer Service is impeccable.
This promotional mailer from Indian e-retailer Jabong.com (Rocket Internet venture launched in late 2011 in India) pretty much sums up the current state of things in the Indian e-Commerce industry. An Indianized version of Latin, “Veni Vidi Vici” as reportedly written by Julius Caesar in 47 BC as a comment on his short war with Pharnaces II of Pontus in the city of Zela (source); the Jabong.com mailer says – “I came, I saw, I shopped a Lott!!.
Forgot to mention – as always, at a % discount OFF. In this case, FLAT 50% OFF.
Other times, its buy 1 get something free, or buy 1 get x percentage off, buy 2 get x+y percentage off and so on.
The issue lies in the fact (in the following quantitative questions) -
> I came, I saw, I shopped a lot – then what?
> When do I come back again, say “t” days/weeks/months?
> If my initial CPA (cost per acquisition for new customer is $x), then on returning after t months, do I make up for the $y capital expenditure (loss) that I gave as discount in the first purchase?
> If my initial CPA is $x, then what’s 2nd, 3rd, 4th, 5th time CPAs?
> If my initial CPA is $x, and my capital expenditure was $y, how do I plan to write this off in my accounting books?
> And most importantly of all, whats the guarantee, this chap will ever come back?
Practically speaking, no Chief Marketing Officer (CMO) of any e-commerce portal in India, knows the answer to these questions. Thus, none of the sites have a decent Referral program (only exception being Fashion&You.com and SherSingh Referral Program), and none have a Loyalty program in place. Discounts, discounts, and discounts is the only battle strategy for all the Dot.coms in India.
Result – After burning $181 million, Flipkart is still clocking 45,000 orders a day; with 60% or more being books/USBs. And yet running Q in negative margins. When will it break even? No one practically knows. Thus, questions arise, can Jabong sustain the current rate of burning cash? And making transactions YET losing massively in ‘unit level transactions’? Only God almighty knows. They will survive till cash runs out; and once it does then………….. Fate of Taggle.com & LetsBuy.com.
2013-2014 would be a tough year for most Dot.coms in India.
Loyalty & impeccable customer service will play an important role for survival in the EU & US downturn(s).
Can Rocket Internet pull it off in India? Am not convinced with the current business model of acquiring customers and providing discounts.
By “building loyalty” – definitely yes.
Only time shall tell.
Not sure what Julius Caesar would say about this.