Reasons behind the Mass E-commerce Shutdowns Crisis in India


E-commerce in India seems to be on the rise but it is not fair to judge the whole picture on the basis of the likes of Amazon and Flipkart. It is true that an e-commerce website is being born almost every hour in India but it is also true that hundreds are dying unknown. Recently is in the news due to an array of internal problems but the real concern are the e-commerce websites that face shutdown without even making it to the news. Here are some reasons why e-commerce in India is an overall failure.ecommerce shutdown india

Conventional shopping is still as popular
Unlike in the west, actually going to the shops for shopping is still the ‘in’ thing in India. A majority of the population don’t trust the new age techniques and a high percentage of the people don’t even have a smartphone or a PC. Among those who do have all the resources, many actually love to go shopping for real and that is really a lot of people.

COD Rejections
Of course professionalism is to never say “You have to take it” but the cash-on-delivery feature harms the sites more than they help. Many people wouldn’t proceed with their order if there’s no COD option for customer’s rights. But many just take it as an alternative for the old window shopping and that costs the companies quite a painful amount.

Time and practicality
There is no shortcut to success but many Indians fail to understand that. Believe it or not, thousands of e-commerce websites have shut down within weeks after launch. Amazon took 13 years to be where it is today but novice entrepreneurs don’t even wait to plan out before investing.

Logistics costs are too high and the services are not fast enough to cater to 100% customers without disappointing any. Not to mention, the corruption in this highly populated third-world country makes customers as well as the website owners suffer.

Lack of originality
Too many sites are being set up to be another or another whereas the truth is buyers go for the most popular so the e-commerce sites with no USP or diversion are suffering silent martyrdom.

Awareness about discounts
To top it all, the Indian buyers are getting wise about marketing strategies and that is a good thing for the country at large. More and more buyers are considering the discounted amount to be the original and then evaluating the product by providing coupons or promotional codes to their customers. This awareness is affecting e-commerce business because too many sites started off counting on the ‘flat 70+30%’ gimmicks and now they are having to offer real 50% discounts to sell.

Valuation trouble
Unlike successes like Facebook, valuation of online retail shops aren’t on the pay-per-click basis. They’re done strictly on the basis of sales that includes the product charges, shipping charges and advertisement and everything therefore depends on whether or not you have a strong investor.

These are some practical hazards faced by e-commerce entrepreneurs but this doesn’t mean you should give up on your e-commerce goals just because your business is located in India. Take lessons from the failures and tips from the e-commerce rulers and with enough time, experience and planning for resources, success will be yours.

  1. New startups in ecommerce space are not funded at initial stage whereas when they start to progress they take up rounds of funding which actually makes their ground shaky. Investors takes a huge share from their company in every round and so the company reaches to a stage where they have to shut down as they have to pay huge return for the funds they took. Then either they shutdown or the news starts to flash of acquisitions in millions or billions. Remember investors invest in various companies which ever performs better in a specific category takes the cake.

  2. Shutdown are always sad & demotivating for others. But what I feel like shutdown happens when competitors have a tough war between offering something that causes them a huge lose or overspends on marketing without even considering their returns.

  3. e-Commerce players like Amazon, Flipkart & eBay will survive this test & go a long way as they are heavily funded. For small players they either have to master a niche or will have to have good margins to pass the test. Or else the news of shutdown of famous players will keep arising.

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