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Indian eCommerce – Focus shifts to Customer Loyalty / Spend

June 23rd, 2016

eCommerce India Customer is KingIndian Internet / eCommerce Companies are focusing on Consumer Loyalty / Spend and Retention, as opposed to primary focus on GMV (Gross Merchandise Value) earlier. We believe this may be a function of limited availability of capital, leading companies to focus on cash generation. Post government regulations that curtailed discounts, companies seem to have done away with the same; most discounts being seen online are being offered by sellers/brands themselves. Amazon has established clear Lead on Website and narrowing the lead with Flipkart on Mobile App.

Customer recall, retention and loyalty are key metrics monitored by companies now, as opposed to an overwhelming focus on GMV earlier. While standard MAUs and app installs are also tracked, orders from repeat customers, and frequency of ordering are being used as metrics to gauge customer engagement. Companies are also focusing on improving customer satisfaction by shortening delivery times, offering wide product assortments and improved service, in a bid to keep customers engaged to their platforms.

Delivery is a large cost component for most e-commerce companies, and hence its optimization is a key area of focus. Demand prediction, delivery-linked payments to delivery staff, as well as infrastructure sharing are various options evaluated by companies to rationalize delivery costs. Companies are using technology heavily to predict peak and non-peak delivery requirements, and optimizing resources accordingly.

COD (cash on delivery) constitutes a large chunk of payments for the e-commerce companies we interacted with, ranging from ~50-70% for online services and products. The proportion of COD, at least for products, has not declined meaningfully over the past couple of years. Tier II/III cities constitute a sizeable chunk of sales of e-tailers, and hence remain a key focus area.

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