The journey of an e-commerce platform

Photo by Mael BALLAND on Unsplash

A new bazaar

The strengths of physical retail—being able to see the product and take it home right-away are outweighed only by the wide range of selection and the attractive prices of e-commerce. How are the range and prices offered?

Deep pockets

In a business such as ride-hailing, where the supply of drivers and vehicles are limited, the platform with the deepest pocket can secure supply and win. A game of limited supply.

However, in e-commerce, since the supply of merchandise is unlimited, a platform is winning only until another platform with deeper pockets comes along offering deeper discounts. A game of limited capital.

You get to play the game by finding deeper and deeper investor pockets faster than anyone else. Every story points to GMV to be the most improtant metric for investors. That is, the total sale of merchendise on the platform.

Steps to get GMV soaring quickly

• You’re faced with the chicken and egg problem. Customers or suppliers? Actually, you don’t need suppliers — just supply. List products at steep discounts to lure customers from competition.
• Start with high volume, small ticket products such as books and music. Partner with logistics and payment services to keep costs low. Spend all capital on covering the discounts.
• Add one vertical at a time, add depth, and repeat to slowly gaining breadth. This is the inventory model.
• As you do however, user experience will suffer due to unreliable delivery times of the logistics providers, and lack of COD support from payment providers.
• But your GMV is increasing. So you’re ready to raise capital.

Steps to improve user experience

• Use the capital to bring logistics in-house as well through a network of vehicles and order management systems to improve reliable delivery and offer COD. Raise capital.
• Use the capital to set up warehouses, and inventory management systems leading to improved quality standards. With a more reliable supply chain, add low volume, big ticket products. They may even have larger margins.
• You might even build your own brand based on the consumer behaviour data to offer more compelling products across categories.
• Customers continue to pour in, GMV continues to grow, but the steep discounts project a forever loss making business.

Steps to improve profitability

• Pitch the growing customer base to bring on suppliers—manufacturers, wholesalers, publishers, etc. Become a marketplace. Earn commissions.
• Consumers are your most valuable asset now. Keep them on the platform with Billion Day Dhamakas. And help them when they don’t have the money to buy through—loans and EMIs. Earn commissions.
• Knock knock. You’ve run into regulatory hurdles due to the unfair advantage your inventory and brands may have over fellow sellers on your platform. But your GMV has been growing. Raise capital.

Steps to productising your supply chain

• Use capital to build an ads and customer analytics platform—obviously. You can earn from not only sellers on your platform, but from any business interested in your consumers!
• Move from inventory into being a marketplace entirely. And shift the burden of the discounts from you onto the sellers. As they compete for discoverability, rake in the ad revenue.
• Pitch to SMEs. Help with shipping to far away places, by offering logistics as an add on feature. As they grow, help with storing inventory, by offering warehousing as an add on feature.
• The network effects bring in more consumers and sellers—and more revenue from commissions, ads, and supply chain add ons from sellers and from financial services from consumers.

Steps to live happily ever after as a super app

• You might expand your financial services arm to include banking and investment products and services.
• You might expand your logistics arm to include hyperlocal delivery of food and groceries.
• You might consider unbundling your unified platform into different platforms for tailored experiences for certain categories like bespoke clothing.
• You might even move back offline — not to sell though. So you can let people experience your products. And use your remarkably well oiled machine to get the products to their door step.