E-commerce in India: Succeeding due to Business Model, Failing Due to Strategy

A Business Model is a higher-order concept than Strategy.

It answers 3 basis questions on How to: Create value, Deliver value, and Capture a part of that value.

E-commerce has gown phenomenally fast owing to its disruptive Business Model: First Inventory-based and then the Marketplace-based.

The online/mobile shopping model has become successful because it did extremely well on all the above 3 parts: Creating, Delivering, and Capturing value. I will not go into elaborating on these 3 here, assuming that readers have a clue already. For example, Value got created due to: Bulk Sourcing, Elimination of real-estate costs, Product Variety, Shopping convenience, Payment convenience, etc.

BUT: My emerging hypothesis (not a conclusion–yet) is: The days to ride on a superior Business Model are now over.

Strategy has to kick-in now. But, how?

First let us understand how, as concept, Strategy is different from a Business Model.

Consider the 3C framework: Company, Competition, and Customer.

A Business Model is mainly about the Customer (Value creation) and the Company (Value delivery and Value capture).

Strategy (at least Porter’s Competitive Strategy, if not Chan Kim’s Blue Ocean Strategy) is fundamentally about Competition.

The current problem with Indian e-commerce is: High-level of Competition. For customers, for funding, for HR, perhaps for Suppliers too.

How can Strategy be the savior here?

Strategy is all about taking a ‘Position’ in the market. A position that best fits your unique strengths to the market opportunities.

Example: Several decades back, in similar industry (i.e. Retail), a similar game was being played. Walmart vs Sears.

Both has similar business models (i.e. discount retailing). But it was Walmart that became HUGELY successful, while Sears languished.

Why?

Because Walmart chose a different Strategy, a different Position.

What was it?

Walmart targeted sub-urban segment, instead of the urban one. That choice defined all of its moves (such as Merchandising, Store layouts, Supply Chain operations, Promotion, Pricing, etc.).

Similarly, Indian e-commerce needs a Strategy now.

Major players Snapdeal, Amazon, and FlipKart are targeting the entire Indian pie. They are all backed by big investors. They are likely to all end up aggressively competing with each other.

Some symptoms have begun showing already: The deliveries have been out-sourced to highly inefficient (and presumably cheaper) Indian Post, the remaining private delivery guys seem stressed out (perhaps are getting squeezed on rates now?), some of the products turn out to be defective (My friend got a water dispenser without the refrigerator!), funding is getting tough (secondary sales), etc.

Why not choose a Strategic position here—just like Walmart did?

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