How cattle can show the way ahead for Indian e-commerce

By Ireena Vittal

Last month, the largest category traded on an Indian customer-to-customer, or C2C, website was not sofas, mobile phones or motorcycles. It was cattle. Is there an insight here for the future of online marketplaces in India? Perhaps.

The global online marketplace model is still in its infancy. Global survivors share four lessons. One, building a marketplace takes years. Trust is critical to attract a sufficient number of merchants and customers. Two, scale matters, both to defray considerable backend costs and to create the ‘network effect’ — a virtuous cycle of more traffic, more sales, more merchants. Hence, the industry consolidates soon and the long tail dies. Three, survivors keep the burn low. Cheap capital is never forever.

Finally, lower prices and discounts are a good early trick as price discovery shifts considerable surplus to consumers. But it is soon insufficient to retain early adopters who are critical. Stickiness and sustainable margins need differentiation: better range, services including vendorfinancing or quality guarantees for customers, revenues from monetising customers. More info

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