Addressing the challenge of growing e-commerce businesses

Covid-19 has changed the way we live and operate and it seems this way of life is here to stay. In the beginning of 2020, shops shut overnight, malls and theatres closed down. For business owners, logistics suddenly halted, supply chains were disrupted and everything seemed to go eerily silent.

The future seemed bleak, but the world of retail bounced back and set up roots for a whole new retail ecosystem. In the absence of multiple points of sale, consumers flocked online to shop safely and snugly from their couch to have virtually everything delivered to their homes.

The rise of e-comm businesses

Studies estimate that consumers in the US spent $861 billion in online purchases in 2020, hitting the highest growth rate in the last two decades of 44 per cent. While online spending has been steadily increasing, Covid-19 has accelerated e-commerce to triple the normal rate — the last time e-commerce sales saw such high growth was in 2008, accounting for 63.8 per cent of total retail sales. For the first time ever in the US, online sales accounted for 101 per cent of all retail gains in 2020.

While Amazon accounted for a third of all e-commerce sales in the US, other online marketplaces are growing at an extraordinary rate. Walmart, Target and Best Buy are just some players gaining pace with Amazon.

As a result, the potential for e-commerce businesses skyrocketed, as more and more of the population world over started turning to digital modes for various transactions and purchases from buying everyday essentials online to using mobile wallets.

Businesses responded by making their offering digital friendly. There was also a slew of e-commerce exclusive businesses, selling their products solely on online marketplaces.

India also followed similar trends, with Covid accelerating online retail shopping. One of the largest retail markets in the world, India is expected to surpass $1.7 trillion by 2025. Today, India is a 130 million online shoppers strong now part of a new generation of digitally savvy consumers. Internet penetration has gone deeper, with about 696 million internet users, about 40 per cent of the population. However, e-commerce retail constitutes only 3.4 per cent of the overall retail market.

This ripe environment along with the ‘Make in India’ movement further encouraged entrepreneurs to start new businesses, a lot of them turning to online marketplaces to launch and sell their products due to ease of setting up a digital shop.

The new age of aggregators

Who are they and where exactly do they fit in? E-commerce aggregators or “roll ups” acquire e-commerce sellers and create a valuable portfolio of brands. For small businesses, this represents a tremendous opportunity. Entrepreneurs build their businesses with so much passion, but are they really able to achieve their true potential?

E-commerce roll ups build a centralised system that can deliver expertise on supply chain management, infuse fresh technology into the business, setting it up to manage the growth, help the seller diversify his product portfolio and allow the seller to grow his business, while benefiting from a financial and liquidity event.

Starting a business on a marketplace is relatively easy. You set up a seller account, list your product and have your orders fulfilled by the platform. But after seeing initial success, the owners find it hard to manage and scale beyond a certain size. A variety of problems creep in. Inventory management starts becoming difficult. Space to store products, warehouses in different locations to service orders faster, the technology needed to manage larger scale operations, funds to diversify the product portfolio… These are just a few of the problems they are likely to face.

For these sellers, the road to achieve the exponential growth that this growing market presents is an arduous one. Supply chain inefficiencies hinderthem from serving as many customers, lack of working capital prohibits them from product portfolio expansion and the lack of technology such as systems for inventory management, accounting and order management, makes managing a growing business difficult to manage.

A new path for the new age entrepreneur

Roll ups are able to hire the right talent who strategically evaluate the pain points of the business and work with the seller to solve inefficiencies while building robust systems poised for exponential growth. This gives the entrepreneur the chance to grow his business with the resources he would be hard pressed to find for growth in a short span of time.

Bringing about that transformational change in a business to boost growth and achieve the true potential of the brand is possible in the best way when there is inherent trust and the seller is fully integrated into the firm’s ecosystem as a partner.

The benefit of an exit strategy can liberate the seller from that threshold beyond which growth seems improbable. As the population shopping online grows in India, the community of e-commerce sellers will also grow bringing about a new ecosystem of sellers that can look forward to building a business with low entry barriers and enjoying a financial exit while still having the option to grow and nurture the business to a scale which they may have never reached otherwise.

The writer is Co-Founder & CEO of 10club