The emerging role of e-commerce in business
I spent eight years working with Alibaba group where we saw e-commerce go from almost zero adoption to now where it is the way that entrepreneurs do business. The way it is changing business is that the Internet is giving people a gateway or opportunity that they didn’t have before--to sell their products in a very inexpensive way to people all over the country. What you see now, for example in China, e-commerce has actually leapfrogged ahead that instead of opening a physical shop, most are going online directly. It’s empowering entrepreneurs at the grassroots level throughout the developing world.
India – the next big e-commerce destination
We saw in China that it has entered its own golden era of e-commerce. People were a little slow getting on but once it took off, it changed the way people did business.
India is probably five or six years behind China.The reason why I am spending so much time in India is because I see that this country is going to enter its golden era. In countries such as Nigeria, Vietnam and Mexico, you see the same trend. But India is the next big market it happens in.
What brought the big names of e-commerce to China?
The biggest opportunity is for the small and medium-sized businesses. They’re the ones that built e-commerce in China. SMBs are generally quicker to adapt to new ideas and quicker to embrace technologies. If you are competing against a big retailer or a big brand, one way of having a level playing field is the Internet. The Internet is empowering these SMBs.
In the West, e-commerce was often about the big retailers. But in China, it is more about the SMBs using the power of the Internet to meet buyers all over the country.
In India, it is going to be the same because we see a lot of the same characteristics that China had. There are many who have great entrepreneurial spirit and products to sell. Just having that online and gaining access to buyers all around the country is going to drive e-commerce.
The reason I am passionate about e-commerce is because it empowers small businesses and entrepreneurs. It gives them a channel to find buyers they never would before.
SMEs: the way forward
The important thing small businesses need to keep in mind when they start doing e-commerce is that a lot of the same principles in the offline space apply online. You need to have great service, make sure you package your product well and provide it in a timely manner. The way you describe your business and products are all clear, consistent, and that your buyers are having a really good experience. That’s true online and offline. But online, there are other things that are important. And that’s small businesses in an online environment. You need to find ways to build trust with your buyer in a way that you wouldn’t offline.
Offline, you can see the person, look into their eyes and gauge if this is someone you want to do business with. But in the online world, you need to make sure that you are giving the service levels that will get you good ratings. So that when people are searching online, they will look at your ratings and they will decide based on that. So, having good services that shows up in your ratings online is what sets you apart from the other competitor who are trying to sell the same product.
SMEs: Infrastructure for great service
For a small business that is going online for the first time, it is really important to know that it takes a while to learn how to do it effectively. But one of the key things that make small businesses successful is creating an organisation that has someone that is dedicated to the online part of the business. It is a little bit different. So, often small business would choose someone from within the company who is very Internet-savvy, who is good at uploading great images, putting great product descriptions. Have someone to be customer-centric is a great way to be successful.
Often when people are just starting out with e-commerce, they try it out for a little bit. And if they don’t get results right away, they give up. But I can tell you that, the pattern we saw in China was that some people tried it and gave up too early and subsequently missed out on a big opportunity. Their competitors go online, take some time to learn how it works and be very successful in the long run.
Success stories in China
Originally people looked at the Internet as a way to start selling their products online. They started it as a hobby. But there are case studies that were really interesting in China where people created a whole new brand for themselves online – sourcing products, designing them and selling them. There is a woman who was a regular shopper online and started selling as a hobby in the weekend. Then she went on to design the clothing and creating her own brand. She has succeeded in becoming a millionaire in no time. Many small sellers in china are becoming millionaires by going online. So, the opportunity that you see now is only going to get bigger and companies/ entrepreneurs that embrace it or learn how it works now will be the millionaires who got ahead in the e-commerce space.
Sellers: battling reluctance to take the plunge
When we were starting with Alibaba and the websites in China, we saw there were two types of entrepreneurs – those who embrace change and chase after the opportunity and those who sit on the sidelines and miss out. We learnt that those who embraced e-commerce early on benefitted from it and built really strong businesses. Those who sat on the sidelines had to scramble to catch up further up the road. The e-commerce revolution is inevitable. Entrepreneurs need to ask themselves: “Am I the type of entrepreneur to grab this and grow a business or am I going to play catch up in five years.”
Sellers: reaching out to customers in Tier 2 & Tier 3 cities
An interesting development in China was that several years ago, businesses were deciding how should they expand? The natural thing that was happening in the West was that retailers were focused on setting up physical stores in Tier 2, 3 & 4 cities. They made sure they got their products out to these stores and other retail channels. In China, they realised that they needed to go where the buyers are going – online. And the beauty was that for a retailer, you simply had to put your products online. You didn’t have to build that extra infrastructure to get your product out to different levels of the country. E-commerce allows you to get your products out to all over the country without putting in the resources.
China’s exodus to e-commerce
There are two types of businesses that were using e-commerce:
- The traditional business that decided to go online to find new buyers and environment.
- Those that started online from Day 1.
So an entrepreneur with products can have a pure online business. It opens up opportunities for entrepreneurs who have no prior business experience.
E-commerce and success for SMBs
Online, you can find a huge array of products. For niche products, it may not make sense to have a physical store. But online, thousands will be interested in it. We saw instances where new product categories were created for people who had ideas. We saw these niche stores grow online in a way that it would not have been possible offline.
E-commerce: an ecosystem in the making
My last year at Alibaba, I spoke at a conference where I said: “Stop whatever you are doing and go create a business that is related to e-commerce”. Because not just the e-marketplaces that grow – of course they will grow. As the economy grows online, it opens up a whole new opportunities for service providers. A photographer, for example, can look to e-commerce businesses and offer up their services. Similarly for content writers or packaging providers. So it is an entire ecosystem and not just the buyers and sellers that benefit. It is also all the third parties who support this movement. While thinking of a business idea, you can also think about serving all the other retailers who are beginning to sell online. Because there are a lot of people who became successful doing that as well.
From Porter, to Indian businessmen
The message I have for any entrepreneur in India is that India, right now, is entering the golden era of e-commerce. The question: how are you going to get involved?