Is online selling profitable for small businesses?
Are sellers in Amazon and Flipkart making any money?
Is online selling profitable for small businesses in India?
Short answer: No, unless you are not selling on your own terms. Meaning, you can easily make a profit if you have your own product/brand & have very good margin, and you sell on your own terms.
If you are a seller buying from wholesale marketplaces(like indiamart), and sell to ECom marketplaces, you will end up with a loss.
There are exceptions. For example if it is a very rare/unique product, and you are the only seller, you can make a profit. But the market will correct itself fast and all of a sudden there will be many sellers selling the same product.
Is online sales profitable as a side income? Challenges and possibilities.
Like any other competitive area, some sellers in online marketplaces can succeed & become successful.
But it takes a lot of learning/investment, effort and skills to succeed.
Many of the marketplaces itself are at loss. They spend lakhs of rupees for marketing, building the large scale operations and tech infrastructure.
Running such a huge operation is very difficult and is only possible because of all the investors who are ready to burn money.
This post is therefore not just to paint online marketplaces as evil.
Without sellers, any of these marketplaces cannot be operating. Those who run these companies know this. But they are ready to push sellers to the limits. They can easily do this effectively using the “big data and analysis” they collect from buyers & sellers.
So marketplaces do just enough to make you stay. And that is how Online market platforms exploit sellers - ECom in India.
So consider this post as a warning to all new sellers that wish to enter the competitive marketplace. New sellers those who don’t have a brand name or a product, or take returns & damages into account can easily get in trouble.
Are Online sellers making any money: Challenges.
Making sellers compete with each other.
When you enter the online marketplace, there are 3 main competitors.
Other sellers selling the exact same product / similar products, the marketplace itself(which might start selling the product) and other established companies trying to copy your product.
Competition is very high even if you have your own brand and product. You have to compete with all the other companies with similar products and on top off that, marketplace itself.
Ecom marketplace will start selling your product by copying it, when you start gaining sales.
They have all the data and resources to replicate the product and sell at a lower price.
But the situation of sellers without their own brand is even worse.
Other sellers can latch on to your listing (that you created with your own photos, details, keywords and optimized for sales) and start selling at a lower price.
Some sellers having dead stock might start selling at a lower price.
They just want to clear the Stock and get at least some money they spent. Thus selling at a loss.
Forcing paid promotion for visibility.
Without getting “visibility” it is not possible for you to sell even a single product. If you have a unique product or rare product, you have better chance.
That means you have to start promoting the product(inside the marketplace). Otherwise, it is very difficult to get more visibility.
Another trick is giving different assurance labels(eg Flipkart assured, Amazon assured, etc) to your products. And to get this badge you have to offer free shipping.
This limits the sellers’ ability to control the price of the product. But products without these badges get less visibility & trust from buyers.
Marketplaces Copying best-selling products.
As I mentioned earlier, online shopping platforms, use their big data and resources to create even better product is very common.
While different governments(including Gov of India) try to stop this from happening, those efforts not working in reality.
Online platforms are quick in finding some loopholes & continue selling their own brands.
They have products in all different category, price segments. Starting from electronics, home appliance furniture to sports & games.
Charging sellers for fake orders, courier returns and buyer’s mistakes.
Charging sellers with all kinds of unfair fees: starting from pickup fees, courier fee, return fee etc. and more.
At the same time they fail to stop fake orders and fraud buyers.
Looming fear of suspending, restrictions and other 100 problems.
If you are a third party seller in online platforms “your business” is not actually yours.
The eCommerce platform literary owns your business. These companies can put a full stop to your sales any point in time.
Sometimes it is not even clear why the suspension happens.
This looming fear of suspension and ban from eCommerce platform which might be generating around 90% of business is horrifying.
Customers abusing the return policy of Amazon/Flipkart.
Most online platforms are biased towards buyers & treat them like kings. This limits the platform’s ability to be “just and fair” to both sides.
Measures taken by online platforms to reduce fraud against sellers, fake orders and other issues are not working. Or they are not trying hard.
Online sales in India: Possibilities.
eCommerce sector Growing fast.
Rate at which eCommerce sector is growing in India is around 20% per year.
This is a tremendous opportunity for both big and small businesses.
If small scale businesses smartly use the agile and learn nature as a strength, they can easily get a share of this growth.
Still much space for own stores.
What big eCommerce companies cannot do personalization.
New online stores can have a chance in the market by giving a personal touch and building a community around the specific interest of the customer.
Growth: those who where not comfortable making an online payment are now starting to buy from new stores.
Opportunity for innovation & new product development.
Since the starting barrier of small scale manufacturing and sales is lowered. It is possible for small businesses to create new products and innovate.
You don’t need to have a lot of stock or money to create a new product. You can start with a simple product and then expand it.
Small scale production enable many small businesses to create new products and sell online.
The answer: Like any other competitive area, 20% of the sellers in online marketplaces make most of the profit. Other another 40% of the sellers are just getting by barely. Then there is another 40% of the sellers who are not making any profit. So that is my rough estimation.
But at the same time there is a lot of space for small scale businesses to create new products and sell online.
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