This presentation on e-commerce in India proposes a greater focus on lifetime value and customer acquisition costs to drive sustainable growth. The author is Lightspeed India's MD Bejul Somaia (http://www.twitter.com/bsomaia). This presentation was given on April 25, 2012 at IAMAI's Digital Commerce event.

1. Making e-commerce a
sustainable business
proposition

2. The Opportunity…
Internet Users in India (Million) Ecommerce TV ($ Billion)1
CAGR: 41% 32% CAGR: 26% 83%
~300 6.7
100
0.6
70
50 0.4
36 0.3 0.3
Note: (1) Non-travel ecommerce
Source: Indian Internet & Mobile Association, Edelweiss India Internet Report

3. The problem…

4. The Real Problem……Unit Economics
 Average Order Value : INR 1000
 Gross Margin (20%) : 200
 Coupons (10%) : (100)
 Shipping/packing : (100)
 COD/Payment Gateway : (30)
 Contribution Margin (30)

5. ……there’s more
Marketing INR 500-700
(Customer Acquisition Costs)
(Don’t forget reverse logistics, inventory write-downs, customer
service, content cost etc.)
Volume does NOT fix the problem !

6. So what does this mean?
Ecommerce is easy to get in to, but difficult to scale

7. Levers to building a sustainable business
 Increase customer lifetime value (LTV)
 Average Order Value
 Contribution Margin
 Retention /Repeat
 Reduce customer acquisition costs (CAC)
 Build a great product => virality
 Think ‘social’
 Scrappy online marketing => free traffic
 Rule of Thumb : LTV > 3* CAC

8. Key Ingredients for Sustainability
 A product that customers LOVE
 Unit / customer economics that work
 Ability to execute
 $$$$$
 Passion and perseverence

9. SCALE SOMETHING THAT IS
WORKING, NOT BROKEN