Scaling and profitability in the Consumer Durables and Information Technology or Gadgets sector has to be understood from the lens of both vertical as well as horizontal e-commerce players. The rules of the game work very differently for both kinds of players and a similar approach and business strategy therefore would not apply across the sector.
Vertical e-commerce players tend to have a far more efficient and qualitative product focus as they are dedicated to a single or to fewer product categories. By virtue of their more skewed product focus, they are able to deliver a far superior consumer experience and their overall product approach is more affective in highlighting the features/USP of that particular category.
Businesses are established largely with two core purposes in mind – achieving scale and achieving profitability: the classic chicken and egg situation. Which one comes first?
For several years now, businesses have been chasing the top line revenue approach and it has been perceived to be as the most logical route to scaling up a business, i.e. to establish a strong cash flow by focusing on more and more sales. However it is imperative to understand that businesses will only become “successful” in the long-run with a more holistic approach: optimising operations, expanding margins and reducing the service cost, whilst building economies of scale. This holds especially true in the Gadgets sector, which makes this vertical extremely interesting to operate in, as one is not able to apply a standard top-line revenue approach and is compelled to drive growth, scalability and profitability more intelligently.
A player who sets out to achieve profitability in the gadgets sector will therefore have to devise a more creative approach in order to build a sustainable business. One way to do this would be to establish strong consumer trust, understand the needs of the consumer and ensure the delivery of a uniquely differentiated consumer experience. Simultaneously, one would have to still keep optimising overall costs and focus on driving efficiencies.
The CDIT sector is a brilliant sector to be in to drive scale, however it is important to understand that the only way to sustain the achieved scale is by efficiently managing acquisition costs. Otherwise one would establish a fast crumbling growth which would not withstand the test of time. So CDIT e-commerce players have to drive growth very strategically.
For achieving these objectives, a Hybrid Business Model approach becomes important. Such a model ensures higher consumer engagement whilst providing a better platform to cater to a wide array of customer requirements. Consumers are inevitably drawn to holistic qualitative servicing i.e. all their needs are fulfilled from one service provider. A hybrid model caters to exactly this - a visitor can consume all pre-purchase information about a product and complete the buying process by purchasing the product on the same platform, while availing the best available deal. Moreover, there is an opportunity to choose the best product as the same platform provides a detailed comparison of multiple products in the same category.
A portal of this kind will therefore provide the consumers with a ‘360 degree experience’ in terms of product information (pre-purchase), comparative research (in terms of features and prices), product demonstrations and expert as well as user generated reviews, purchase of the product as well as after-sale services; thereby encompassing the entire value-chain. The objective of such a platform is to help the consumer make the right buying decision and also guides them to optimally use their existing gadgets. This kind of an approach enables the player to build a strong and loyal consumer base using deep behavioural insights.
In today’s volatile business landscape, expectations of the consumer are ever evolving. One has to adapt an approach which aims at retaining existing customers by offering new and customised services, while at the same time attracting new potential customers by meeting their product and service requirements.
This article has been authored by Bhawna Agarwal, CEO,Gadgets 360.