Four Reasons Why Your Next Venture Shouldn’t Be E-Commerce
E-commerce has been the biggest boom of this century, with companies like Amazon, Alibaba, Flipkart and Snapdeal making millions of dollars. Since e-commerce’s valuation model is based on revenue, sales and customer acquisition, these models can be termed as real businesses which actually have a positive return on the invested money once their brand equity has been established.
Just like 1999, the last few years have seen a rise in the amount of money being invested by the venture capitalists in the e-commerce space. However, due to high Series-A and Series-B funding, these startups face the risk of getting a lower valuation in the next rounds. Many of these startups are brutally destroyed by the competition as a few companies dominate the majority of the market share. Newspapers are full of news of startups bleeding out to the competition.
Here are four reasons why your next venture shouldn’t be in the e-commerce space:
1. It’s a copycat market
Let’s face it, you are doing nothing new. Maybe your inventory management is better, but there is no real innovation anymore (there was a time when ‘1-click purchase’ patent by Amazon truly revolutionized e-commerce). There is no real need for your business in the market unless it is offering a truly unique solution for the customer’s existing problems.
2. You might not have an exit option
If your startup fails after a significant amount of money and time has been invested in it, you might not have a viable exit option. You can either hope to be acquired by a bigger e-commerce company (which might not a possibility if you have a ridiculously high valuation) or you can just run out of your luck. The latter can be a pretty nasty situation which can leave you broke. Better to learn from the mistakes of others rather than learning it the hard way.
3. It’s extremely crowded
The market of companies offering e-commerce solutions is overcrowded. Market penetration with the wide spread of existing solutions is now more difficult as compared to what is was six or seven years before. People are already used to certain apps and they can remember only a limited amount of brand names. The brand equity of the current giants is too big to compete with.
4. E-commerce is natural now
Founding a new startup isn’t going to get you significant media coverage anymore. People aren’t going to offer you a second look, even if you have been lucky enough to get their attention for the first time. E-commerce is nothing unique now, it is as natural to people as WhatsApp is in their daily lives. Unless you give them something that has never been offered to the customers before, it’s difficult to make it alive in the war zone out there.
These are the reasons why I believe why your next venture shouldn’t be an e-commerce company. After all, not doing something different but doing it in a different way might not be your savior in today’s post-bubble era of cut-throat competition.