The Bravehearts- E-commerce wars

Of the many battles fought, none of them were as pitched and fierce as the e-commerce battle of 2014. In the middle of this wolf fight, some remarkable achievements also inspired and set new standards. E-commerce will continue to be among the biggest newsmakers in the coming times. E-commerce funding reached new heights, brand battles got more intense than ever before and the flurry in the talent market was serious.

Gartner estimates the India e-commerce market to grow 70 per cent between 2014 and 2015 and reach $6 billion. One of the key concerns with the e-commerce market in India is that service providers are so focused on execution and winning customers at this point that at many times, it comes at the cost of future vision. Mergers and acquisition activity is increasing, thereby increasing the scale and breadth of services and operations of individual players. At the same time, many challenges continue to plague the market, including low internet penetration, low volumes, and logistical issues.

Buying loyalty through stocks

Hiring and recruitment data from this year’s IIT placements reveal that e-commerce has propelled itself to becoming one of the top preferences for candidates this year. The promise of a collegial work environment, faster growth opportunities, bigger incentives and the freedom to carve one’s own career are seen as the biggest crowd pullers to the e-commerce space. These are some of the best times for e-commerce firms and data shows that e-commerce companies are able to attract some of the best talent from the premier institutes in the country.

Compensation is the primary tactic for e-commerce companies to attract and retain talent at this point. The common notion in the talent market in India is that an offer with an e-commerce firm comes with an increment of 60-70 per cent in salary. The salary figure of Rs. 1 crore has almost become a benchmark for salaries in business and functional head roles. At the senior leadership levels, Rs. 6-crore plus salaries is commonplace. The primary difference between packages offered by e-commerce firms compared to traditional firms is in the structure of compensation. While traditional firms believe more in providing cash, e-commerce firms are more reliant on stock. With the option of offering stock, e-commerce firms are able to inflate salary packages much higher than traditional firms. The tactic, at this point, is working because current talent trends indicate that the talent market is happier to have a higher overall compensation package with stock options compared to a lower package with more cash.

Another key advantage of offering stock is the inbuilt long-term loyalty that comes with a reward system based on company performance. While it may mean higher payouts, e-commerce companies are building loyal and committed executive teams through the premise that the real benefits of stock options come only in the long term.

Sales do not equal total shareholder returns

The dramatic Flipkart-Snapdeal face-off in early October was a story of polarities. For the lucky customers who were able to avail some big deals, it was a dream-come-true. For many others, online shopping turned out to be a harrowing experience, with payments failing, web sites crashing, and information overload. While the e-commerce story was scripted similar across the globe, one e-tailer showed the world a new paradigm of conducting online commerce. Alibaba’s ‘Singles Day’ was the biggest event in the history of global e-commerce, with the Chinese company making total sales of over $9 billion on one single day. Borrowing its name from a conversation about the day belonging to four singles, 11/11, the ‘Singles Day’ will forever be etched in online commerce history as a day which emphatically showed the world that online commerce is here to stay. While online commerce companies in India try and play catch up with Alibaba, it is a benchmark that sets the highest levels of service, technology, and planning.

Flipkart kicked off the war and Snapdeal responded with equal intensity. Snapdeal announced a shopping bonanza on the same day with a flurry of discounts and deals to ride on the great big online shopping wave. Customer acquisition is the biggest focus for e-tailers in India and companies in this industry are maintaining their single-handed focus on this objective. At the same time, it is no secret that e-tailers in India are losing money, as customer acquisition costs are much higher in this industry compared to any other industry. Most believe that the flow of funding is the only reason why online commerce firms are staying afloat despite the magnitude of losses. While clearly, sales volumes have become a primary business target for online retailers in the country, they are not necessarily translating into total shareholder return. 2015 will likely be a year of consolidation for the e-commerce industry in India with major M&A activity.

Many e-commerce companies in India also came under the scanner for the wrong reasons. Customers complained that e-commerce companies increased the marked prices of products before offering discounts, thereby making the discounts appear more inflated. While this worked in many cases as an excellent marketing tactic, it was not too long before the market started to brand them as unethical. It also opened up questions on ethical business practices, enough for the Competition Commission of India (CCI) to take notice. The Ethics Research Center, an American non-profit research body, in its publication, “Building a Corporate Reputation of Integrity” states that ethical leadership is a key contributor for top talent in an industry to choose an employer. While faced-paced growth may be a key area of focus for the leadership, they have to consider the impact of their actions on the talent market.

It is alright to be human

The Bansals of Flipkart came up with an emotional apology to their customers for letting them down on the ‘Big Billion Day’ sale, and it did surprisingly strike a chord with many. It was a brave display of leadership intent, which many call a masterstroke. Despite receiving its own share of criticism from various quarters, it displayed that owning up to a mistake in today’s networked age is never a bad idea. What clicked on this occasion was the fact that the organizational leadership made a strong statement both to its customers and its internal and external talent pool that it is okay to be human. In an industry where everyone is trying to project the organization and the leadership’s image as the role model of perfection, here is an example of a brand that was open to accepting its human side. It was this very human move that propelled Flipkart back to its spot as India’s answer to Amazon.