The Indian e-commerce market is one of the top growth stories of the last decade. As we speak, we must note that the Indian retail market stands at a valuation of over $1 trillion. However, we have just scratched the surface. E-commerce penetration in the retail sector is expected to grow to 10.7% in 2024 from 4.7% in 2019 with a 27% CAGR M-o-M. I personally believe these numbers may have accelerated further due to COVID-19. As the industry grows exponentially, there’s a bunch of aspects that need to be focussed on.
It’s about time the Indian e-commerce market truly starts looking at overall conversion rates as a problem statement and looking at building specific solutions to improve them. I say this because even after all the disruption and innovation in this industry, the average e-commerce conversion rate stands at 3.81% for the global market and 1.10% for India. These numbers stand true for the newer marketplaces or the D2C brands building an entity on their own. Industry leaders like Amazon experience a whopping conversion rate of 10-15 percent!
Let’s put everything aside for a minute and look at a usual online shopper journey. A customer ‘visits’ your website. They ‘search’ what they are looking for and if they find it, they ‘add it to the cart. Finally, they ‘checkout’ where they have to add ‘customer details’, ‘shipping address and then make the ‘payment’ to complete the cycle.
At every part of this funnel, there’s a significant drop-off and a potential GMV loss for the business. Problems of poor search capability, ineffective CTA placement, misleading icons, multiple hops of payment methods are a few of the many things that can be improved across the funnel. When you think this is all, the problem of RTO further impacts the conversion rates of CoD orders, a payment method that still covers 60-70% of e-commerce orders.
The sad part is that the problem of high efforts and low conversion has been bogging sellers down for many years now, and yet very few businesses could surpass the threshold of this challenge until today.
So, how do we bridge this gap and truly deliver value for everyone running an e-commerce business? Let’s explore!
The User Experience Conundrum
One of the most important aspects of building an e-commerce business is banking the best of efforts on user experience. As we talk right now, I have 5 different e-commerce websites open before me and guess what, all of them have a different checkout experience. Some of the e-commerce enablers offer storefronts with a set checkout flow while some give the business owner the liberty to design their checkout.
While this seems like an easy solution, it is about time we start moving to a broader concept of universal checkout – in terms of design and payment modes. Developing a universal checkout experience requires the checkout to be truly available for everyone.
Accessibility is more than just a list of checkboxes, but deeper thinking on how to design proper human-facing software that makes the experience easier for all. To boost the sales of an e-commerce website, it is crucial to provide a world-class experience from cart to checkout to have a higher conversion rate. According to Baymard Research — the global average cart abandonment rate currently sits at 68.8%.
Here are a few things to ponder about an e-commerce website when we talk about cart abandonment and related issues:
- Why do some users face problems in performing a successful checkout at an e-commerce website?
- What motivates your visitors to make a purchase?
- What causes frustration in a new or frequent user which can negatively affect their conversion rate?
- Are you asking them too many details during the checkout process?
Amazon’s CEO Jeff Bezos once said. “If you build a great experience, customers tell each other about that. Word of mouth is very powerful”. Can we really argue over this? I don’t think so. Of course, the success of an e-commerce business depends on several factors like:
- the quality of the product or service offered
- the quality of the content presenting the offer to customers
- The quality of design for the electronic platform — website and/or mobile application — via which the sales are going to be delivered
It is just right to conclude that user experience plays a vital role in all of these. Thoroughly thought through logic and navigation, clean interfaces, attractive visuals, and seamless payment flows can directly influence the business profits. This is the space where designers and business experts come together for the greater good i.e for the benefit of the end customer.
The Power Of Real Game Changers – Digital Payments
We have come a long way in our journey with digital payments and it has simplified our lives in hundreds of different ways. But a business must be mindful of providing the latest and innovative payment options like EMI, Buy Now Pay Later (BNPL). This just provides ease to business while also building a layer of loyalty.
UPI, since its advent has been a disruptor in the fintech ecosystem. It has given a much-needed boost to the digital payments infrastructure. With payments being just a link or a QR code away, businesses have found a solution at their disposal. All these years, offering CoD as a payment option has not proven to be a very fruitful solution. Instead, it made the entire process for the e-commerce business a lot more cumbersome.
With UPI, businesses can choose to send a payment link after the customer has successfully placed the order. They can also nudge the customer to pay a day or two before their product will reach their doorstep. And all they have to do is send a link. A simple step like this can make the entire system so much more robust!
While UPI, BNPL, and in general affordable digital payments are winning the hearts of businesses, there is still a lot to do to make the entire user flow a little more agile, personalized, and synchronized with the rest of the checkout flow.
CoD & RTO – The Pillars Of Indian E-commerce (And Their Challenges)
The landscape of e-commerce has been unique in the Indian market when compared to the rest of the world. We all know that Flipkart was the pioneer of CoD back in 2010. A list of new payment options has emerged in the past 10 years that have made the e-commerce market much simpler. Even then, India, being a traditionally offline marketplace, took a long time to get used to digital payments and the trend is likely to remain the same.
It was only after the event of demonetization in 2016 that Indian shoppers were forced to look for options due to the shortage of liquid cash. Even then the circulation of cash in 2018 came back to pre-demonetization levels. And while we are amidst the contagious pandemic, the country’s adoption of digital payments has been far from significant. During the first lockdown, CoD % went down but came back up very quickly. We are standing at 2021 and over 60-70% of all e-commerce orders even today, are CoD.
In a nutshell, while digital payments are seeing an increased adoption with the advent of UPI, cash remains the undisputed king. So it becomes essential to keep monitoring CoD conversion rates as well and find ways to improve them.
For a customer, CoD provides the following advantages :
- Convenience: Indians love liquid money and choosing CoD gives them an option to cancel the order as per their wish
- Uncertainty of delivery: Customers are not sure of the delivery time hence they prefer CoD so that their money is not ‘locked’ for the entire duration in uncertainty
- Freedom of experimentation: Cash on Delivery makes it comfortable to pursue and ‘trust’ smaller brands. CoD ‘secures’ the customer by assuring that payment needs to be done after receiving the product
On the flip side, for a business, CoD bring in the following implications:
- Increased probability of RTO: Cash on Delivery orders can cause an increase in RTO and cancellations, simply because it’s easy to not accept them when they arrive at your doorstep.
- Impulse purchases: Shoppers usually place orders impulsively, and this leads to a high amount of cancellations. This is especially true in the case of Cash on Delivery orders where the customer simply cancels their order after an impulse purchase.
- Additional costs: Courier companies charge for delivering COD orders above the regular charges. This is called a “cash handling charge”, which refers to the money that needs to be paid to vendors for only handling your cash.
Despite these problems, they have to offer CoD because CoD provides:
- Customer satisfaction: The majority of Indians are used to the ‘pay-after-service’ mindset. It gets easy to help them make a buying decision if they have an option to pay after the delivery.
- Reach: Businesses can expect to see a spike in their overall sales and brand reach when they offer Cash on Delivery as an option to pay, especially in smaller cities.
The Indian market has been a unique use case when compared to the rest of the world. India, being a traditionally offline marketplace, took its own sweet time to get used to digital payments. It was not until demonetization that Indian shoppers were forced to look for options due to the shortage of liquid cash. That said, the recent event of the ongoing pandemic has also accelerated the growth of digital adoption. We have seen words like contactless come into action and people looking for QR codes to complete a transaction. These incidents have been accelerators the Indian economy needed.
Let’s now talk about RTO. Return to Origin (RTO) is when orders cannot be delivered and have to be shipped back to the warehouse. There can be multiple reasons that RTO happens like customers not being available, they forgot to cancel the order, orders placed by mistake, and more. This brings in a huge cost burden on e-commerce businesses as they lose a lot of money in shipping it back and forth. There are other losses as well such as damages in transit, opportunity costs, packaging costs, operational costs, etc. While all of these are business-related issues, RTO also amounts to huge numbers of carbon footprints, hence harming the planet.
What’s noteworthy is that only 20% of RTO issues are due to logistics. The remaining 80% of RTO orders are due to the intent-based fallacy of the shoppers. To give some more context to the point I am trying to make, understand the ratio of RTO in prepaid orders vs RTO in CoD orders. In a prepaid order, there is a <1% chance of an RTO while in CoD the chances are as high as 30-40%.
The Birth Of GoKwik – A Partner Every Ecommerce Business Needs
I would like you to go back to where we started – the massive (and visible) difference that exists between the e-commerce giants and the booming e-commerce businesses. It is nearly impossible to build the tech capability without being in the system for decades. Harold Geneen has rightly said, “In the business world, everyone is paid in two coins: cash and experience. Take the experience first; the cash will come later.”
There has been a quest that has brought me so far in this journey – who is solving the challenges of User Experience, conversion rates, and RTO for D2C businesses and upcoming brands. As an industry, we need to divide our focus between physical offerings and building robust tech capabilities. This is exactly what I learned in my time at the Bombay Shaving Company as the Chief Revenue Officer. We need to bank on the power of personalization – not just in communication but also in the user’s shopping flow.
Personalization is a very powerful tool. Imagine the wonders you can do with your business if you can map your users’ behavior. If you see that your customer has good shopping behavior – pays on time, does not endorse returns often, you can choose to reward them with loyalty points, rewards, and BNPL options. On the other hand, if you see that the customer had bad shopping behavior – too many returns, RTO issues, and canceling too frequently, you can simply disable options like CoD for them. Long thing short, it is high time we start building on the power of a data-driven approach in our e-commerce businesses to ensure that businesses do not lose big on cost and manpower due to poor shopping behavior. More importantly, do not lose out on GMV and sales due to inefficiencies in conversion rates across the funnel.
Wondering, what are we up to?
Briefly put, we are on a mission to democratize the shopping experience for businesses. Each one of us at GoKwik shares a common goal – to empower every e-commerce business with a support system that can help them provide the best shopping experience in the industry. We want to assist businesses to unveil the power of personalization based on shopping behavior. All in all, GoKwik’s mission is to improve overall conversion rates, help release more GMV with increased RoI and provide protection against risks such as RTO to e-commerce and D2C brands.
If you are an e-commerce brand looking for higher conversion rates and reducing RTO, drop me an email at email@example.com Together, let’s democratize the shopping experience!