eCommerce looks like a promising space and most of my friends are bullish about the future of e-commerce businesses in India. Many companies are funded and many more will be funded in the next 2 years. Hopefully the bubble would be burst by then.
An average order from an e-commerce site is around Rs 400. The shipping cost would be around Rs 100 which is 25% of the value. In most of the cases discount is 10-40 %. I am sure there will be negative margin in the sale. Now add up the costs of customer acquisition, development, logistics etc.
Negative margins and high cost of customer acquisition is being justified by lifetime value of the customer. Scaling any e-commerce business is just scaling your losses and the limit to that is the amount invested which unfortunately is plenty. I wish part of this was invested for innovative solutions in energy, waste management and new technologies.