8 Common Challenges of E-commerce: What Brands Face and How to Overcome Them
Let’s imagine you've launched your dream product online, but sales aren't matching expectations. You certainly aren’t alone, as thousands of e-commerce companies are struggling with the same.
While India's e-commerce industry touched US$123 billion in 2024, the path to success remains riddled with obstacles that catch even seasoned brands off guard.
Here's the thing - knowing these challenges of e-commerce beforehand can save you millions in lost revenue.
Whether you're battling cart abandonment rates of 70% or struggling with India's COD obsession, every problem has a solution. But first, you need to understand what you're up against.
Ready to turn these roadblocks into stepping stones? Let's dissect the most pressing e-commerce challenges in India and, more importantly, how to conquer them.
1. Building customer trust online
Have you ever hesitated before clicking 'Buy Now' on an unfamiliar website? That split-second doubt costs Indian e-commerce brands lakhs annually in lost sales. Trust isn't just nice to have - it's your survival currency in digital commerce.
The trust crisis runs deep. Nearly 43% of Indian consumers[1] worry about receiving counterfeit products, while 38% fear their personal data might be misused.
Add inconsistent product quality and sparse genuine reviews, and you've got a perfect storm of scepticism. These e-commerce issues particularly plague new brands trying to establish credibility against giants with millions of reviews.
What’s the solution?
So how do you bridge this trust gap? Start with authenticity certificates prominently displayed on product pages.
Implement blockchain-based verification for high-value items - yes, it's worth the investment. But here's what really moves the needle: user-generated content.
Don't forget the basics either. SSL certificates, secure payment badges, and partnerships with trusted logistics providers signal legitimacy.
Most crucially? Make returns ridiculously easy. Nykaa's 15-day no-questions-asked return policy helped them achieve a 2% return rate - well below the industry average of 15-20%.
2. Logistics and delivery issues
What's the point of a great product if it never reaches your customer intact? Logistics remains one of the biggest challenges of e-commerce in India, where 70% of the population lives in areas with patchy delivery infrastructure.
Last-mile delivery alone accounts for 53% of total shipping costs[2]. Factor in India's unique geography, from Kashmir's mountains to Kerala's backwaters, and you're looking at a logistical maze.
Meanwhile, reverse logistics for returns can cost 1.5x more than forward shipping, eating into already thin margins.
What’s the solution?
But innovative brands are cracking the code. How? By thinking local. Partner with regional courier services that understand local nuances. Set up micro-warehouses in high-demand pincodes; even a 100-square-foot space can slash delivery times from 7 days to 24 hours.
Here's a game-changer most miss: predictive analytics for inventory placement. By analysing purchase patterns, you can pre-position stock closer to likely buyers. And for returns? Implement QR-code based instant pickups.
3. Payment failures and COD dependence
60% of Indian e-commerce transactions[3] still happen through cash on delivery. Payment failures plague 25% of online transactions, creating a vicious cycle where customers lose faith in digital payments.
These e-commerce problems run deeper than technical glitches. Bank servers timeout, OTPs arrive late, and payment gateways crash during sales. The e-commerce market in India loses crores annually to payment-related cart abandonment.
What’s the solution?
The solution isn't choosing between COD and digital - it's perfecting both. Integrate multiple payment gateways to ensure redundancy. When Razorpay fails, PhonePe picks it up.
Offer payment links via WhatsApp for failed transactions as recovery rates jump. For COD, digital pre-confirmation through automated calls should be implemented. This simple step reduces fake orders significantly.
But here's the masterstroke: tokenisation with saved cards. By storing payment tokens (not actual card details), you enable one-click checkouts while maintaining security. Brands implementing this in the e-commerce industry in India see higher conversion rates.
4. Regulatory and compliance barriers
Think the recent GST compliance is complicated? Wait till you navigate FDI regulations, data localisation norms, and constantly shifting e-commerce policies. These barriers of e-commerce can turn profitable ventures into compliance nightmares overnight.
The numbers tell the story. Compliance costs consume 8-12% of revenue for small ecommerce businesses. Add the Personal Data Protection Bill requirements, and you're looking at infrastructure overhauls costing lakhs. For foreign-funded ventures, FDI caps and marketplace model restrictions create additional limitation of e-commerce growth.
What’s the solution?
Automation is your first defence. GST automation tools like ClearTax reduce filing time by 70% and eliminate human errors. For data compliance, implement privacy-by-design architecture from day one.
Partner with legal firms specialising in e-commerce for quarterly compliance audits. Create compliance playbooks for each state you operate in. Document everything. This proactive approach to challenges and opportunities of e-commerce keeps you ahead of both regulators and competitors.
5. High competition and price wars
When Amazon and Flipkart control 60% of Indian e-commerce, how do you even compete? This David-versus-Goliath scenario represents one of the core challenges of e-business.
The race to the bottom is brutal. Marketplaces slash prices by 40-70% during sales, funded by deep VC pockets. Your ₹1,000 product sells for ₹400, destroying brand value and margins.
Customer acquisition costs have skyrocketed 45% year-over-year. When everyone's fighting for the same customer with the same playbook, nobody wins - except perhaps the customer.
What’s the solution?
Successful challenger brands don't compete on price, they compete on purpose. Take Boat's strategy: instead of cheaper electronics, they sold a lifestyle. The e-commerce industry in India rewards differentiation, not discounting.
Build your moat through community, create exclusive member benefits that marketplaces can't replicate. Focus on profitable niches ignored by giants. Selling specialised pet food might seem small, but Heads Up For Tails built a ₹300+ crore business doing exactly that.
Remember, in the vast challenges of e-commerce, specialisation beats generalisation.
6. Data and analytics gaps
What's the biggest challenge for most businesses when going online? It's not technology or funding, it's making sense of data. Most brands drown in metrics but thirst for insights, creating a paradox where more data leads to worse decisions.
Consider this: the average ecommerce brand uses tens of market analysis tools. Yet a majority can't accurately predict next month's demand. These e-commerce issues cost Indian brands crores in lost efficiency annually.
What’s the solution?
The fix starts with integration. A unified dashboard tracking tool like Intellsys collects scattered data points from 200+ sources.
Implement predictive analytics for demand forecasting. But here's what transforms businesses: cohort analysis. Understanding customer lifetime value by acquisition channel revolutionises marketing spend.
7. Customer experience and returns
Ever ordered a "navy blue" shirt only to receive something closer to purple? These expectation mismatches drive 30% of all e-commerce returns, making customer experience one of the most expensive challenges of e-commerce to solve.
Each return costs ₹150-500 in logistics, plus the hidden costs: customer service time, quality checks, and repackaging. Worse, 58% of customers[4] who experience a bad return never shop with that brand again.
What’s the solution?
Technology offers elegant solutions. Augmented reality try-ons reduce fashion returns. But the real breakthrough? Rich product content. Brands providing multiple images, size charts, and fabric videos see fewer returns.
Offer instant refunds upon pickup confirmation - don't make customers wait 7-10 days. Provide free return shipping; it costs less than losing a customer forever.
8. Talent and scaling challenges
Finding people who understand both technology and retail represents one of the hidden challenges of e-business.
Scaling amplifies every weakness. What works at ₹1 crore monthly revenue breaks at ₹10 crore. The e-commerce industry in India is filled with brands that couldn't scale beyond ₹50 crore annual revenue.
What’s the solution?
Smart scaling requires systematic thinking. Document every process before you need to. That customer service playbook seems unnecessary now, but when handling 1,000 queries daily, it's salvation.
Invest in training programmes; developing talent internally costs less than hiring experienced professionals who might not fit your culture.
Consider the venture studio model for specialised functions. Instead of building everything in-house, partner with experts for technology, logistics, or marketing.
This approach helped brands like SleepyHug scale from zero to ₹100 crore in 13 months. The challenges and opportunities of e-commerce often require expertise you don't have, and that's okay. Strategic partnerships beat expensive mistakes.
Face the challenges of e-commerce head-on
The challenges of e-commerce we've explored aren't just hurdles, they're filters. They separate brands that merely sell online from those that build lasting digital empires.
Success requires more than knowing these problems exist. You need systems that anticipate issues, partnerships that multiply capabilities, and data that drives decisions. The brands thriving despite these e-commerce challenges in India share one trait: they view obstacles as competitive advantages waiting to be unlocked.
Ready to transform your e-commerce challenges into growth catalysts? At GrowthJockey - a full-stack venture builder, we've helped 25+ ventures navigate these exact obstacles through our venture design framework and market intelligence platform, Intellsys.ai.
Discover which challenges are costing you the most and get a customised roadmap to conquer them.
FAQs on challenges of e-commerce
Q1. What are the challenges of e-commerce in developing countries?
Infrastructure gaps, digital literacy barriers, payment system limitations, and logistics networks designed for traditional retail create unique hurdles in developing nations.
Q2. What is the biggest challenge for online business?
Customer acquisition cost versus lifetime value remains the fundamental challenge, as competition drives up marketing costs while customer loyalty decreases.
Q3. What are the 5 forces of e-commerce?
Supplier power, buyer power, competitive rivalry, threat of substitution, and threat of new entrants shape the competitive dynamics of digital commerce.
Q4. What are the main challenges of e-commerce?
Trust building, logistics efficiency, payment processing, regulatory compliance, and customer retention form the core operational challenges facing online businesses today.
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