Big e-tailers get bigger, small players fail to click

MUMBAI: Despite an online shopping frenzy in the country and large investors stepping in to fund several online retailers, most e-commerce players are yet to turn their click-and-buy model into big businesses as the big ones steal the show.

While nearly half a dozen shopping portals such as #Zovi, #FashionandYou, #Yepme and #Shopclues have doubled their sales since the last two years, they are yet to reach the Rs 100 crore sales mark, and pale against the likes of #Flipkart, #Snapdeal and #Jabong that clocked anywhere between Rs 500 crore-Rs 2,800 crore in sales for 2013-14, according to filings with the Registrar of Companies.

India, one of the fastest-growing e-commerce markets, is expected to have 100 million online shoppers by 2016 when the industry will grow to $15 billion, or about Rs 93,000 crore, up from 35 million consumers and $3-billion valuation this year, according to a recent #Google report.

Yet, in a highly competitive marketplace, where big discounts are the primary sales drivers for online retailers, many small players are struggling to gain ground. “For every successful online retailer, there are at least 10 others which have either shut shop or got acquired,” said Devangshu Dutta, chief executive at retail consultancy Third Eyesight.

He said just selling at lower rates isn’t enough for small players at a time large players flushed with funds aggressively look to grab market share through deep discounting. “Smaller players should have some key differentiator so that customers can give business to them instead of competition,” Dutta said.

In fact, with small players forced to match discounts offered by bigger rivals, most of these firms reported higher losses, some even posting half their overall sales as net loss.

VAS Services, which runs #Yepme portal, posted a net loss of Rs 45 crore on net sales of Rs 61 crore last fiscal, while the net loss of #Shopclues at Rs 38 crore was higher than its net sales of Rs 30.5 crore.

But investors are still upbeat about e-commerce players, due to the huge growth opportunity.

“Investors are still willing to pay fairly healthy valuations for some of the smaller players in the market,” said an investor who has backed a private label e-tailer.

“Compared to other developed markets, e-commerce entry valuations in India are still relatively attractive,” the person added.

Some small players did manage to improve their performance though.

Robemall’s Zovi, which more than doubled its sales in FY14 to Rs 51 crore from Rs 21 crore in the previous year, reduced its net loss to Rs 19 crore from Rs 34 crore during this period.

#FashionandYou, a flash sales site of Delhi-based Goldsquare sales, also managed to reduce losses to Rs 20 crore in FY14 from Rs 77.9 crore in the previous year as it consolidated its business after acquiring fashion and beauty e-tailor #Urbantouch a year ago.

“The focus throughout the year was to bring efficiency and cut down cost that included trimming down the employees from 1,000 to 300 people,” said Aasheesh Mediratta, CEO of #FashionandYou, which posted a 21% Rs 75 crore due to the decline in sales at reorganization. The company is hoping to stage a comeback on the back of a $50 million funding it plans from new and existing investors.

But a source in one of the venture capital firms that had invested in the company said it lost precious time.

“In the current e-commerce environment, losing even three months is like losing a year. They (FashionandYou) have lost nearly three years,” the person said.

Even the big ones are making losses in this industry. Combined losses of Bangalore-based #Flipkart, Delhi-based #Snapdeal and Amazon India were more than Rs 985 crore for the last fiscal.

#Flipkart and #Snapdeal — which counts #eBay, Azim Premji and Ratan Tata as investors — together sold goods worth more than $4 billion last fiscal year.

The Indian e-commerce industry picked up in a big way in the last couple of years, triggered by deep discounting strategy from newer players even if that meant incurring heavy losses.

The online buying frenzy also brought along a lot of entrepreneurial startups, also triggered by the fact that popular companies such as #Snapdeal, #Junglee and #Flipkart were witnessing soaring valuations.

Source : TOI

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Author:

Neeraj; an entrepreneur & a visionary in the field of Railway, Defense & Automobiles, is a graduate in commerce and a Harvard Business School Alumni. He’s an expert in govt. liasoning & contracting and has an exceptional network & connections at both local as well as global level. He’s an expert in Market Strategy & Planning and has served number of overseas companies as an advisor/consultant. He takes a profound interest in upcoming startups & is very receptive towards ground-breaking ideas & innovations. He likes to brainstorm those ideas and if the values & philosophies matches; he is even ready to invest his resources, serve as a mentor or act as an incubator to futuristic businesses.

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