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December 18, 2014
Sagar Malviya & Snigdha Sengupta, The Economic Times
Mumbai, 18 December 2014
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 croresales 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 ecommerce 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 .`30.5 crore. But investors are still upbeat about ecommerce 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% decline in sales at Rs 75 crore due to the reorganisation.
(Published in The Economic Times)
