E-commerce: a friend, a foe  


July 4, 2016

Rashmi Pratap, Hindu BusinessLine
Mumbai, 4 July 2016

Apart from changing business models, mall operators are also benefitting from the challenging times in the e-commerce space. Though online sales are expected to zoom to $55 billion by FY2018 from $14 billion in FY2015 – according to Retailers Association of India – investors in e-retailers are tightening the reins. They are questioning the business models of e-commerce players, who have been forced to re-think their strategy.

Hedge funds have been actively funding Indian start-ups so far. However, with economic slowdown in China and rising interest rates, they have scaled back their investments.

With tightening fiscal environment, the expectations of investors have also undergone a change. “While earlier the expectation was to deliver much more in terms of growth, now they are asking for better balance between growth and profitability,” says Alok Mittal, angel investor and CEO and co-founder of Indifi Technologies.

To add to it, investors are also cutting down valuations of e-commerce ventures. Flipkart’s investor Morgan Stanley marked down the e-retailer’s valuation from $15 billion to $9.39 billion earlier this year.All this means investors are now less bullish on e-commerce firms. And that, mall operators hope, will translate into lower discounts for customers who will throng the malls.

Devangshu Dutta, Chief Executive at retail consultancy Third Eyesight, says e-retailers have a reach that is unlimited by time and geography.

For standard products such as diapers, online convenience may win over the need for a physical experience.

However, non-standard products such as apparel or jewellery lend themselves to experiential buying, where a physical retail store definitely has an edge, he adds.

But all this doesn’t mean that e-commerce is no more a challenge to retailers. “I think e-commerce remains a threat to retailers who refuse to change,” adds Dutta.

But for successful malls like Viviana, DLF and Forum, e-commerce has been a teacher. “It has made us re-think some of the ways we do our business. We now know it is important to engage closely with customers,” says Suresh Singaravelu, Head – Retail, Prestige Group.

(Published in The Hindu Businessline)