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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)
