Ecommerce industry is growing, but will the current etailers survive?

Ankur Bisen, Senior Vice President of the Retail & Consumer Products division at Technopak penned down his thoughts on the present state of the ecommerce industry for ETRetail and very creatively described, “Indian E-commerce industry currently resembles an action thriller movie, in which we are yet to witness the climax. In fact, we have barely reached the interval.”

We agree! With several loose ends, twists & turns, acquisitions & stake sell-outs, skewed business models, high sales with no profits, Indian ecommerce is one interesting suspense story that everyone has their eyes own without any clue as to what will happen next.

Everyone wants to know although the ecommerce industry is growing, will the current etailers survive, if things continue the way they are?

Here are the reasons or loose ends why this particular question is on people’s mind:

• India’s ecommerce market is limited and complex in nature

The market already feels crowded with leaders (mainly Amazon, Snapdeal, Flipkart, Paytm, eBay) that have hold on 80% of the market. Number of online shoppers and purchases is increasing. Although, India is not one of the top 10 ecommerce markets in the world. India’s ecommerce sales in 2014 was 1/80th the size of China and 1/58th the size of the US

• No market leader as yet

Other countries have one definite market leader. India doesn’t as the leadership position keeps changing every quarter. As a result entry barrier is low and quality of the market is degrading. Right business model couldn’t be established at the beginning as competition is fierce between multiple players as opposed to one VS one.

• Profitability, still a dream

None of the etailers have achieved profitability. None of them has reached break-even. Instead are burning exorbitant amount of cash on discounts, ads, promotions, with future in mind that has put present on the backburner. This unhealthy business model is disrupting the retail industry and hurting sellers of all size

• Supply side limitations of merchandise

This has created a huge gap between product availability at price points that drives volumes and repeat purchases & customer loyalty. This is why etail sales accounts for only 0.9% of the total retail sales.

• Rules and Policies

For now there aren’t ecommerce specific modern rules & regulations, policy or regulatory framework. Once that comes through, the industry will go through a sea change. Same goes for the impending decision on FDI in ecommerce which will change the leadership position and might push some existing players out.

The above listed pointers address decisions that are yet to be taken (Rules, FDI) or faulty business practices, which the industry watchers hope dies soon.

Gradually investors will push for profitability, which means discounts and ads will no longer serve the purpose and ecommerce marketplaces will have to work on creating an individual identity in the minds of buyers & sellers. Once measures are taken to cover loopholes, the mystery of ecommerce industry will unravel itself. We’ll know which leader will survive or will a new player takeover.