Losses pile up for ecommerce companies; investors’ money down the drain?

Money is slipping away from online marketplaces, digital start-ups and ecommerce-focused companies’ pockets as fast as sand slipping through fingers.

Industry experts have predicted that Amazon India would touch a whopping $1 billion loss by the end of FY 2016-17. The American ecommerce giant’s operational losses touched a new high in 2016. Experts suggest that this is a direct result of Amazon’s investments in its India unit and high cash-burn rate in a bid to compete with home-grown etailers Flipkart and Snapdeal.  

“Amazon is playing the market-share game in India. The internal directive to employees is not to bother about customer acquisition costs but to single-mindedly pursue growing market share to gain market leadership. To achieve this, Amazon is expecting to incur losses of $1 billion at the close of FY17 at the rate of about $80 million a month, which is almost four times the $261 million loss it incurred in FY15,” sources revealed.

Then to add salt to the wound, Flipkart emerged as the winner during the October Diwali sales, in spite of Amazon spending big bucks on marketing, incentives, discounts and scaling up their operations.

Ecom Express’ FY15-16 loss crossed the Rs. 100 crore mark

It’s not just the marketplaces that are losing money. Ecommerce-centric logistics company Ecom Express’ loss for FY 2015-16 is Rs. 104 crore. The company’s loss doubled from Rs. 49.4 crore in FY 2014-15 to Rs. 100+ crore in the last fiscal year.

While the firm’s revenue doubled too from Rs. 151.25 crore in FY15 to Rs. 359 crore in FY16, its expenses have gone up too (Rs. 463 crore) in order to meet the demands of ecommerce biggies Amazon, Flipkart, Snapdeal and others.

Snapdeal’s investor Softbank’s profitability affected due to India investments

After online marketplaces and ecommerce-focused companies, the losses are passed onto the investors who put in the money. Japan-based investor Softbank’s India investments are turning out to be the roadblock in their path to profitability. Softbank’s India investments include online marketplace Snapdeal, taxi-aggregator Ola, branded-hotel aggregator OYO and ad-tech firm InMobi.

The firm’s loss touched $558 million in the first two-quarters of FY16-17.

“This (loss) was mainly due to a loss recorded as the amount of changes in the fair value of the company’s investments in India, from March 31, 2016, till September 30, 2016,” Softbank stated in its financial report.

Is this the reason, why Snapdeal’s Mumbai team was moved into a co-working space?

Flipkart’s CFO left the company due to continued losses and inability to raise funds?

The heavy losses of another ecommerce giant, Flipkart compelled its Chief Financial Officer Sanjay Baweja to leave the company. Industry watchers say that Baweja resigned from Flipkart due to the mounting losses and inability to attract investors amid series of devaluations. Flipkart’s inconsistent financial reports could also be one of the major reasons why the etailer’s CFO quit.

What’s clear though is that, right from ecommerce leaders to start-ups, from investors to ecommerce-focused companies, all have recorded heavy losses consistently. Would this downward trend ever end? And will any investor pour funds in these money-guzzling ecommerce firms?

Logistics companies growing exponentially thanks to ecommerce, says KPMG study

Independent logistics companies in India are having a blast. Online commerce companies are increasingly turning to third party logistics firms to share the load of multiplying orders. With the ecommerce scene in India only set to go north, things are looking perky for logistics as well.

Despite most companies like Flipkart, Amazon and others channelling 50% of their transport needs to their own logisticsdepartments, standalone courier companies are very much in demand.

The study shows that Indian ecommerce is expected to reach a cool $136 billion by 2020. Etailing alone is poised to grow to $37 billion by 2020.

The study attributes this spike in demand for logistics to, “The rapid e-commerce growth in retail and other segments has resulted in the emergence of third-party logistics operators, emphasis on service levels, increased penetration in Tier II and Tier III cities, surged cash-on-delivery services, geographic penetration and supply chain security requirements.”

Logistics to grow by 48%

A Nielson study shows that the logistics industry in India will have a cumulative average growth rate (CAGR) of 48% by 2020. It is expected to be worth $2.2 billion by 2020. In this lot, third party logistics firms will witness a 10 – 12 % of growth in the period.

Upcoming players

Logistics companies like BlackBuck, TruckSuvidha and GoBolt are making a mark for themselves. GoBolt recently got a round of funding from MCube8 (MCube Captial’s wing exclusively for startups).

Existing players like Flipkart’s Ekart are trying to make money by extending their services to others. Ekart is considering a stint in hyper local delivery for other companies. The Indian Railways is also contemplating providing warehouse and transport facilities for ecommerce companies.

The competition is tough, but with ecommerce expected to grow, there will be no dearth of demand for transport companies.

Hit by the currency ban? Let customers ‘pay later’ for larger ticket items with ZestMoney

Cashless payment option, ZestMoney integrates on your checkout to help customers shop now but pay the bill over time.

The shock currency ban imposed this week has had major ramifications for the entire e-commerce industry. In the first few days, merchants and sellers across all categories have reported declines in sales – from 10% to 90% depending on category. Not surprisingly, those worst hit were the sellers most exposed to COD. As the queues at ATMs and banks across the country lengthen and consumers household expenses use up the meagre cash reserves people have – it doesn’t look like we will see a re-bound in orders in the near term.

Many in the industry are predicting at least three months of depressed sales – perhaps more, depending on how smoothly the roll out of the new currency is handled and how badly consumer confidence is hit.

Has your transaction size been affected?

What can you do in the mean time to ensure you don’t slow growth in your business? And is it even possible to turn this difficult time into one of strength – where you can stand out amongst the competition?

One option is to offer more cashless payment options – but not just wallets, which we all know have their challenges when it comes to larger ticket size orders. ZestMoney is an option that not just helps the customer in times of cash-flow shortage, but also helps you increase transaction size if used effectively.

ZestMoney is a Bangalore based company, founded by payment industry veterans and backed by some of the largest fintech investors in the world.

 ZestMoney effectively enables a “cardless EMI” – customers can make a big purchase, by paying only a tiny down-payment (via PayU payment gateway) and then splitting the cost over subsequent months, deducted directly from their bank account.

Gain customer’s confidence & trust

Customers feel more confident making larger purchases this way and will even up-scale their transaction when they know this option is available. ZestMoney also leads to a far lower return rate, faster cash collection cycle and can increase customer loyalty and retention.

Says one of ZestMoney’s partners,

“We have seen a tremendous increase in sales after implementing ZestMoney. With quick integration of Zest, we have been able to add wings to the dreams of our travellers who did not like using credit card.”

 

 ZestMoney can take as little as one day to integrate, depending on your technology platform. They provide a full merchant dashboard and reporting to make your life easier.

So if you’re struggling without COD, reach out to the ZestMoney team at Marketing@ZestMoney.in, or simply go here: http://zestmoney.in/merchant/. As a special offer for IOS readers, a reduced merchant rate will apply.

Court orders criminal investigation of Askme.com & its business operations

Trouble keeps brewing for Askme.com and Askmebazaar.com. The ecommerce company shutdown in August and blamed Astro Holdings, an investor, for its inability to repay its sellers. The two fought back and forth about this while sellers sat in despair and pondered when they would receive their much-awaited pay.

Some sellers went all the way to the Ministry of Commerce and Industry to complain about pending payments from AskmeBazaar. Now, the Delhi court has ordered an FIR to be lodged against Askme.com and its online retail platform AskmeBazaar.

What grounds is the FIR based on?

A case of cheating and fraud was registered by the local police against Askme.com and AskmeBazaar upon directions from Metropolitan Magistrate Pankaj Sharma. This was after allowing a complaint by a firm that it was cheated by the online retail portal.

The court went though with its directions based on initial reports filed by the authorities. In its order the court stated, “Facts disclose ex-facie commission of cognizable offenses and in the considered view of the court, field investigation by police is required in this case.”

Cheating and fraud under the guise of discounts!

While hearing a plea from Limo Trading Company, it was alleged that the directors and other officials at the ecommerce company offered hefty discounts while selling products. However, later at the time of payment, the profits from the discount sales were not transferred as agreed.

The complaint against the company also stated that its online portal charged a commission for each transaction irrespective of whether it was successful or not.

More promises but no remittance

The plaintiff alleged that once it enrolled on the portal, its international partners came to India and made promises to boost the quality and increase the visibility of comments on products they supplied. This was expected to boost sales on Askme.com and finally result in greater investments, the complainant mentioned.

Timely payments were assured after the usual transaction fee deduction. This gave sellers confidence to sell more on the portal. But the according to the complaint made in court, the supplying firm never received the money buyers paid for their products.

Askme along with its parent company Getit Stores ran multiple businesses like online grocery, online retail, an e-wallet, tele-information services, local searches, directories, classified media, and so on, the court took into account.

With sufficient primary evidence provided through the complaint, it was declared that the online business firm and its operations must face criminal investigation. And, it has asked the police for a detailed report about the same.

So, what does this mean for online sellers cheated by Askme? Are they closer to receiving justice? What about payment settlements? Will sellers receive the money they’ve been robbed of?

B2B ecommerce player Udaan, a Flipkart alumnae product, raises significant capital

The online business to business industry in India is slowly spreading its fledgling wings. Companies are making their mark and impressing investment firms to part with money. The latest to raise capital is Udaan.com. The company, brainchild of former Flipkart executives (Sujeet Kumar, Vaibhav Gupta and Amod Malviya), has raised $ 10 million from Lightspeed Venture Partners India and US.

Udaan.com is in the pilot stage, and is focussing on mobiles and apparel. The company plans to launch full-fledged operations in the next two months.

B2B in India looking good

The industry is gaining traction in India and everyone wants a share in the pie. India’s B2B market is slated to grow to Rs. 45 lakh crore by 2020 (from the current 19.13 lakh crore). Leading companies like Amazon, Alibaba, and Shopclues have their wholesale ventures. Earlier this year, Shopclues tied up with Chinese company DHgate and the Singapore Traders Association to improve its wholesale arm.

Amazon has extended its B2B operations to include more cities, and has invested Rs. 115 crores. Alibaba plans to collaborate with transport companies including DHL and Delhivery to expand its business. The purpose is to aid its sellers. The Chinese ecommerce company is also in talks with banks to raise capital.

Wholesale business has greater scope than retail due to the sheer volume of sales, and the reduced role of discounts in the equation. In this climate, it is heartening to know that new players are coming in, and getting the required support from investors.

Black Friday, Thanksgiving gives Indian online sellers & shoppers reason to cheer

After the Diwali shopping extravaganza, Indian online sellers and shoppers are looking forward to the Black Friday and Thanksgiving weekend followed by the Cyber Monday sale.

It is primarily an American holiday shopping event just before Christmas and New Year. But thanks to ecommerce, vendors and buyers from India also reap the benefits of the US festive cheer.

Indian sellers and products to reach international buyers through Amazon

US-based ecommerce giant has been running its Global Seller program in India and few other countries. Since then, the program has swelled up with many Indian sellers getting an opportunity to sell their products in the international market.

This time around too Amazon plans to assist Indian vendors to make the most of the annual Black Friday and Cyber Monday sales (November 25 and November 28) in the US. Few of the updates about 2016 edition are:

• Indian sellers have already dispatched 10 lakh products
• The shipment includes ‘Made-in-India’ products such as clothes, fashion accessories, ayurvedic/organic products, healing crystals, consumer durables and kitchen essentials
• Some of the brands that are part of the shipped consignment are Manyavar, Biba, Himalaya, FabIndia

Gopal Pillai, GM – Seller Services, Amazon India asserted,

“Our Global Selling program has empowered over 18,000 sellers through this program. In the past few months, Amazon has identified top selling products in the US, closely engaged with sellers to provide them insights on these bestsellers and has worked backwards to enable them to offer products in these categories to global customers at best prices. Indian sellers who participated in the Black Friday and Cyber Monday sales last year witnessed growth in range of 2X to 10X for each of the 2 days and we expect a bumper season this year as well.”

Black Friday and Cyber Monday deals to fall on Indian buyers’ lap

Shopaholics in India too would get their hands on attractive deals and discounts during the US’ shopping season, courtesy ecommerce biggies Amazon, Flipkart, Shopclues and eBay.

Etailers believe that there will be a huge surge in demand for electronics and fashion product categories. And hence, they have planned a special sale around Black Friday and Cyber Monday. Shopping trend experts also predict that Indian buyers’ won’t mind buying from global ecommerce sites as well, if the deals are great and international shipping service is available.

It is definitely a great opportunity for Indian sellers and buyers, especially when the popularity for ‘made-in-India’ products, ayurveda, and yoga has considerably increased globally. But will it be as big as the Diwali festive sales? Indian sellers, do you have any big plans for Black Friday, Thanksgiving and Cyber Monday 2016 sales?

Returns bring down Etailers from their festive sales high

The ecommerce scene was buzzing with sales all October long. Marketplaces claimed to have broken records and achieved new levels of greatness. The sales figures reported in the first week of the month were phenomenal. But why stop there? Major etailers held multiple sales events in the attempts to grow their sales figures and outdo each other.

Now that the mega sales have wound down and the enthusiasm has stabilised, it’s time to face the tidal wave of returns.

Festive season returns for Flipkart and Amazon

The prospect of returns was never mentioned when sales skyrocketed. But when you consider the percentage of festive season returns, the sales figures given by Flipkart and Amazon begin to diminish significantly.

During the Big Billion Days sale, Flipkart sold 15.5 million units. Amazon, on the other hand, sold 15 million during the Great Indian Festival. These numbers increased with additional festive sales.

Sellers on Flipkart claim, they saw returns of at least 40% after participating in the Big Billion Days.

Some sellers who participated in this sale on Flipkart were not impressed by the sales numbers the etailer published to the public. They claimed that returns were rampant during after the Big Billion Days and it was all the marketplace’s fault!

Here’s what a couple of sellers had to say about their experiences with Flipkart’s BBD sale:

Flipkart isn’t the only marketplace receiving return requests. Amazon’s festive season returns are at about 25%. For some, the returns percentage varied from 25 to 40% depending on their product category.

Online seller Aman said he experienced returns ranging as high as 20% due to the etailers inability to deliver his products on time. The seller further comments on sales he received on other marketplaces like Shopclues, eBay and Voonik, during the festive season sales. Check out his comments here.

Flipkart defending itself?

The head of Flipkart’s marketplace Anil Goteti claimed that in most cases the returns received were in single digits. Goteti said, “Across the board, we have seen returns coming down by about 25 per cent compared with last year.”

He further added, “We have sellers who adhere to our standards but there are always some whose products can be bad and hence returns can shoot up to even 25 per cent.”

Amazon did not comment on the matter yet. But we do know that ecommerce firms will pass on the cost of returns to their online sellers and if you are one of them the bill for product returns will be long and expensive this year.

Amazon beats Flipkart, Snapdeal to emerge as India’s most attractive internet brands: TRA Study

US-based online retailer Amazon has been ranked as the most attractive internet brand in the country ahead of rivals Flipkart and Snapdeal as well as search engine giant Google, according to India’s Most Attractive Brands Study 2016.

“For the first time in three years, Amazon has been declared as the most attractive internet brand (96th rank overall)…,” said the study carried out by Trust Research Advisory (TRA).

Google emerged as the second-most attractive internet brand in the country while its overall ranking was 102. The study was based on primary research conducted on close to 3,000 consumers across 16 cities.

Flipkart grabbed the third position in the internet category, jumping 221 slots to 125th rank across India, while Snapdeal saw an improvement of 63 ranks to 302nd on the list. Social networking giant Facebook rose 202 ranks in the national rankings to 157th position in 2016, and was placed fourth in the category, the study said.

“The Internet category has seen a surprising shift in the top ranks, with Amazon ranking higher than Google, implying a serious improvement in the appeal of conducting transactions online,” TRA Chief Executive Officer N Chandramouli said.

This is apparent from the fact that out of the 29 brands listed in the Internet category in 2016, 11 brands were online retailers, he added.

”Expected brands like Shopclues (461 rank) and Uber (483) were listed in the internet category along with some surprising entrants like Koovs (477), Voonik (937) and Oyo Rooms (948),” he said.

The list was topped by Korean electronics giant LG while the Tata conglomerate slipped in ranking to the seventh spot this year (from 5 in 2014 and 4 in 2015). Other internet brands in the tally included WhatsApp (339), Paytm (341), Myntra (397), Youtube (500), Twitter (506), Ola (605) and JustDial (786).

Alibaba moves closer inside India with Paytm’s help

Alibaba seems to be taking slow and steady steps into the Indian ecommerce industry. The recent turn of events that have transpired between the Chinese company and Paytm (where the former holds a stake) have led us to believe that.

Around fifteen employees from Alibaba China are said to be visiting Paytm’s Noida branch to observe the working of Indian ecommerce. Now Paytm has said that there is no specific agenda to this; and employees of both companies frequently visit each other’s office. However, we have reason to believe that there is more to this.

Getting ready to take India by storm

Alibaba has long expressed its interest in establishing a footprint in India. Towards this end, the company has taken the following steps in the past:

• After acquiring a share in Paytm in early 2015, Alibaba put in $ 680 million in the Indian company
• Alibaba reportedly set up a team for its India operations a few months back
• One97, Paytm’s mother ship, officially registered the latter as a separate business entity recently. Experts speculated that this could be to aid Alibaba to make a formal entry in India.
• Guru Gowrappan, Alibaba’s global MD recently joined Paytm’s board of directors
• The Chinese company worked towards creating a logistics arm in India
• Speculations were on that Alibaba was keen on increasing the 40% stake in Paytm

Alipay and Paytm

Alibaba’s payments company Alipay recently announced that it would share its technological expertise with Paytm to help the latter build a payment platform.

The fact remains that Alibaba will soon be reason for Flipkart and Amazon to lose more sleep. Amazon was unable to capture the Chinese market thanks to home grown Alibaba’s clout. The company is facing a similar battle in India versus the blue-eyed marketplace Flipkart. In Indian ecommerce two is a crowd, three (Snapdeal is also in the game) is chaos and four will surely be all out mayhem.