What is happening in the e-commerce sector right now
The e-commerce sector is going through a lot of flux right now. Eighteen months back there were new companies starting every week. Now same number of companies are shutting every week. From euphoria, industry has moved into consolidation. About 18 months ago we started building the market-place model that is unique in a way, we can scale up easily. Now most of the e-commerce is moving from inventory led to this model. Along with deals, companies started listing their products and services on our website. We did not say no, because at
the end of the day, we are just a marketing platform. We provide reach to
merchants, giving an opportunity to supply locally and sell nationally.
We wish to grow the size of Indias retail market, which has innumerable local brands that are great products, but dont have the reach. We help them with technology, logistics, managing customer support, merchandising and so on.
Why do you think that inventory model will not work in India
Inventory based model is basically dead. Now they are building businesses from scratch. After sinking hundreds of millions of investors money, they
are moving to market-place model.
Inventory model is not financially
viable because of the inventory risks of crore of rupees, thousands of people
in the logistics area, have significant
operating costs. Globally, there are
not many successful inventory model
e-commerce businesses. We dont need any working capital for inventory.
We are spending less money because of automation, even as we are growing.
How exactly does a seller benefit from a market-place
For instance, if a brand has 1,000
unsold T-shirts, finding a single buyer is
difficult. And sending them to 150 retail outlets across the country is also
inefficient. So, our market-place
will solve these issues and still make
money on this. Business is a lot about
having critical mass and more sellers will bring in more buyers and vice versa.
Why is it that real world retailers globally make money whereas
virtual retailers dont
The real estate cost is exorbitantly high in India that you cant make
money in retail. The problem with
virtual retailers are that they build a huge logistics team, which they dont need. And on top of that many of the brick and mortar retailers dont have that much inventory and you have so much money stuck in working capital. You have already bought it and end up selling only 70% of it. And then you sell the remaining stock at super discounts that you end up losing all the good margins you made in selling the 70% of goods.
Are the margins lower in the market-place model
Not really, if you account for the
working capital cost. And also for the fact that there is substantial amount of distress in the inventory levels and you are selling goods at throwaway prices, which wipes out the additional margins you get in inventory model. You cannot see the margins in isolation. The cost tends to add up in managing and liquidating the inventory as well as the cost of managing a workforce for this inventory.
When are you going to be profitable
If you try to achieve profitability too soon before scaling, you end up not
investing in growth. We are currently
investing in two focus areas. One is technology like we give the sellers a lot of performance management tools so as to help them to benchmark against the best performers in the same category, technology related to shipping and so on. And the other is acquiring new consumers. You cant ask telecom companies whether they are profitable in the third year of business from around 70 lakh e-commerce transactors (excluding travel), we will go up to three crore over the next five years. We are still in an investment phase and I think it is the prudent thing to do.
What is the role of Trustpay in the market-place model
That was more a reactive decision.
According to a recent Google study, the single biggest reason for consumers not buying on e-commerce is lack of trust. This gives the consumers seven days under which if they dont like the product, they can get their money back. The money is put in an escrow till the consumer is happy with the product. We also have a shipping platform called Safeship, which has integrated large number local and national courier companies so that there is no burden on the sellers to find a courier service.