Boom Or Bust

Written by Diksha Dutta | Diksha Dutta | Updated: Jun 25 2012, 06:29am hrs
Indian e-commerce might be flourishing, but its leading players are a desperate lot. In their endeavour to try out something new, they are tweaking their core business model to survive in this fiercely yet cluttered market, which is hungry for profits

Change is the only constant when it comes to e-commerce websites in India. Or for that matter, if one were to look at history anywhere in the world this has been the thumb rule for an e-commerce company. The worlds largest e- retailer, $48 billion Amazon took ten years to build a brand or come to substantial profits and went through a lot of changes in its business model in the mean time. Before that, there was struggle for survival and way back in 2000 investors and analysts even said that Amazon is in losses and should be shut down.

Today, the scenario is worse with Indian e-commerce companiesnobody understands this business. Ambitious entrepreneurs in this market are trying to figure out what to sell or how to sell and discount-hungry consumers are unable to choose among various websites which have different things to promise. You need to be clear about what category or niche you are selling. Is it the coupon of a local Dulhan beauty parlour or a dinner deal at Radisson hotel You cannot confuse the consumer by selling both extremes on your website, feels Ankur Warikoo, CEO, Crazeal, Indian arm of the US-based online dealmaker Groupon.

Amidst this confusion, there is also good newsinvestors are trusting the e-commerce story and pumping money for these entrepreneurs. Top line revenues for these start up e-commerce companies might be heavy, but profits are far and constant dose of change is necessary. We pick up five companies who have changed their business models from the point of their inception and are earning revenues from different segments now.

Snapdeal

2010: 100% revenues from selling deals

2012: Entered products business, less than 50% revenue from deals

Kunal Bahl, CEO & co-founder at Snapdeal looks serious and lost in business planning when we meet him in his first floor office in Delhi. We had an investor meeting in the morning, it is too much work to handle at the age of 28, he says. But the young business mind claims that his venture is one of the very few e-commerce companies making profits, analysts and industry rivals do not agree though. Moreover, there are no numbers to reveal as the company is not listed.

The company started in December 2009 with a business model which earned 100% revenues from selling deals and services. But change became inevitable for Snapdeal as products yield higher profits in the e-commerce space. Points out Bahl, June last year, we started hearing suggestions from consumers that we should start selling physical products on our website. Seven to eight months ago, we started a line of products and signed up with domestic as well as international retail chains. This affected the performance of the company directly. The revenues have been growing at 80% now and when it was only deals, they were growing 50% year-over-year.

Bahl still has plans, We are planning to launch books and music media soon on our website. But, products is definitely a tougher market I would say. When we had services and deals, we were serving only to 30 cities. And now we are in products, the range is in 4,000 towns. We deal with 10,000 brands.

Bahl agrees that Snapdeal has to perform in a country where the mental map of e-commerce companies is not established and thus it is necessary to constantly evolve. We will keep delivering what customers want. We will keep coming up with newer ideas and newer services or products. More than 50% of our business is now products. So we deliver what customers want. We are re-balancing every six months since we have launched, he says with a smile. Snapdeal will close FY 2013 with R600 crore revenue and has 1,500 employees.

My Dala

2009: Started with selling deals

2012 : Sells products, marketing solutions, but focuses on deals

The need to make money made MyDala experiment. Anisha Singh, CEO and founder recalls, We did not have funding from 2009 to 2011. We had to make R1 into R10 ourselves, so we learnt innovation. Singh confesses that in e-commerce, nobody knows who is competing with whom and the industry is going through a fun phase. But she is clear about what MyDala is, We are not a pure e-commerce site, we are a marketing company also. I like the online and offline play.

My Dala recently started selling products on its website, but less than 10% revenues come from it. What excites Singh more is the ability to provide marketing solutions to all the vendors they have on their website, complete package she calls it. We have been revamping the website for the past four months. Now we do all sorts of merchant marketing and social media for our customers. We tell them that we will do your entire marketing online and sell deal packages too, her eyes sparkle with the idea.

In August 2011, was the companys first funding from investor InfoEdge which gave it a boost but Singh wants to keep the company slim. It was after this that the online portal expanded into citywise- localised deals. However, MyDala does not hold inventory with them like other e-commerce sites. Industry spectators feel that not holding inventory can also lead to delayed delivery. But Anisha is focused, My job is selling deals and getting business for my customer, not holding inventory. And we believe that this has worked for us and will work in the future.

Singh did not share the revenues and confessed that the company is at present not making profits, but dealsites are here to stay. She says optimistically, Negotiation is in our blood. E-commerce players need to understand that the teams which are going to top win in India are the pull and push model, not just the push model.

Myntra.com

2007: Personalisation platform for products and gifts

2011: Fashion and lifestyle e-retail

Scale is what tempted Mukesh Bansal to change the business model of Myntra.com. More profits, more revenues and more growth was all he wanted way back in 2010. From 2007 to December 2010, Myntra was in the business of online demand personalisation. The products ranged from T-shirts, mugs, greeting cards, calendars, key chains, diaries, wine glasses, coasters and many such products with photographs, one-liners and slogans.

Recalls Bansal his mindset in 2010, We realised that personalised gifts was a niche category and was only a R50-100 crore market. I could make out that e-commerce was taking off in India. That is when we started diversifying from business-to-business (B2B) to a fashion and lifestyle portal in 2011 January. Today, the fashion and lifestyle industry online is R1,000 crore and is growing at 100% year over year.

Very soon after this revamp, growth accelerated for Myntra and the business reached a scale. Illustrates Bansal, We became from 100 people in 2007 to 800 people now. From 300 transactions per day in 2007, we now do 80,000 a day. Even on the revenue front, we make Rs. 40 crore a month now, we used to make only a crore a month when we were a business-to-business company.

Venturing into fashion and lifestyle has given Myntra the ability to focus on advertising as well. Says Bansal, There is a lot of difference in our brand campaigning two years ago and now. We want to build the brand Myntra and reach a bigger audience. Its only last year that we started concentrating on mass media- TV and print. Before that, we were focusing on digital only.

Myntra has 300 brands right now on its website. Believes in keeping inventory which allows it to ship faster. Nevertheless, scale is still Bansals top priority: We plan to achieve larger scale in this category only. Will be R500 crore by March 2013.

Flipkart

2007: Online book seller

2010: Books, gadgets and electronics

2012: Added life style products to its product portfolio

Focus and Flipkart go hand in hand. But still there have been talks that the company is struggling for growth as it book sales give heavy discounts and thus there is no scope for profits in these sales. The good news is that books is not the only thing that Flipkart sells.

Sachin Bansal, CEO and founder at Flipkart knew from day one that there will come a need to diversify soon, From the time we had launched Flipkart in late 2007, we had decided that we will not restrict ourselves to merely selling books online. We entered the market with books because it was a relatively easy category in terms of entry and shipping, he says. Due to the low price points, consumers found it easier to trust the brand with that initial purchase that is so essential to buying into the very idea of e-commerce.

But how came the idea of venturing into electronic products and why Says Bansal, We knew that once our business model started working and we had some learnings about the Indian e-commerce market that we could use, we would venture into newer categories. The aim had always been to become a comprehensive one-stop shop for the Indian shopper and consumer electronics formed an essential part of this market.

The year 2010 was the inflection point for Flipkart when it also started selling electronic products apart from books. In 2009-2010, Flipkart recorded annual revenue figures of R25 crore. It closed 2011-2012 at R500 crore and its target is to achieve $1 billion by 2015.

Recalls Bansal, We ventured into our first non-books category with the launch of media and mobiles in mid 2010. Today we have 14 categories and have also entered the digital content market with the launch of Flyte, our online music download store. Our teams have grown as well. From less than a 1,000 in 2010 we are today 4,800 employees working across various centres in the country.

Bansal also knows the reason for change very clear in his mind. A lot of the changes that the company has seen over the last couple of years has been the function of scale, he says.

BookMyShow.com

1999: Sold movie tickets online

2009: Forayed into sales of tickets for live events and sports events

2012: 50% revenues from non-movie tickets

BookMyShow was one of the early birds in the e-commerce industry, even before the dotcom bust happened in India. We have learnt our lessons in the past that we need to adapt to the ecosystem, says Ashish Hemrajani, CEO and founder of Bookmyshow.com as an industry vendor.

Hemrajani claims that every few years markets bounce back in e-commerce and it is important to change. The revenue model for BookMyShow has too changed quite a bit.

In the last 2-3 years our revenues from non movie ticket bookings have been really picking up and has reached 50% of the total revenue. The portal also sells tickets for live entertainment events and sports.

In 1999, BookMyShow sold movie tickets directly to consumers. In 2002, Hemrajani realised that the company needs to do something radical and become a B2B company. That is when it started installing ticket booking softwares at cinema halls. We were dealing with consumers through cinemas then. In 2007, we again came back to a B2C model. Later in 2009, we started selling tickets apart from movie shows, he says.

It was necessary for the company to diversify not just to survive but to be a complete e-commerce company with best practices. Good news is on the cards. The last seven quarters have brought profits for us . Our focus now is to be leaders in entertainment ticketing. We want to expand in rural cities also, today most of our revenue comes from top ten cities in India. We want to make our website international.

We recently entered New Zealand as well, says Hemrajani.