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  1. Ecommerce: Kishore Biyani wrong on what makes shoppers stop

Ecommerce: Kishore Biyani wrong on what makes shoppers stop

Future Group's Kishore Biyani believes online retailing is a fad which will not last long.

By: | New Delhi | Updated: September 22, 2015 6:37 PM
ecommerce players

Kishore Biyani’s Future Group may have built up a revenue base of close to Rs 15,000 crore at one point but the business was so highly leveraged it was threatening to fall apart.

Shobhana SubramanianKishore Biyani believes online retailing is a fad which will not last long. Certainly not every e-retailer is going to be around five years down the road; there are copycats that will collapse and some far-fetched ideas that simply won’t work. But it would be wrong to altogether dismiss the e-channel simply because of the sheer ability of the platform to bring together buyers and sellers at a click. While we may want to believe that consumers are not comfortable with buying big ticket items over the web, think again. The average ticket size on Srikanth Iyer’s Homelane.com, for instance, is Rs five lakh but the managed marketplace hit orders of $1 million in July and was the just 13 months into the launch. So, at the risk of sounding terribly clichéd, if there’s a value proposition, the business will survive.

It’s true e-retailers will not be able to hold on to their price advantage for very long. Already lots of books now cost more on Flipkart than in Khan Market because there are delivery charges to be borne. But browsing in bookstores is now a luxury for most; it’s just simpler to order online. The clincher, therefore, is not in the price, it’s in the convenience which will command a premium in the age of instant gratification where time, not money, is the more precious commodity.

Biyani says e-tailers aren’t talking scale but the fact is that brick and mortar (B&M) retailers haven’t done it either; after close to two decades in the business, Shoppers Stop’s profits in FY15 were barely Rs 50 crore and the revenues were not even Rs 5,000 crore. Biyani’s Future Group may have built up a revenue base of close to Rs 15,000 crore at one point but the business was so highly leveraged it was threatening to fall apart.

Scale is important but it’s more important to be profitable and that’s where e-tailers may trip; in their eagerness to grab market share, they’re adding consumers who may not all be ‘paying’ for the goods or services just as brick and mortar retailers stumbled on the high rentals as they added floor space and were compelled to scale back. There’s little point in having 100 million consumers who’re hooked to your service because it’ coming virtualy free. However, what many e-tailers are careful about is not holding inventory, a learning from their B&M ancestors who ended with long working capital cycles because they were compelled to hold stocks.

CRISIL estimates revenue growth—for a clutch of two dozen retailers—will taper off to between 13-15% over the next two to three years from a compounded 24% in the five years to March, 2015. That sounds possible not merely because some of the shopping will move online but also because consumers—especially the affluent lot—now have many more options. Which is probably why some e-ventures are simply offshoots of the B&M avatar— in the jewellery space for instance—so that the risk is minimised and the consumer gets the benefit of whichever channel he or she chooses. At the end of the day, though it’s all about topline and in India, there’s never seems to be enough of it to go around.

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