Tough to be profitable in e-commerce in India: Manoj Gupta, Craftsvilla
E-commerce has changed the dynamics of business globally as well as India, and has seen several success stories. While the sector is still on a growth curve, there is consolidation and course correction being seen.
In conversation with Adgully, Manoj Gupta, Co-Founder & CEO, Craftsvilla, speaks about the consolidation happening in the e-commerce space, a reality check on the profitability of e-commerce ventures and more. Excerpts:
What are the new equations seen emerging in the e-commerce industry in India?
The e-commerce industry will see a lot of focus on vertical e-commerce in the next few years, including a lot of focus on fashion vertical, and online players will start getting in private label brands and/or offline retail businesses.
What kind of a consolidation scenario do you envisage in the Indian e-commerce space?
Most of the big companies will merge or will be acquired by international behemoths. No surprises if Alibaba acquires Flipkart/ Snapdeal or Uber/ Didi acquires Ola.
How will the GST Bill benefit the e-commerce industry in India?
As far as I know, there are no direct benefits of GST to e-commerce, while indirectly logistics delivery time and cost should be lower as there would be lesser paper work in crossing borders or entering different states.
Are mergers the best way out for smaller e-commerce players in India?
Mergers are the best for bigger e-commerce companies as it will allow them to exit either through M&A or IPO. For smaller e-commerce companies, they should continue to build a niche business in a profitable manner and exit only if there is disproportionate value to their business given by an acquirer.
How do the smaller e-commerce players maintain consumers’ share of mind and recall, given today’s landscape?
Smaller e-commerce companies can build a great business as they can focus on niche segments and can create a big differentiation with profitable unit economics. Good part is that a lot of money has been spent by big companies in bringing consumers online and smaller ecommerce companies can ride on that.
With a pressure on venture funds, do you think e-commerce players need to go the public funding way? What are the implications for the industry?
E-commerce companies will need to look at public markets very soon as there has been dearth of real exits in India and global investors would want to see some examples of exits before investing more money.
What, according to you, are the reasons for the pressure on funds for the e-commerce industry?
The reason is lack of real exits in e-commerce in the last six years of e-commerce boom.
E-commerce players broke out of the traditional business models and saw tremendous growth. But now it is return to the business basics of profitability and measurable growth. What has led to this shift? Is there a course correction underway in the e-commerce industry now?
It is tough to be profitable in e-commerce in India as the efficiency of e-commerce business in India is still very low compared to other markets. The cost of logistics as proportionate to order value to high fixed HR cost per order are metrics where India is far compared to other countries.
Why do you think more and more e-commerce companies are turning to social media platforms like Facebook, Instagram for their advertising requirements? How are these platforms more advantageous than other advertising media?
Social media platforms are great assets as they can drive a lot of business in the long run. Craftsvilla benefited a lot by building biggest social fan base in e-commerce in India as it is helping to reach customers at minimal cost. In other platforms, you need to continuously spend for every order/visit.