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E-commerce trends | Survival of the fittest

E-commerce may have other benefits—less traffic on the roads, convenience, a wider range of products—but in India, there is no denying that people throng online marketplaces because of the discounts on offer. Photo: Bloomberg

E-commerce may have other benefits—less traffic on the roads, convenience, a wider range of products—but in India, there is no denying that people throng online marketplaces because of the discounts on offer. Photo: Bloomberg

For almost two years now, shoppers on e-commerce sites in India have had it good. Flush with funds from venture capital firms, these e-tailers have offered huge discounts; 30-40% is normal; 70% isn’t unheard of.

E-commerce may have other benefits—less traffic on the roads, convenience, a wider range of products—but in India, there is no denying that people throng online marketplaces because of the discounts on offer. And because Indian laws only allow online marketplaces (platforms that connect buyers and sellers), the beneficiaries in at least some cases (many marketplaces flout rules by having direct or beneficial stakes in sellers) are small sellers. They manage to push more inventory, and whatever discount they offer is usually made good by the marketplace operator. Media companies have benefited, too, thanks to the significant amount of TV and print advertising taken out by the e-commerce companies.

As MintAsia’s cover story explains, 2015 put to rest any doubts about the viability of e-commerce (although not of e-commerce companies) in India. There are several factors that made this possible: a critical number of smartphones (around 150 million Indians have them); cheap data plans; and the growing popularity of electronic payments (thanks to electronic wallets).

It was also the year when it became clear that so-called modern or organized retail didn’t really have a future in India which looks likely to leapfrog it and adopt e-commerce wholeheartedly (in much the same way it did mobile phones). Yet, the growing difficulty of even some of India’s unicorns to close subsequent rounds of funding at desired valuations points to the same thing that the layoffs at some food-tech and hyperlocal start-ups and the demise of some others do—an increasing focus on cash flows and path to profitability (if not profits themselves).

The bloodletting—for there will be blood (with the only question being when)—will benefit start-ups with scale, unique technology propositions, more efficient supply chains, stronger brands and, of course, better business models that are focused more on cash flows and profits than valuation. Regulatory clarity that looks forthcoming in 2016 will benefit start-ups with clean structures that are legal in both letter and spirit. The result may well be an ecosystem with one or two large companies and a smattering of also-rans in each category. That promises to make next year even more interesting than this one.

[“source -livemint”]

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