Indiaplaza.com: How an Indian e-commerce firm ran out of cash
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Interesting read. I'm not aware of the scenes behind e-commerce world, but I guess the man is right about quite a few things.
Good read and I am pretty sure that is where many of the other e-com only businesses are headed in the long run. Almost every popular e-com business in existence in India is in ever increasing losses and the only way they are still running is because some greedy investors put in money because they still have hope that the business might become profitable in the future. They will keep running as long as somebody else is ready to put in money, but who knows when the investors will decide in the long run that they had enough.
Flipkart for example had a loss of Rs 300 crore in 2013 and that increased to Rs 1300 Crore in 2014. God knows how many fold it has increased in 2015.
Disregarding profits entirely to capture market or going after GMV is a grave mistake. This simply doesn't work in the long run. I would much rather that these companies capture market though quality of service and support and other value to the customers rather than by selling at a loss to give better prices than the competition. It is a given that customer will not be loyal. It is an absurd expectation for any company. And in any case, loyalty cannot be acquired merely though better pricing.
If you have a product on sale at Flipkart or Amazon and another e-com site for 75% discount on the price at the former but it is well known that this site cheats customers and has bad support, people are likely to stick to Flipkart of Amazon despite the massive discount.
IndiaPlaza happens to be first e-com site that I used more than 10 years back and it was always kind of obvious that it was going to end up with this fate. Support was always kind of bad and there was no quality control over the vendors. There was no way it could sustain once other players appeared on the scene.
Flipkart for example had a loss of Rs 300 crore in 2013 and that increased to Rs 1300 Crore in 2014. God knows how many fold it has increased in 2015.
Disregarding profits entirely to capture market or going after GMV is a grave mistake. This simply doesn't work in the long run. I would much rather that these companies capture market though quality of service and support and other value to the customers rather than by selling at a loss to give better prices than the competition. It is a given that customer will not be loyal. It is an absurd expectation for any company. And in any case, loyalty cannot be acquired merely though better pricing.
If you have a product on sale at Flipkart or Amazon and another e-com site for 75% discount on the price at the former but it is well known that this site cheats customers and has bad support, people are likely to stick to Flipkart of Amazon despite the massive discount.
IndiaPlaza happens to be first e-com site that I used more than 10 years back and it was always kind of obvious that it was going to end up with this fate. Support was always kind of bad and there was no quality control over the vendors. There was no way it could sustain once other players appeared on the scene.
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Very Good Article, Must read for any person interested in internet based start ups .
It tells a lot about Ecom industry as a whole. Only Genuine people meet a fate like that, in a country like India, out of a failed venture.
For Eg: Mr Malya Asked for Govt to bail him out when KF airlines ran into losses. I don't think employees have received their pending salaries yet. Mr Malya still continues his extravaganza.
I am seeing a consolidation in Ecom business to a situation , with final 6-7 major players remaining . After that, the price advantage of buying online might diminish as they start concentrating on profits.
It tells a lot about Ecom industry as a whole. Only Genuine people meet a fate like that, in a country like India, out of a failed venture.
For Eg: Mr Malya Asked for Govt to bail him out when KF airlines ran into losses. I don't think employees have received their pending salaries yet. Mr Malya still continues his extravaganza.
I am seeing a consolidation in Ecom business to a situation , with final 6-7 major players remaining . After that, the price advantage of buying online might diminish as they start concentrating on profits.
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from the comments section:
This company was fabmall then fabmart then trinethra retail finally sold to aditya birla retail.
the initial group of partners made some money in the sell out..hari menon, etc.
then started big basket
wonder why this gentleman was left stranded?
that's a valid point. i find it very hard to believe that a brand like indiaplaza would not find any takers in this crazy boom of e-startups. Is some vital piece of info missing from the article??
This company was fabmall then fabmart then trinethra retail finally sold to aditya birla retail.
the initial group of partners made some money in the sell out..hari menon, etc.
then started big basket
wonder why this gentleman was left stranded?
that's a valid point. i find it very hard to believe that a brand like indiaplaza would not find any takers in this crazy boom of e-startups. Is some vital piece of info missing from the article??
http://www.vccircle.com/news/techno...-scale-profitably-bigbasketcom-ceo-hari-menon
No mention of vaithee?
No mention of vaithee?
I am just wondering - People do know about Amazon never actually making money right? They have to keep on "pivoting" with new ideas like CDN, hosting, mobile phones, tablets, TV boxes, mobile gaming to keep them relevant.
Additionally most VCs want growth, it doesn't matter if it comes at a cost. Recently a Y-Combinator AMA question was - Will you reject me if I am growing slowly but organically (read with proper customers instead of "coupon" and free ones)? The answer was - Yes, we would. We want companies growing at least 10% a week.
This would mean, today you have 10 customers, they want you to grow to 22 more than double in a year. How does that come about without aggressively pursuing customers specially with a loss.
One of the companies called "Cinkle" (look it up and see the "idea" they have) actually gave $20 notes through a vending machine. Just to push its business. What will a company trying to stay profitable will do ?
Additionally most VCs want growth, it doesn't matter if it comes at a cost. Recently a Y-Combinator AMA question was - Will you reject me if I am growing slowly but organically (read with proper customers instead of "coupon" and free ones)? The answer was - Yes, we would. We want companies growing at least 10% a week.
This would mean, today you have 10 customers, they want you to grow to 22 more than double in a year. How does that come about without aggressively pursuing customers specially with a loss.
One of the companies called "Cinkle" (look it up and see the "idea" they have) actually gave $20 notes through a vending machine. Just to push its business. What will a company trying to stay profitable will do ?
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