The Indian e-commerce and start-up sector has hit a rough patch.
Serious questions have been raised about the ecosystem after the arrest of Stayzilla co-founder on a vendor’s complaint and staff layoffs in e-commerce majors Snapdeal, Yepme and Craftsvilla.
What is the present problem?
In the last five years, an estimated $15 billion, or Rs 97,000 crore, has been invested in this sector.
Leading domestic players in the e-biz sector raised huge sums of money.
These investments were used by the companies to try out new business models.
But since they failed to figure out the right economic model, the plans backfired.
The venture capital and private equity (PE) players realised that they were unable to reap the real fruits of their investments.
While big players face a funds crunch, smaller entities are being forced to shut shop.
Can this be addressed?
Following this, e-commerce majors such as Flipkart were finding it difficult to get the next round of funding.
Snapdeal’s major investor Softbank is looking at merging operations of Snapdeal and Flipkart.
Paytm is also gearing up to grow its business as investor Alibaba eyes the Indian e-commerce market.
All this will result in major consolidation among the players.
India’s e-commerce market is still at an early stage.
The market is seeing signs of consolidation as scale is a key success factor in the business.
In countries like the U.S. and Europe, it is common to see ideas or businesses fail.
It is almost a given that about 70% of the new ideas fail, and a few start-ups succeed, and investors accept it as reality.
It is accepted that in a strong start-up environment an idea which sounded excellent and received huge funds can fail.
Industry experts point out that failures should not cause scepticism towards innovation and entrepreneurship.
