Why profitable business is a must for e-commerce business in India

The blooming e-commerce companies in India need to focus more on a business model that will be profitable in the short to long term for better survival, a senior functionary of PricewaterhouseCoopers (PwC) has said.

"The Indian e-commerce companies should establish a business model that is profitable in the short to long run. That is very important for survival, PwC's director, operations, Saurabh Srivastava, told IANS in an interview.

"If the companies do not become profitable, the private investors will run out of patience and unless the companies are profitable, they cannot get listed," Srivastava added.

Srivastava, who had earlier worked with Flipkart and McKinsey, said at present none of the Indian e-commerce companies are profitable.

Flipkart, India's largest e-tailer, recently got $1 billion funding, which took its valuation to a whopping $7 billion and made global headlines. Soon after, the US-based Amazon said it was investing $2 billion in India's e-commerce space.

With 243 million Internet users, India's e-commerce industry is growing at 38 percent year-on-year. Analysts expect the market, which is now $15 billion, to touch $100 billion in the next five years.

Indian e-commerce industry is expected to spend an additional $500 to $1,000 million on infrastructure, logistics and warehousing, leading to a cumulative spend of $950 to $1,900 million till 2017-2020, a joint study by industry body Associated Chambers of Commerce and Industry of India (ASSOCHAM) and PwC said recently.

"It is also very important that the Indian e-commerce companies get right set of people in the technology team. The backend of these companies are traditionally not very talented. They need to have best of talent.

"And the most important thing is to get a robust and reliable supply chain. In India no reliable supply chain provider is available in e-commerce space as yet," Srivastava said.

Absence of a proper supply chain had always been a hurdle for e-commerce companies.

Srivastava said big e-commerce companies Flipkart and Jabong have started with their own supply chains, but what about the smaller players.

"They find it difficult to manage. The large supply chain players also do not find e-commerce companies very profitable," he said.

"As far as logistics is concerned, there is a tremendous need for a new company to come with really deep pockets as the bigger players in the supply chain sector do not find doing logistics for e-commerce as profitable," Srivastava added.

He said the industry stakeholders are working towards this one channel. "Hopefully a solution will emerge soon as the size of the e-commerce industry is expanding every day."

He, however, cautioned that the e-commerce companies should be careful about playing in the retail space and, more so, in the multi-brand retail business model. "They should properly pick and choose brands so that the business is profitable."

Speaking on the kind of help the government can extend to the industry, which has a huge potential in a vast country like India, Srivastava said: "One thing with which government can really help is by slashing and simplifying various taxes at the central and state levels.

"Stakeholders are in talks with the government on this matter. Also, if foreign direct investment is allowed in the business-to-consumer sector, that will help the industry a lot." Source: http://firstbiz.firstpost.com/

Cross-border e-commerce taking giant strides now

India is fast catching up on cross-border e-commerce — export and import of goods through online channels — with the US, UK, Australia, China and Germany emerging as preferred business destinations.
Cross-border e-commerce in India has taken great strides to become three times the size of the $3.1-billion domestic e-commerce market. Driven by small and medium entrepreneurs who are tapping into overseas markets and the Indian consumer’s appetite for electronic gadgets, it stood at $9.8 billion in 2013, poised to grow at a CAGR of 30%.

Indian merchants have curated a global clientele for niche Indian products, exporting ethnic wear, handicraft, leather fashion accessories and semi-precious jewellery, which account for $1.8 billion or over half the value of the domestic e-commerce market. Out of the $8-billion imports, bulk of the orders comprise gadgets like mobiles, laptops and internationally acclaimed books, revealed data provided by Delhi-based Federation of Indian Exports Organisation (FIEO).

“Since the Reserve Bank of India has raised the financial limit for online transactions from $3,000 to $10,000, we will see an increase in trading of hallmarked gold jewellery as well,” said Ajay Sahai, director-general and CEO, FIEO.

The US, UK, Australia, Russia and Israel are major export destinations for Indian merchants taking the online route while China, Germany, Malaysia and Singapore are preferred import hubs.

According to Sahai, most of the medium and small entrepreneurs use global online marketplaces like eBay or Amazon to trade, while a handful have set up their individual online stores. The online marketplaces, however, account for about 95% of online exports in numbers and around 85% of the transaction value.
“Global online marketplaces are mainly used for retail sales. But, we export large volumes to whole-sellers through our own online store. Online is certainly a better route as it gives you a continuous flow of new customers. Besides, we save significantly on infrastructure costs,” said Sandeep Mehrotra, owner of silverware manufacturer Progress Enterprises. “We sell goods worth R6-8 crore annually through e-commerce to international markets.”

Sahai, however, said India has a long way to go before it catches up with the likes of China and the US in cross-border e-commerce exports. “China is already exporting goods worth $20 billion through outbound e-commerce, while the number for India is only $1.8 billion. The Centre should provide a seamless environment to realise the full potential of cross-border e-commerce,” he saiz.

Indian merchants are enthused by the scope for growth, with the global cross-border e-commerce market poised to grow from $105 billion in 2013 to $307 billion in 2018. Around 15,000 Indian merchants are listed on eBay, exporting around 9 lakh products to 31 international markets. “Besides exports, consumers from over 2,638 cities in India are importing products from global eBay merchants from 141 countries,” said Navin Mistry, head-retail exports, eBay India. He further added that around 36% exporters have recorded a growth rate of 20% while over 30% of the merchants have reported 21-40% growth.

Source : http://www.financialexpress.com/