THE_E-COMMERCE_BUBBLE
Economics
defines bubble as a circle of rapid expansion with a sudden contraction.
E-commerce has been evolving tremendously in India with the help of the smart
phone revolution. The e-commerce sector has swallowed funding of about $5
billion in 2014. This lump sum money has come from large investors such as
Softbank. The e-commerce sector has gone up so big that one of the e-commerce
giants Flipkart is valued at $11 billion whereas traditional players such as Pantaloons
could not even reach the billion dollar mark. What happens to this ever
increasing e-commerce bubble? Does it burst or contract bringing all e-commerce
to a total shutdown?
A
report says that e-commerce companies have suffered a loss of $156 billion in
2015 due to their cash burn strategy. But I am not so convinced with this
bubble theory. There are around 150 million active internet users in India,
where 2/3rd of them come under the category of energetic youth
(25-35), who have the capacity to bring a brand to a high position. I agree that Internet penetration is very
dismal in India, but it has been compensated by cheap internet enabled
Smartphones to a very great extent.
Though
connectivity is important, the real growth would be the increase in purchasing
power of an Indian. The survey shows that the per capita net national income
has increased by 9% in the year 2014-15. With the increase of double income
households in India, people find very less time to spend with their family. So,
E-commerce is coming very handy for this category of people. Also, the high
traffic and pollution have become a boon to the e-commerce sector.
Since
the e-commerce industry is still coming into existence and showing vital signs
for future potential, they should create a base of loyal customers by giving
lucrative offers and discounts. As always, price has been crucial for an Indian
customer. The E-Commerce industry
can be complementary to many offerings like education, health, hospitality and
what not. This advantage for an E-tailer over a brick-and-mortar player allows
him to offer significant discounts by leveraging the higher margins which is a
win-win proposition. In addition to E-shopping, customers are also shopping
online for occasions like marriages and parties; it is due to huge offerings of
items and aggressive campaigns. Creative concepts such as ‘Big Billion Day’ are
the icing on the cake.
For the efficient running of the E-Commerce
industry, three things are crucial – handling an inventory of both short and
long tail items by the companies in the fray, providing a delightful and secure
online surfing and shopping experience to the customers, and ensuring a strong
logistical delivery channel. Companies are committed to work upon first two
criteria and they are doing great, but the third one is the criterion where
India with its present infrastructural red-tapes needs more.
The advent of new government has given rise to a
new hope. If an industry stalwart like Mr.Ratan Tata is lending his trust to
new E-Ventures and the Giants of E-Commerce like Amazon & Alibaba are
investing fortunes in India, then it indicates that E-Commerce is going to
stay.
Like every sector, not
every entrant getting funding will be viable in the long run. Some
consolidation will take place, especially if money is guzzled out for long.
India is yet to get its own Amazon or Alibaba, and for the investors playing
prudently, the picture is rosy ahead. The ‘bubble’ may burst for others.
MR.
K. KRANTHI KUMAR, MBA I YEAR