an additional $2 billio
E-commerce has, without any iota of doubt, been the flavour of this year. From Flipkart’s ability to raise USD 1 billion, Amazon's commitment to invest USD 2 billion in its India business and companies choosing to sign exclusive tie-ups with such portals (as seen with Xiaomi’s Mi3 phones), business models are undergoing metamorphosis to boost sales.Take Arvind Limited for example. The company that has been in textile manufacturing for over eight decades has launched its e-commerce platform-Creyate- with an initial investment of around Rs 20 crore.
Why the need to foray into digital space, one may wonder. Simple answer: The industry can give a turnover of over USD 20 billion in 4-5 years.
“E-commerce is an incredible force. China, whose economy is similar to ours, has reached the size of USD 200 billion in a very short period of time. The industry can expand through this route and grow to USD 20 billion soon,” says Kulin Lalbhai, executive director, Arvind Limited.
Ashvin Vellody of KPMG couldn’t agree more. From a study conducted by the advisory firm, Vellody states the digital space is seeing rapid growth and it has seen a 34 percent year-on-year ( YoY) from 2009 to 2012. And despite this impressive run rate, he believes the e-commerce industry has a lot more potential to grow.
So are the brick and mortar shops passé?
Not necessarily, believes Raghav Moolchandani of Archies. “On the contrary, e-commerce will complement businesses. It will boost ground sales as it will help in reaching to more number of people,” he says.
In what could validate this belief, Raghav is putting his money where his mouth is. The company just recently revamped its e-commerce platform – archiesonline.com- in order to make it more user-friendly and to attract more customers.Apart from its own website, Archies has tied up with portals like Flipkart, Snapdeal, E-india and Groupon India.
This, Vellody says is just a good example of piggybacking as it overcomes the challenges of scale, of the task of reaching customers in time.
“This is common with emerging brands that tie up with established e-commerce portals as the latter have figured the best way to provide service delivery and get to the targeted customers in a more easier fashion,” he adds.
But e-commerce shouldn’t be seen just as channel for existing brands, highlights Lalbhai. He believes it is a unique business opportunity when one can bring new products to customers.
“We will ourselves be bringing new brands to the online space,” he adds.
But where's the moolah?Flipkart, started in 2007 is yet to garner profits. The founders- Mukesh and Sachin Bansal have only been raising money through private equity.
But the lack of a clear cut profit in P&L accounts isn’t bothering the newest entrant in the e-commerce space. Radha Madhav Corporation announced its foray into the digital space on September 8.
Mitesh Agarwal, managing director and chief executive officer says the company has spent the last 4.5 years working on its products – 1100 in all.
“We have spent a majority of the last 4.5 years working upon establishing logistics for the portal. Our paying days are over now and whatever seem to be the losses, were costs incurred on learning and establishing a good logistic structure. Now is the time for capitalizing,” he adds optimistically.
Posted by: Ritika Dange
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