E-commerce boom: Investors turn focus to profitable growth

As the e-commerce market grew by leaps and bounds in the last four years, investors have shifted their focus to profitable growth to achieve stability, a CII-Deloitte report says. According to the report, e-commerce B2C segment has grown significantly, leading to creation of many 'unicorns'. "However, focus of investors going forward seems to have shifted to profitable growth to achieve stabilisation of the economic model," said the report titled 'e-Commerce in India - A Game Changer for the Economy'.

It further said the primacy on profitable growth seems to be leading to collaborations and partnerships across the value chain with the aim of optimising costs. It forecast that since the e-commerce B2B segment is showing signs of rapid digital adoption, this is likely to feed the significant rise of MSMEs and entrepreneurs from the Indian hinterland. With a push from investors for profitability and early break-evens, the leading e-commerce companies are seen to be cutting down their burn rates by as high as 50 per cent.

"This aggressive drive comes at a point when capital is becoming scarce for top venture-backed online retail companies. There is also a reduction in dependence on discounts as a growth strategy," the report added. The e-commerce industry is expected to form the biggest chunk of the Indian Internet market with a value of approximately USD 100 billion by 2020.

According to the document paper, the e-commerce growth has been brought about by increasing Internet and smartphone penetration in not just metros, but in tier two and three cities. Mobile devices are further expected to drive sales through online platforms over the next 5 years, it said.