E-commerce is here to stay as consumers are moving online: Infibeam CEO

Ahmedabad based Infibeam is one of the few e-commerce firms in India to turn profitable. The company was recently reported to be in talks to acquire Gurgaon based Snapdeal. With a merger of payments firm CCAvenue, Infibeam now has a large payments arm beside a B2B marketplace Buildabazaar and an online B2C retail venture. The company earned a profit of about Rs 43 crore, last fiscal.

Infibeam.com founder and CEO Vishal Mehta clarifies to Moneycontrol on whether the company had serious discussions with Gurgaon based Snapdeal for an acquisition. A former Amazon employee, Mehta explains how entrepreneurs should go about building a profitable e-commerce venture:

Was Infibeam in talks to acquire Snapdeal? What were the contours of the talks?

In e-commerce industry where evolution is very different, there is a lot of market speculation exchanged as well. It was pure market speculation. We were proactive about it in terms of communication.

We work in this (e-commerce) industry. We will, of course, have lots of companies who we will like to evaluate and in that there will be a lot of market speculation.

So we have been very vocal about it saying that if there is something to be communicated we will do it at right time and through the (stock) exchange. But when the news (about Infibeam and Snapdeal merger) came out but it was all market speculation.

How does Infibeam plan to compete with the behemoth Amazon in its web services and e-commerce business?

Amazon doesn’t do what we do. Its business model is totally different.

Amazon works as a marketplace. Amazon focus on just one URL, I focus on thousand of URLs. (through Buildabazaar, Infibeam Web Services and Infibeam.com).

That’s the biggest difference between us and Amazon. I am an enabler.

What’s your advice to entrepreneurs in e-commerce trying to build a profitable business? Why do so many of them fail?

In the long-term, you want to build consumer trust in e-commerce. So you don’t get devoted in the flash of brilliance. You should get devoted to consistency (of service & quality) in my opinion.

It’s easier to come first in the class but to consistently be at the top is harder. Entrepreneurs at least the ones with whom I interact with have the same mindset.

Three things are important to build trust: You have to be fair to your employees, customers, and stakeholders because that creates loyalty.

One needs to be consistent.

You have to question yourself repeatedly if you are being consistent.

Many e-commerce businesses know the cost but they don’t know the revenue. But one has to figure out repeatable revenue. If I know the repeated revenue coming in then I know I have made it.

The more you become repeatable, you are predictable.  Once you are predictable then you can manage your cash flows very well.

Most of the time even if you are a startup or a mid-level company where you go wrong is the cash flow.

The payment cycle—though it is a profitable business  I able to manage it with my cash flows?

Be very firm in business - It could be I want to make it work no matter what.  A ‘No’ is a ‘No’.

The size of the opportunity will look interesting but until and unless I know the core of it. So being firm is very important.

The moment you are firm you know your choices are black and white.

E-commerce is how many times you turn over your inventory. You can use asset light approach and manage your cash flows.

Many e-commerce sites have laid off a lot of people in the last few months. Some have shut down. What do you think is the problem in e-commerce sector in India?

I can’t comment on the specifics about other companies. I think one need to understand the per unit economics of what you do.

The challenge is if you amplify your business without getting into the per unit economics and if you are making a loss in per unit economics then the loss is compounded.

There is thesis associated to that one can think of loss as an investment but the thesis is yet to play out. One can always argue that is an investment into acquiring and not a burn or a loss.

In India if you acquire a customer by making a loss then it is very hard to make profit from the same customer.

The second part is what are you trying to create. That is very important to know before you amplify it.

It is a very competitive market. For a user to go to ten different places to search for products is very easy.

E-commerce is here to stay because all the consumers are moving online.

India is scale. You don’t have to worry about scale here. The question is what business model you will establish to make money because for a business to be sustainable it is very important to be profitable.

The thesis has to be very strong, tested and should evolve.

How should startups go about raising funds and avoid catastrophic failures?

I still think investors are investing in startups to harvest at some point.

Before investing, any investor will first look at the management team, then the business model and then eventually the valuation.

All the way from the beginning you have to understand what you want to be.

Life becomes easy if you know what you want to be because then you know about the capitalization, implementation and what you want to achieve.

So per unit economics have to be evolving. Profitability becomes very important in companies in medium to long-term.

Growth and profitability is not either or. It is an ‘and’.

If you lose sight even on one, then you may not do justice to your shareholders.

In my thesis, if you feel something is wrong with your planning and thesis then change it because it will be very hard after 18 months.

How have you verticalized Infibeam?

Think of it as a verticalized e-commerce. Last year we picked up Amul which very important used case for us in the dairy industry.

Rather than doing it yourself, you have many people doing it for you in a vertical fashion.

Each of them gives us an appetite and understanding of what retailers, distributors and brands would want and it is supported by the platform and our framework.

Last year we picked a payment company called CCAvenue. They offer payment instruments and they have a network in 52 different banks and all different currencies are processed.

Payment is a very important component because it is a termination of a transaction and if you deeper integration into payments then it becomes very attractive to merchants. So we amalgamated it into the company, this year.

sabahat.contractor@nw18.com