Harsimran Julka moneycontrol.comAs you open your desktop or smartphone to buy those sweets and gifts this Diwali shopping season online, remember it will be a make or break one for some e-commerce players. Several might not exist next Diwali.
The top five Indian online shopping site ranking currently runs like this: Amazon-Flipkart, Snapdeal, Shopclues, Paytm, in that order, followed by a two dozen other smaller ones.
It’s the smaller ones which have been deprived of the Series B or C funding that will be prone to high survival risk in the next 12 months.
This year alone two players Fashionara, AskmeBazaar and PepperTap which ran huge discounts last Diwali are non-existent. Grocery e-tailing is expected to see the largest graveyard as more are expected to fall by the side, with lesser ammo provided by investors.
The existential question comes about as many of these firms started with me-too models, focused on expanding volumes with no-regard for profitability. The only fodder they survived on was venture money.
Survival issues for biggies too
While it’s known that the smaller me-too e-commerce players will fail, this Diwali will also be a make or break one for two biggies – Flipkart and Snapdeal.
While there is not a survival issue for both, growth and scalability in next twelve months for both will depend a lot upon how they perform this festive season.
With Flipkart having suffered [valuation downgrades] and no likely exit looking for Snapdeal, this Diwali will be an opportunity to up their GMVs and justify their ask for bigger funding rounds to fight with Amazon. GMV is a term used in the e-tailing industry to signify the total value of goods sold. Some retailers don’t count returns as part of it.
For any online or offline retailer, the Diwali shopping season in India accounts for almost one third of their gross annual sales.
Miss this period and you have a huge backlog to catch up with your nearest rival. And media and analysts leave no stone unturned to compare the e-commerce players GMV and gross sales as soon as they put up the balance sheets and P/L statements on the website of Ministry of Corporate Affairs.
If Flipkart misses this period, it certainly will result in a lower GMV. This will impact its valuation and dislodge it from the number one position in India's e-commerce market for at least for the next 12 months.
Already, Amazon has dislodged it from number one position, as reported here, in the months of July and August.
For Snapdeal, too, it has become a tricky game. While Shopclues has positioned itself as the etailer of the masses, Snapdeal is yet to find its brand positioning.
Currently, Gurgaon-based Snapdeal is positioned at the number three slot. However, if funds from one of its biggest investors Softbank and Alibaba Group dry up, it may have little chance but to call truce with either Paytm or Flipkart and look for a possible merger, to survive and counter the behemoth Amazon.
Jeff Bezos, the Amazon founder this year, announced an additional USD 3 billion worth of investments in India. A large part of it may go in on boarding sellers, funding discounts and marketing campaigns.
Quality of sellers becomes critical
E-commerce has become a game of control over the quality of sellers on the marketplace. All players are trying to onboard sellers at a fast pace. Consumer shopping in India starts skyrocketing just after the Shraadh period ends and continues till Diwali.
While consumers thrive on discount-laden shopping sites, they actually click the buy button on the site which ensures quality and timely delivery, even if it’s actually a few bucks costlier.
And it's the quality of products they receive and a timely delivery that makes them stick with that e-commerce player post the festive season.
Already, the valuation downgrades by a few analysts in Flipkart have scared away big private equity investors.
A valuation downgrade means the money that you put has reduced over the year, even if you're not looking to exit that player in the near term.
Ultimately, how a company is perceived long-term in the eyes of the discerning Indian consumer, will depend upon the quality of the seller sending that package over to your home.
While Snapdeal and Shopclues have amassed a large number of sellers, many are just on paper.
Some sellers I talk to confide that they are still on rolls of some etailers long after they stopped listing their products on their websites, some even after more than a year.
It's true finding quality sellers is a painful task for any marketplace. But once you have focussed your effort on finding that one quality seller than amassing all the local shops in a market, the results will be astounding. Lesser returns, satisfied customers and repeat orders will be experienced.
All e-commerce players have started to amass sellers prior to Diwali shopping season.
However, a lack of training, education or intent of the seller to supply that quality product that your buyer ordered this Diwali, will make or break your marketplace.
And if your seller sent a broken dinner set, a chipped LED TV, or a gift wrapped smartphone for parents that reached late, it's unlikely the Indian consumer will forget or forgive you.
After all, the special occasion of Diwali comes just once a year for her, when she can make her loved ones feel special.
After all, the special occasion of Diwali comes just once a year for her, when she opens her heart and purse out to make her loved ones. And too bad for an etailer if it fails to meet her expectations.
Even so, as the investment climate for late stage deals declines, many smaller e-commerce firms will find it difficult to sustain till the next Diwali. However, failing to meet the expectations of the Indian consumer will just exacerbate that fall.
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