What is the issue?
- The Indian e-commerce and start-up sector has hit a rough patch.
- Serious questions have been raised about the ecosystem after the arrest of Stayzilla co-founder on a vendor’s complaint and staff layoffs in e-commerce majors Snapdeal, Yepme and Craftsvilla.
What is the present problem?
- In the last five years, an estimated $15 billion, or Rs 97,000 crore, has been invested in this sector.
- Leading domestic players in the e-biz sector raised huge sums of money.
- These investments were used by the companies to try out new business models.
- But since they failed to figure out the right economic model, the plans backfired.
- The venture capital and private equity (PE) players realised that they were unable to reap the real fruits of their investments.
- While big players face a funds crunch, smaller entities are being forced to shut shop.
Can this be addressed?
- Following this, e-commerce majors such as Flipkart were finding it difficult to get the next round of funding.
- Snapdeal’s major investor Softbank is looking at merging operations of Snapdeal and Flipkart.
- Paytm is also gearing up to grow its business as investor Alibaba eyes the Indian e-commerce market.
- All this will result in major consolidation among the players.
- India’s e-commerce market is still at an early stage.
- The market is seeing signs of consolidation as scale is a key success factor in the business.
- In countries like the U.S. and Europe, it is common to see ideas or businesses fail.
- It is almost a given that about 70% of the new ideas fail, and a few start-ups succeed, and investors accept it as reality.
- It is accepted that in a strong start-up environment an idea which sounded excellent and received huge funds can fail.
- Industry experts point out that failures should not cause scepticism towards innovation and entrepreneurship.
Source: The Hindu
