While the big boys of Indian e-commerce, Flipkart, Snapdeal and Amazon are putting big money to scale up operations, the road ahead for most of the smaller players looks uncertain.
Challenges such as high customer acquisition and an unprofitable business model continue to keep the players awake.
“In India, customer acquisition costs are high, which makes e-retailers achieving profitability much difficult. The industry is yet to see customer loyalty like in the mature markets as Indians often tend to shift allegiance to ones offering better discounts,” said Tanvi Malik, co-founder of FabAlley.
The Indian e-commerce sector is currently pegged at $13 billion, and industry experts expect it to reach $30 billion by 2020.
Indian e-commerce market is taking time to catch up with the rest of the world, Malik said, comparing it with China and the US. As of 2014, the Chinese market is pegged at $180 billion.
According to Mallik, Amazon’s $2-billion announcement would be beneficial to a lot of companies as online retailing moves over to the mobile space. “The industry needs a lot of software and technology to help it scale up,” she added.
“There is no better time to run a start-up,” said Mayank Bhangadia, co-founder of Roposo.com, a social network for fashion, funded by Flipkart co-founder Binny Bansal.
“It appears that the funds are not the challenge. The confidence is still low, with the conversion rates in India being just 1-3 per cent (footfalls converting to actual buying) as against 5-10 per cent in China,” Bhangadia added.
“There is nothing special about the $1-billion gross merchandise value. The present merchandise market in India is about $500 billion, and this is expected to grow to $1 trillion in the next five years or so. E-commerce, if it only accounts for 5 per cent would be about $50 billion,” said Arvind Singhal, Chairman at advisory firm Technopak. This is the potential the e-commerce companies are looking to tap into.