e-commerce companies to think rationally...else it may end up like dotcom blast

E-tail is basically replicating the role of the distributor/wholesaler and the retailer in the traditional brick-and-mortar supply chain and rising valuations around the globe, especially for e-commerce firms and a million dollar question arises in my mind is, if a company is losing money on every transaction, then the business model is not sustainable. Unless e-commerce firms start to differentiate their offerings significantly from each other, I do not see things improving.

The e-retail industry in India is in the floating stage. It’s become a very high and competitive space, these companies are spending a lot on customer acquisition, and that explains the loss. Only two sets of people are winning this ecommerce battle. First are the delivery companies and the second, digital marketing companies like Google and Facebook. It is absolutely a mad race where investors will definitely take a hit in long term. Secondly, it has been reported fake likes which has lead to pongy scam in India and abroad. Facebook does not have a tool that lets people delete fake followers in bulk. You have to do it individually. It is also a fact that advertisers sometime have to pay and sometime not to pay for fake likes. One can pay Facebook for increasing the likes.

It is an absolute fact that customer acquisition cost for all e-commerce companies is the main investment backbone and the biggest tool of customer acquisition/retention is through advertising and despite mounting losses, the advertising budget of the ecommerce players is only ballooning. While Flipkart staked claim to supremacy during recent big sale events by flaunting its win over Amazon stressing on selling big ticket items like electronic goods and apparels, the fact is by selling electronic goods at greater discounts to show revenues. This is not a big deal because if you give discounts on a branded electronic item it will sell and it is leading to huge losses at the same time.

In the case of Flipkart, it has to borrow money from the equity investors and whereas Amazon can afford to lose more than it can. Since Amazon is behind Amazon.

Tags: e-commerce, dotcom blast, e-retail industry, e-retail industry in India, facebook, google, amazon, flipkart