Thursday, February 11, 2016

How deeply are our e-commerce cos. bleeding .. a plain analysis ..

For how long can our e-commerce giants keep bleeding and live off the funding of the venture capitalists ? 

Top 3 E-tailers have bled by almost rs.3900 crores last year .. Others in classifieds, foodtech and real estate have bled by almost rs. 800 crores last year. See graphic ..

Let us realise there is nothing like a free lunch .. We will one day pay for all these through our nose !! 😊

How and to whom is the question !!

The reason why cos are ready to bleed initially is to claim the market share.  Amazon India bleeding can be understood as its parent organisation can handhold it for another ten years before it gets wiped out, by which it can expect to capture customers and marketshare.

We need to understand some basic facts regarding Indian e-commerce companies and can classify them as below.

A) Transaction related, B2B or B2C
B) Transportation / storage infrastructure private/public related
C) Value related
D) profitability related

Trying to answer the following questions will give a better understanding of the e-commerce sector in the country. 

1. Is e-commerce B2C the only way to profitably transact business ? Looking at profits, can B2B save these companies ? Looking at losses of the companies, can we get data as to what, B2B or B2C, contributes more to losses as percentage of sales ?

2. Is B2C e-commerce as profitable as it is expected to be ?

3. Are e-commerce companies able to provide value and reach to the Indian masses who are looking for a new shopping experience ?

4. Other than the basic reasons of variety, convenience and reach thru logistics operators, can the e-commerce industry extract / provide more value / benefits by means of reduced costs / improved profitability to other stake holders ?

5. Will better logistics and transportation infrastructure in the country improve their profitability and bring e-commerce companies once again to the limelight ?

6. What are the basic reasons why the costs of e-commerce companies are increasing ? or has an analysis been done as to what are the pain spots in Indian e-commerce industry ?

7. Why is it that 'economies of scope' is not as lucrative to B2C customers as is 'economies of scale' ?

8. What is the minimum threshold transaction value per transaction or during a fixed time period that can help sustain e-commerce operations both for B2C and B2B transactions ?

9. Should e-commerce companies collaborate to have a common shared logistics partner to bring down logistics costs ?

10. Has any study gone to understand by what scale are the costs of distribution larger than the costs of acquisition and supply in B2B and B2C transactions ?

These are some interesting questions which the e-commerce companies need to attend to very urgently, which will keep propping every now and then for which answers keep evolving over time..

If India is not able to come up with a native indigenous and cost-effective solution to this issue of gallopping losses, I am sure the e-commerce industry in the country will not last long.

george.

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