Aditya Birla Group’s online fashion vertical abof.com is hoping to build a successful business model with reduced discounting. Correction in the industry is already happening and over the next 18-24 months it should be more prominently visible, abof President & CEO Prashant Gupta told BusinessLine .

What’s the status of the e-commerce market now, almost six years after the initial hype?

A lot of long-term clean up has happened, many have fallen by the wayside.

The next 18 months will be crucial in terms of getting to a position by some of the (existing) players who are able to build the right brand equity and sustainable business model.

Many e-tailers, despite scale, are not profitable. So people have to find ways for economic viability. It’s hard to tell who these players will be.

But in an industry that is into deep discounting, how will profitability come?

It is a tough path from where one is to where profitability is.

The good news is abof has seen significant reduction in discounts (by e-tailers) over the last six months.

When abof had its first end-of-season in January, we dropped prices to match competition. In July, we saw around 700 basis points reduction in discounting.

For example, an item which was sold at 47 per cent discount in January was sold at 40 per cent discount in July.

But this also takes away volumes?

A reduction in discount will hit volumes. But discounting will have to go down.

You have to gradually work towards bringing down discounts. A knee-jerk reaction will cause disruption.

It (reduction in discounts) will also mean that froth in the market will go away — both in terms of players and consumers.

Instead it will leave a set of true e-commerce consumers. Even this will be a sizeable number.

When do you see the correction happening?

In the next 18-24 months.

When abof was incubated, we thought discounting would moderate by 2015. But the industry dragged it into one more year.

In this context, when do you see profitability for abof?

It is a long gestation, large-scale business that has to be built over a period. So may be (profitability will come) five-six years.

What has been the company’s growth like?

Because July and August are the end-of-season period, they are large months for us. In July, we have become probably the third largest player in the market after Myntra and Jabong (amongst apparels-focused portals). Our traffic and orders have grown. We touched an annualised GMV (gross merchandise volume) of ₹200 crore in July. So, roughly, we did around ₹17 crore of business in that month.

Do you expect the same traction post the sale period, especially considering you aren’t into deep discounting?

We have scaled up to getting somewhere around 130,000-200,000 visitors a day. In the first few months this was 5,000-10,000 a day. Yes, we are a bit moderated on discounts. And we work hard on the user/customer experience. For example, people who browse spend nearly 10-12 minutes with us. Nearly 40-45 per cent of my orders are repeats. As we grow older, the numbers will go up. There is enough out there in terms of scale which will allow us to build a successful business.

Any plans to adopt a marketplace model or will you add warehouses?

We follow a buyer-seller model (abof buys the products and stores them at its warehouse). As of now we are not planning any changes to it. The company has a 50,000 sq ft warehouse in Bengaluru operating at 30-40 per cent capacity. We are now looking at another in NCR over the next 6-12 months.

Maybe two years (later) we could look at Mumbai.

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