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Nammagroceries.com gets about 219 views and earns a mere Rs 60 a day. The Bangalore-based online groceries store has temporarily suspended operations for 3-4 months.
A similar trend appears to be playing out with other e-commerce sites that have not been able to survive in the highly competitive online retailing space.
However, many of them do leave a promising message, “We will be back with better product range to serve you better.”
Given the current scenario, private equity investors and venture capitalists have become choosy about their investment. What appears to also pose a hurdle are the similar formats of business models.
“The e-commerce business is extremely capital-intensive as the cost of customer acquisition (ad and promotional spends) is high. Promoters end up burning more than they earn. We keep receiving investment proposals, but nothing sounds really exciting. The business models of these Web sites are very similar to the already existing ones. We are looking for something exclusive,” said Anil Joshi, President of Mumbai Angels, an angel investor firm.
According to a First Data Corporation and ICICI Merchant Services report, the domestic e-commerce market has the potential to grow between $125 billion and $260 billion by 2024-25.
Logistical planning
PE analysts said it’s the lack of logistical planning that is leading to e-commerce companies either consolidating or completely disappearing off the Web. (See table)
A Grant Thornton report says the mortality rate of e-commerce sites is increasing. In December 2011, Taggle.com quietly buried its online products retail business. It had raised funding commitments of $9.25 million as seed investment. Others that have wound up are Harisabzi.com and Sabzimandi.com.
“Many people have to rework their e-commerce models in a bid to survive,” said Samarth Mungali, Founder, Tadpolestore.com.
Citing examples of a few not-so viable models, Arunima Singh Deo, Founder, Babyoye.com, said about 20-30 deal/coupon selling sites have either disappeared or have changed their model. Crazydeal.com closed down, while Groupon India is facing tough times and even Snapdeal.com appears to have reworked its model to become an e-tailer from just a deal site, Deo said.
Grant Thornton expects this rate to increase this year, as Series B funding appears to be drying up for companies.
Sanjeev Krishan, Leader, Private Equity from PwC, said, “Flipkart and others are struggling. The space has no entry barriers so it is easy to set up operations. However, logistics and the back end need to be strong.”
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