Indian e-commerce players may see a tough year ahead. While overall business is likely to grow, a number of mergers and acquisitions and wind-ups are on the cards in 2013.
The Microsoft Accelerator report released in December 2012 reveals a bleak prospect for the Indian e-commerce start-ups. The number of tech start-ups between 2010 and 2012 went down to 379 from 519 (2011) and 452 (2010). One third of these are e-commerce.
“The ecosystem in 2013 will be difficult. Only deep-pocketed players will survive. Customer acquisition cost has been huge for the industry and we might see consolidation in the near future,” Manish Chopra, CEO, Zovi.com — an online apparel retailer — told
Market sources confirm the same. The average acquisition cost per customer for the online apparel industry remained between Rs 500 and Rs 1,000. E-commerce sites need the same customer to make at least two to three purchases a year to justify acquisition costs. But this is yet to happen.
Changed scenarios
The Indian e-tailing market is estimated to be worth $12 billion by 2015, according to estimates by investment bank Avendus.
Moreover, Flipkart and Snapdeal - India’s biggest e-commerce successes so far – have closed their recent acquisitions Letsbuy.com and esportsbuy.com. Later in the year, fashion wear e-tailer Myntra acquired Shersingh.com.
“We are open to strategic acquisitions that can help us strengthen our technology expertise,” Mukesh Bansal, CEO and Co-Founder, Myntra.com, adds. The deal space saw exit of players such as Taggle and Dealivore. Snapdeal too moved away from a pure deals site (selling deal coupons) to a marketplace model, where it acts as a link between the buyer and seller. It also added a variety of new products to its portfolio.
Breaking even
While the market is still hesitant on how soon e-commerce players will break even; the fact remains that no major e-commerce player has broken even so far. Snapdeal.com is one such company that is eyeing to break-even in 2013.
“But you need to see the average size of the company and the product portfolio in order for it to break even,” Sandeep Komaravelly, VP - Marketing at Snapdeal.com, said. Market sources admit that e-commerce is a deep-pocketed game.
“Currently, we are at 20 orders a day. Once we reach 25 orders, we will break-even,” says Sumeet Arora, founder of PepperCloset, a 4-month old online e-tailer that sales only in tier 2 and tier 3 towns. But 2013 also holds a new promise. Mobility is likely to be the new area and most e-commerce sites will look to have their own mobile apps.