E-commerce firms log out of non-core biz

E-commerce companies’ efforts to dabble in multiple areas online do not seem to be working too well.

Over the past few months several big players have had to shut down unviable businesses. While global taxi hailing app Uber shut down its auto-rickshaw hailing service, online payment firm Paytm has closed its hyperlocal grocery service within a few months of launch.

Flipkart, meanwhile, has been unable to scale up its grocery business Nearbuy. Experts say large online companies are trying too many things and burning cash in a bid to acquire more customers, denting margins in their core businesses.

“These companies are not really brands that are diversifying. They are at best marketing platforms or a distribution channel that are occupying space on their users’ mobile sets,” said Saurabh Uboweja, Brand Strategist and founder of consultancy firm Brandsofdesire.

“There is no underlying logic or value system that binds the users except that they have all been bought through discounts. So, there is no consumer stickiness or loyalty,” he added. 

He added that if online companies wish to sell another product or service through the same channel with the aim of monetising the platform, they would not succeed easily.

According to industry sources, Ola is struggling in the other areas it had entered. For example its grocery business Ola Store is likely to be shut down.  The company launched the service early this year but has not been able to expand beyond Bengaluru and Hyderabad.

Ola did not wish to comment on its grocery business as Ola Store is still in beta stage.

On the other hand, pure grocery online retailers such as PepperTap and Grofers have expanded in over 10 cities in just a year. “It seems like Indian start-ups tend to do ‘start ups within start up’, which is constantly pivoting from their core value proposition to consumers. While the Indian market is quite fluid and companies have to try various models, they should be pragmatic and not lose sight of the core problem they are trying to solve,” says Tej Kapoor, Country Head at UK-based Daily Mail Group.

Adds Uboweja: “Just offering a solution because you have a channel won’t cut the ice any longer as global investors are showing withdrawal symptoms and want business models that are profitable and have a semblance of predictability.”

He noted that investors are also getting sceptical in the way companies are burning cash to launch a new service every day.

“Investors are now questioning start-ups and heavily funded e-commerce companies on profitability,” said an investor on request of anonymity.

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