Startups face sales slump for first time

BENGALURU: Startups in fast-growing consumer categories such as fashion, beauty and furniture are struggling with a slump in demand as consumers pare discretionary spending while the ongoing nationwide lockdown disrupts operations.

The 21-day lockdown by the government to contain the outbreak of novel coronavirus has upset the supply chains of e-commerce and other companies that are slowly starting to resume normal business. Only essential products such as groceries and medicines are currently being sold on most platforms.

“With the entire country shut for business, startups have to pray for the best, but plan for the worst,” said Mohanjit Jolly, partner, Iron Pillar, a technology-focused venture capital fund.

Even the two biggest online retailers Flipkart and Amazon India are likely to see a drop in sales this quarter because of weak demand for mobile phones, electronics and fashion, the three categories that make up a majority of their business. Both have temporarily halted sales of consumer goods other than essential items amid restrictions.

“Discretionary spends have drastically come down because of demand and supply issues. On the one hand, consumer demand for goods in these categories is down because of the low mood of the nation at this time and the economic hurt coming our way, but we have genuine obstacles in India’s workforce being able to report for work,” said Anup Jain, managing partner, Orios Venture Partners.

Some startups have even moved to delay payments to vendors and cut jobs, said entrepreneurs and investors.

Earlier this week, online cosmetics and fashion retailer Nykaa informed vendors that it has suspended operations because of the lockdown. Nykaa has temporarily shut retail stores and offices, it told the All India Online Vendors Association. It also informed vendors that its cash flow and income have been impacted and would therefore delay payments of outstanding invoices. Nykaa, which has just raised ₹100 crore from existing investor Steadview Capital, has also said that for now, it will focus on daily essentials such as personal hygiene.

Premium workwear brand Fablestreet has closed its office, manufacturing facility and retail store, which has deeply impacted its operations and revenue. “From a business perspective, the lockdown has put us in a zero revenue situation and we’re focusing on conserving the current cash and outflow, while minimising any impact on our partners,” said Fablestreet founder Ayushi Gudwani.