‘E-com­merce firms mak­ing swift changes in biz mod­els’

Fund­ing squeeze, fo­cus on prof­itabil­ity be­hind move: study

The Hindu Business Line - - NEW ECONOMY -

A tight­en­ing fund­ing en­vi­ron­ment has prompted In­dian ecom­merce ecosys­tem to adopt stricter eval­u­a­tion norms for busi­ness mod­els, with fo­cus on prof­itabil­ity and con­sol­i­da­tion, a re­port said.

“We be­lieve this shake-up may in­ten­sify fur­ther, lead­ing to the emer­gence of one or two strong com­pa­nies within each sub-sec­tor,” said the re­search re­port by Ko­tak In­sti­tu­tional Eq­ui­ties.

A lack of fresh fund­ing as well as stricter fo­cus on prof­itabil­ity by in­vestors is lead­ing to swift busi­ness model changes by com­pa­nies, it said.

Con­sol­i­da­tion wave

Fur­ther, the cur­rent wave of con­sol­i­da­tion among e-com­merce play­ers may in­ten­sify, lead­ing to fewer, stronger play­ers emerg­ing within each cat­e­gory.

“Low val­u­a­tions may prompt brick-and-mor­tar com­pa­nies to take over some e-com­merce ri­vals, in a bid to make an on­line pres­ence for them­selves like Ti­tan’s pur­chase of Carat­lane and Fu­ture Re­tail’s pur­chase of Fab­fur­nish,” it said.

Fur­ther, re­cent gov­ern­ment reg­u­la­tions clamp­ing down on dis­counts and de­pen­dence on sin­gle large ven­dors may ne­ces­si­tate fur­ther changes in strat­egy and could im­pact sales growth in the near term, the re­port added The hy­per-val­u­a­tions seen in suc­ces­sive fund­ing rounds in 2014-15 also seem to be cor­rect­ing, it said.

Fidelity had marked down its hold­ing in Flip­kart by about 40 per cent as of Fe­bru­ary 2016 (com­pared to Au­gust 2015).

The val­u­a­tion of Rocket In­ter­net’s Global Fash­ion Group (par­ent com­pany of Jabong) plum­meted by about 67 per cent dur­ing its last fund raise in April 2016, while Fab­fur­nish was ac­quired by Fu­ture Group at a sub­stan­tial dis­count for $3 mil­lion, the re­port noted.

The re­port also in­di­cated that the hy­per-lo­cal cat­e­gory seems to be the worst-hit among e-com­merce play­ers.

Gro­cery de­liv­ery firm Pep­perTap shut its de­liv­ery busi­ness and is fo­cus­ing only on lo­gis­tics, while de­liv­ery com­pany Road­runnr has merged with food-or­der­ing app Tiny­owl.

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