By Prachi Srivastava
According to a report by Gautam Chhaochharia and Shaleen Kumar, it is believed that by 2020, e-commerce sites like Amazon, Flipkart and even Snapdeal will be able to realise sales between $48 billion to $60 billion but bearing in mind the present statistics it appears improbable that things will be as fruitful as they sound. In FY16 Snapdeal suffered a staggering loss of Rs 3,316 crore which is almost double the amount of Rs 1,328 crore for the year 2015, a rise of approximately 150%. Snapdeal’s revenues had risen by 56% to Rs 1,457 crore from Rs 933 crore in the same period a year ago.
Hence, despite having invested nearly 200 crores in advertisements and campaigning, Snapdeal slipped to the 3rd position compared to Flipkart and Amazon.
Sustaining in the long-term
[su_pullquote align=”right”]On the back of the innovative business model, Amazon is able to realise profits now in the US after many years of struggle as they focused primarily on customers rather than competitors.[/su_pullquote]
Currently, Snapdeal is in intense distress but the real question is can any of these e-commerce sites sustain low prices for a long-term? Reports of Ernst and Young and PwC suggests that these e-commerce websites have to crop up with strategies which are devoid of heavy discounts. These sites continue to provide discounts on various items as if it were a norm, which is slowly coming back to bite them in the form of the escalating financial pressure.
Profitability has to happen much before 2020, otherwise investors will be in trouble, as itll be tough to justify valuations. However, I do think itll actually happen before 2020 as discounts reduce over time, said Abhishek Goyal, a former investor with Accel Partners who now runs a start-up called Tracxn. On the back of the innovative business model, Amazon is able to realise profits now in the US after many years of struggle as they focused primarily on customers rather than competitors. This success triggers investors in India to have faith in the e-commerce business.
The effect of constant online sales on the companies. | Photo Courtesy: The International Business TimesSustainability of these firms
Innovation and invention are the key factors that can uplift these firms. They are required to invest in a business structure which can effectively deliver a quality product and convince customers regarding its authenticity. These online portals need to work on various age groups to upsurge their consumer base and not only young generations, they need to understand and cater to the requirements of each age group.
[su_pullquote]These online portals need to work on various age groups to upsurge their consumer base and not only young generations, they need to understand and cater to the requirements of each age group.[/su_pullquote]
With the proliferating demand and advancement of data analytics, e-commerce players are required to emphasise more on those items and goods which are challenging to sell. They need to cut down on their costs over logistics and working capital and avoid cash pilferage by encouraging cashless payments rather than cash on delivery (COD). In the recent past, Amazon overtook Flipkart in terms of market share, shifting Snapdeal to number 3 position. Though the venture-capitalists of Flipkart and Snapdeal are not the same, they can still think of merging together to compete at par with Amazon.
Started by school friends Bahl and Bansal, it is now Japans Soft-bank group that is one of the largest stakeholders in Snapdeal, with 33% stakes while the founders are left with 6.5%. Just like how only the parents can truly nurture a child and raise him to face the challenges of the world, what Snapdeal needs is its original spark which had brought about this companys immense rise in the past. Apart from all this, Snapdeal must also focus on improving its logistics division to uplift the company to its former aura.
Bibliography
-
http://www.livemint.com/Companies/Qt7vyAZ1ywO0y9e3P1MjcI/Snapdeal-losses-more-than-doubled-in-201516.html