We’ll now see more problem solving biz models in e-comm: Vishakha Singh

E-commerce has changed the dynamics of business globally as well as India, and has seen several success stories. While the sector is still on a growth curve, there is consolidation and course correction being seen. 

In conversation with Adgully, Vishakha Singh, Founder and CEO, Red Polka, speaks about the Indian start-up ecosystem, consolidation in the e-commerce space, impact of GST, gameplan for smaller e-commerce players and more. Excerpts: 

What are the new equations seen emerging in the e-commerce industry in India?
There is no doubt that launch of start-ups in the e-commerce space triggered the start-up India trend 2008 onwards in a big way. The growth and eye popping valuations commanded by some of the largest Indian e-commerce companies encouraged both entrepreneurs and investors alike to take the Indian start-up ecosystem seriously. Riding on this wave, many businesses actually found it comparatively simple to raise funds for their business ideas. 

Cut to 2016, the Indian start-up ecosystem saw the funding tap running dry as investors become more conscious about return on investment window. This was driven by the need to invest in relatively safe business ideas, which could deliver some success for the funds. 2016 has been a game-changing year for Indian start-ups as entrepreneurs sharpen focus on bottom-lines. We are seeing new equations emerging in the segment:

a) Clear sign of focus on building revenue based business while building scale, delivering customer value rather than just delivering discount

b) With big-ticket acquisitions of players like Myntra and Jabong, spotlight is on fashion commerce as it offers better margins.

c) There is a growing trend in the fashion e-commerce segment to launch new business models to drive higher customer retention and improve revenues. Like social media driven fashion portals, curation driven fashion e-commerce sites and niche led fashion sites are also gaining traction.

What kind of a consolidation scenario do you envisage in the Indian e-commerce space?
Supply chain or the logistics is the backbone of the e-commerce space. We have already seen dedicated logistics companies come up in a short span of time. We expect that this part of the business is likely to get more organised with cost consciousness in every e-commerce company. This is likely to lead to consolidation in logistics segment. Gradually, one will even drive revenue from premium services through e-commerce like charges for faster delivery, etc. 

How will the GST Bill benefit the e-commerce industry in India?
The e-commerce industry is hailed to be the next big industry in India. It has already captured the attention of consumers, investors with its sheer size of business. The taxmen, too, are trying to get a piece of it. Unfortunately, till now, clarity on tax laws for e-commerce is not quite clear, but we expect that once the GST rolls out, quite a few confusions were likely to disappear. 

The GST Law has a separate chapter on e-commerce transactions in an attempt to put an end of the sector’s misery of complying with various laws, which change as per state and sometimes municipal wards also. 

Under the GST, e-commerce operators will be required to collect tax at source and deposit the same with the government. However, clarity is awaited for those businesses that enjoy tax exemptions on the basis of their turnover. Would they have to deduct tax still from their suppliers and if yes, then how will the refund procedure work? Similarly, there are many such issues waiting clarity for different players in the e-commerce segment, who are not doing plain vanilla sales of goods and services, there are classified companies, wallet companies, etc. Currently, all of them are defined as e-commerce operators. We believe that GST will ensure a fair taxation for e-commerce players, but we are awaiting micro level clarity of how it will be implemented. 

Are mergers the best way out for smaller e-commerce players in India?
Smaller players should accept the fact that they can’t compete with giants like Flipkart and Snapdeal in the same area of business. Thus, it is important for them to carve out a niche for themselves and offer a clear differentiation to their consumers. If small sized e-commerce players are unable to define their USP, a merger will be their only way out. We believe that with growth in Internet penetration and 4G beginning to find traction, there will be a major growth in online shoppers and therefore should be viewed as an opportunity by smaller players to start building a rich niche for their businesses. 

How do the smaller e-commerce players maintain consumers’ share of mind and recall, given today’s landscape?
Smaller e-commerce players should play on their strengths to maintain mindshare of its consumers. Such companies should build on their brand strength and position it as per their niche so that consumers’ recall of their brand name is higher. Even in commodity based business brand helps in market share and mind share. The same applies in all business, including e-commerce. 

With a pressure on venture funds, do you think e-commerce players need to go the public funding way? What are the implications for the industry?
The perception that e-commerce companies and start-ups in general are finding it difficult to raise funds is not entirely true. It is true that investors in general have become more conscious about the kind of business they want to park their funds in. As a result, funding is flowing to businesses, which show a promise, a vision to generate revenues and a clear exit path for the investors. The current slowdown, for the lack of better word, is a cyclical trend but green shoots are appearing. 

For start-ups, public funding cannot be explored as an option because even now a majority of these businesses have yet to build up and may not attract investors in the open market. 

What, according to you, are the reasons for the pressure on funds for the e-commerce industry?
It is there for all the sectors. In e-commerce specifically, some businesses over-projected their growth numbers in order to attract investors, expected consumer acceptance of the medium and growth mismatch, discount driven business models to lure customers are some of the gaps that have been created. One will now see problem solving business models other than just scale up models.