Significant lay-offs of workers by Snapdeal has shaken the image of the start-up culture of which e-commerce was largely seen as a success story i.e. in terms of generating employment in the otherwise sluggish job market. The bleeding losses plaguing the sector perhaps obligate a deeper thought at the policy level, feels Nasscom. Instead of chasing a viable business idea, Indian e-commerce companies have rather chased valuations by luring in customers by offering deep discounts which had messed up their accounts to the extent of firing people as the only means left to save on their escalating costs. Many do not see much hope in the current crop of Indian e-commerce companies which they feel have always lacked a sound business strategy. “Besides enriching themselves, the truth is that many founders have not been able to set-up a business of much worth,” says Harminder Sahni, MD at Wazir Advisors, a retail consultancy.
Despite being hailed as a visionary of sorts, many promoters of Indian e-commerce companies have, in fact, earned a bad name to the culture that the nation espouses to unleash the entrepreneurial potential in the country. “Sacking of a large number of low and midlevel staff is the direct result of that irresponsible behavior,” says Sahni. “Besides messing up their own balance sheets, they have also messed up the economics of numerous brands,” adds Sahni.
“This is just the start. I am expecting similar lay-offs by other big e-commerce companies,” says Praveen Khandelwal, president of CAIT. “Unimaginable discounts, part of their plan to manipulate the market, cannot be viably offered forever. This was the bubble which was supposed to burst sooner or later. Instead of more employment, these companies are going to generate a significant level of unemployment in the market,” says Khandelwal.
But things must move. Given the rapid growth that India’s $20 billion e-commerce sector has seen, “it may be a temporary blip and definitely not a failure of the Indian e-commerce model”, says Sangeeta Gupta, senior vice-president with Nasscom. She feels that it is just a phase for these start-ups from where they would all be looking at their next level of evolution. For the greater part of 2016, e-commerce companies have been investing in newer models marked by lesser discounts and increased focus on profitability. Irrational spending on customers’ acquisition has come down. “So clearly they have already started working on that direction,” says Gupta.
“Government support would, of course be, needed. If we look at e-commerce companies today, they look like segregated entities. The government should, in fact, support an integrated model for e-commerce companies as opposed to only the marketplace one,” says Gupta. Having one’s own inventory and having one’s own logistics arm to save on cost etc might help these companies to achieve viability. “So how the government can incentivise all of these should also be looked at,” says Gupta.