Indian consumers are having it better than ever before. With speedy delivery, discounts of up to 70% and a wide range of products across large online retailers, India splurged big online. However, since late last year, the party’s dying down.
Amazon started winning market share and investors at Flipkart and Snapdeal, however, started pulling back. While most e-commerce entrepreneurs have argued the marketplace model is fundamentally more efficient than single-brand retail, Chumbak co-founder Shubhra Chadda says their model has its merits.
“A lot of marketplaces are starting their own brands. They won’t do that if its low margin. Single brand retail have higher margins as you’re not buying stuff off and haggling over the commission. You own it, and you’re in complete control of how to peg it”, Chadda says.
“For a company like ours that has offline and online, there are capex in our business, but as long as you manage it well, you can keep in the positive. Also, the way customers shop on Chumbak.com is very different from the way they buy it off a marketplace”, she adds.
The current downturn in the investment cycle has forced the biggies to cut back on discounts and advertising, and consequently, sales have suffered. This is a vicious cycle where you die either ways. Failing to raise new money means you cut discounts and advertising, which means sales suffer, which in turn means lower valuations and further struggle to attract investors.
“A marketplace is very price-driven. I don’t know if discounting everything is the right way of doing it. I think in a way that’s spoiling the market”, Chadda says.
Currently, India permits 100% FDI in online marketplace but none in e-commerce. While 51% FDI is allowed in multi-brand retail.
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