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Will E-Commerce be the next face of dot com bust?
By siliconindia
Bangalore: The e-commerce industry is heaving in its second wave in India. We can find many new e-commerce startups emerging with new but mature ideas. It is from the learning and experiences of those old companies, which survived the dot com bubble a decade ago, the industries today appear to overcome serious infrastructure challenges in India.
"There are some parallels between the rise and subsequent burst of the dot com bubble in 1999-2000 and the current situation with e-commerce. This time around, e-commerce seems to have come off age, with better connectivity, strong and rapidly growing internet population, credit card growth as well as payment gateways have come a long way," says Anisha Singh, Founder and CEO, mydala.com, a group buying online portal.
A report by the Internet and Mobile Association of India has revealed that India's e-commerce market is growing at an average rate of 70 percent annually and has grown over 500 percent since 2007. It is estimated that e-commerce market will reach a whopping $10 billion by the end of 2011. 80 percent of e-commerce market is captured by online travel followed by e-tailing, financial services, other online services and digital downloads.
"The current growth in e-commerce industry among others, can be attributed primarily to the rising internet penetration and a willingness from the customers and retailers to use it as a channel for buying and selling goods and services. The growth seen in the last two years is bound to sustain, given the success of Innovative business concepts in this space. Hence, the boom of this sector is based on strong fundamentals," shares Kunal Bahl, CEO, snapdeal.com, a group buying online portal.
The highly literate population of urban India, the increasing literacy rate of rural India and the expanding base of internet use in rural and urban India has contribution towards the current inflating market of e-commerce. Internet has grown to become one of the fastest growing communication medium and made e-commerce a new buzzword over the last decade. The third generation mobile services will be the icing on the cake. "Indian consumers are becoming more comfortable purchasing online, which is helping various new social networks to grow. It is a re-emergence of the wave. It is a big wave-up and as every wave has, it will also see a plateau, but not in the next 5-10 years. The smarter business build on experience and great models will survive. And those who want to, must start learning from the survivors of the dot com bubble," says Pearl Uppal, CEO, Fashion and You, a group buying online portal.
The sudden flow of start-ups in ecommerce market and the cash funding to these start-ups show the rising interest of the Venture Capitalist towards e-commerce market. Ashwin Raguraman, Vice President, IKP Investment Management Company, says, "The near future of e-commerce is bright and I cannot foresee any such bubble for the next few years. Rather the industry will grow as the consumer spending power is increasing, or we can say that the per capita income is growing with the economy. But one of the important element is not to copy the west blindly."
The current bubble has attracted VCs to invest in these start-ups. Anisha shares, "There is definitely elevated activity in terms of VC interest in Internet or e and m commerce companies. The feeling seems to be is that we have crossed the chasm for e-commerce in India and it's time to see how the industry and different innovative models mature."
VC's play a critical role aiding start-ups as well as mature internet businesses think strategically, making the right heirs, scaling up operations and expanding the customer base. "It is important for an entrepreneur to choose their VC carefully. VCs should provide dollar plus value to the organization, as they bring in with them knowledge and learning from across the globe, which will define the success and failure of the business," quotes Pearl.
VCs fund companies not just for social cause, but they have vested interest in them. Alok Mittal, Managing Director, Cannon Partners, says, "We lean to find the quality of service and the interest of the start-ups towards consumer satisfaction in every aspect along with the business model they are working on. Before investing, we do a research on the vertical to find the strength and loopholes. This works toward framing a healthy organization."
The current boom phase is real and yes, there will be failures, especially the companies who do not have a solid and/or scalable business model. What is required is not to follow any model blindly, just because they are beneficial for others. Try to find out your own strength and weaknesses before venturing into a business and find such VCs who can help you in not only monetary terms but also can guide you to walk on pebbles but with covered feet.
