Experts warn India’s e-commerce story is at risk of losing its shine as retailers ignore the sustainability of their businesses and acquire market share to drive up valuations. Some go to the extent of comparing the Indian e-commerce scenario to the dotcom bust in the West a decade ago.
Rosy numbers prompted investors to back e-commerce firms with cash, but hard questions are being asked now. It is now an open secret that no venture is making any profit, not even the top sites. The cost of customer acquisition is as high as Rs 4,000-5,000.
A flurry of new online retailers has made it possible for Indians to buy everything from books to washing machines with just a few clicks. But the infant industry seems to be headed for trouble.
E-commerce transactions touched Rs 8,146 crore in 2007, more than doubled to Rs 19,688 crore in 2009, and crossed Rs 45,000 crore in 2011, estimates the Internet and the Mobile Association of India. The transactions are expected to touch $70 billion by 2024-25 and could even rise to $260 billion if all factors remain conducive to growth. The number of e-commerce websites shot up to 1,877 in May this year. But with the number of Venture Capital transactions and the total funding on the decline, it's introspection time for the industry as a whole.