In a major operation, Delhi Police has recovered around 50 .32 bore revolvers and 100 magazines. The consignment was being to Delhi brought from Jharkhand and one person has been arrested.
Before I start the article I would like to admit my limitations. The context of this article is only India, since some of the factors considered may only be applicable to other markets.
How quickly times change! It wasn’t very long back that scepticism surrounded any virtual retail business model. It was only 4-5 years back that tele-shopping was equal to selling weight reducing medicine or machines and at best cooking ware and bed sheet or cheap mobile phones. What changed so dramatically in last 2 years that e-commerce is today threatening the biggest brick and mortar retailers/ distributors/ middlemen. And what is even more surprising that none of them seem to be resisting it? Is there something that old school businessmen are waiting for or know more?
I am no marketing or economy expert but I think there are some factors that have lead to the rise of e-commerce and will also be responsible for its fall.
1. Excess Liquidity – To nurse the ailing economies national bankers of various countries gave heavy doses of liquidity to bring the economies, which were once chugging nicely, back to life. Some of this money was attracted by India too since it was perceived to be the bright spot in EMs, especially after the change in regime. But most of the companies at that time were sitting on huge debt burden gifted by recession. Promoters had pledged shared for picking up debts in anticipation to repay it through equity dilution but the recession had left them high and dry….chocked with debt burden. This resulted in a funny situation wherein money was available for investment but opportunities dried up!
2. Brick and Mortar retailer were not expanding – At the same time, while habits of Indian consumer were changing from going to regular retailers/shop owners to big retailers, the change was slow since small time retailers were fighting it out nicely and big retailers too were not providing huge price differential. This was resulting in slow growth of large size retail stores and some of them doing very badly.
3. Internet penetration - This was the time when mobile phones and internet had penetrated deep in Indian market. The Indian consumer was becoming very friendly with the latest apps and social media networks were becoming common; making India markets ready for shopping online.
4. E-tailing was successful world – Some of the young and very bright Indian entrepreneur took clues from western world were e-tailing was very successful and then it started happening.
The e-tailing blast – Some e-tailers who convinced investors to burn some money in anticipation of capturing the market and once a big market like India is under the belly, all losses will be made good and the returns will be unprecedented.
That would have been true if the players were limited. But as it happens, when crazy amount of money starts chasing very few good ideas greed takes over and business plans with limited risk become madly aggressive. Investors were ready to burn money to beat the other guy down and snatch the missed opportunity to invest in something that holds promise to give BIG returns. This is exactly what is happening in e-commerce right now. Discounts are being given through the investment losing sight of the real business profitability. How long can this continue? No prize for guessing that it will end sooner than expecting.
Sadly, I foresee the funds drying up soon and the addictive steroid of freely available money that was funding huge discounts will recede, resulting in crumbling businesses with very weak muscle and bone. I will be happy to be proven wrong but don’t see any signs of it and am scared that we will witness yet another meltdown….similar to the dotcom burst. I wish that our core economy soon kick starts by much needed government intervention and the manpower leaving these companies find its way into other growing sectors of economy that are hopefully built on stronger fundamentals.
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