The Venture Intelligence Blog

Businessworld has an amusing article on how small retailers are having a great time enjoying the (VC-funded) discounts offered by e-tailers. Heavy discounts, offers on first-time registration, and cash-back vouchers floating on the web are pulling retailers, like Joshi, to shop online with the motive to resell. E-tailers, already marred by negative gross margins, are taking a further hit. Retailers buying online eat into e-tailers' margins and, despite offering huge discounts, these e-sellers do not get the loyal customer they have been looking to cater to. ...Electronics, with its thin margins, is the most adversely affected segment — though the fashion and apparel category, which has better margins, is not far behind. Industry sources believe that most e-tailers that sell a lot of electronics generate about 20-40 per cent of their sales from resellers. However, most electronics players claim it is less than 5 per cent. With companies such as Jabong, 99labels, Freecultr, Timtara...

The debate that Amazon.com must have had about 15 years ago - whether it should stick to selling books or move into other categories - is now happening at niche Indian e-tailers. From a Business Today article . Niche players have two kinds of clientele. "In the cities, they provide convenience and value, while in the small towns they provide availability," says Raghav Gupta, Principal at investment firm Booz and Co. Increasingly, a substantial part of these websites' patrons come from Tier-II and Tier-III cities, where many now have the purchasing power to afford the best, but often cannot find shops in their area selling premium products and brands. "We see a lot of high value electronic items being bought from smaller cities," says Arindam Bose, MD and Chief Customer Officer, timtara. Amin of bestylish says half his orders come from the smaller cities. As for items like lingerie, many small town folk prefer buying online rather than at a store. "The socia...

Business today has an article on the challenges facing BigBasket and its smaller competitors. One reason why no e-grocery startup other than BigBasket has managed to raise money is that margins are wafer-thin. "At a gross margin of 12 to 15 per cent, profitability cannot be more than two per cent," says Gaurav Saraf, Director of Epiphany Ventures, a venture capital firm. The gross margin on fast-moving consumer goods is as low as 14 per cent. On fruit and vegetables, it is around 16 per cent but shelf life is shorter. This is why many sites, including MyGrahak and FamilyKart, stay away from fresh produce. BigBasket, however, says it has no problem. "Fruit and vegetables are procured only on order, except for those with a longer shelf life, such as potatoes and onions," says Menon. "This reduces loss of stock by three to four per cent." One of the biggest rivals of e-grocers is the local kirana store, which offers home delivery in many cities, often within...

“We were the first fund to invest in e-commerce trading platforms in India. We don’t think all the companies funded are bad. However, now many ‘me too’ kind of companies are coming up. We believe there is not much room for new e-commerce companies to come and exist...There are opportunities for the existing e-commerce companies to scale up and they may attract investments from some of the later-stage VCs. But we are not planning to seed-fund any new firm. Now, there are talks of consolidation and acquisition between portfolio companies and other e-commerce companies” - Prashanth Prakash, Partner, Accel Partners in an interview to Business Standard. On a related note, Nasscom's Emerge Forum has a series of posts on e-commerce in India. One of the lesser known factors behind e-commerce growth has been the increased adoption of online buying model by smaller cities. With 30 million active Internet users in these cities, the contribution to e-commerce sales in India is estimated to...

Anand Lunia of Seedfund has an article touching upon this at StartupCentral .