NEW DELHI: Call it collateral damage. With India's e-commerce industry growing at warp speed, many portals are falling by the wayside unable to keep up with the nature of the beast. Apart from talks of Myntra being bought out by Flipkart, which could well turn out to be the biggest consolidation the Indian e-commerce market has seen, the latest portals to join the e-commerce dead pool are Istream, Dhingana, Letsbuy, Studyplaces and Honour among many others.
Radhakrishnan Ramachandran, founder and CEO of Istream was inconsolable when his portal shut down within a year of going live. On the premium video streaming site, which is no longer functional, he writes: "My team was heartbroken. They just couldn't rationalize the situation. Neither could I. We were by far the undisputed leader in the premium online video space in India. Our numbers were soaring-in March we crossed 6 million unique users. We had marquee brands advertising with us. And now we are forced to shut Istream down-something we built with so much passion, emotion and honest sweat. I don't have all the answers as to why it had to end this way."
Istream, initially funded by Saif Partners, shut down because it ran out of money. Similarly, Letsbuy, once a popular shopping site, opted for a distress sale to e-commerce giant Flipkart. "Investors decided it was time to consolidate their risk profile and opt for one big player rather than put their money into too many smaller baskets," says Gaurav Saraf, director, Epiphany Ventures that has funded a few e-commerce ventures.
Satyan Gajwani, CEO of Times Internet that operates many successful portals including Indiatimes, says the Indian online retail industry is still in its nascent stages. "It's not even 1% of the country's total retail business. So, the market opportunity is still huge. But it requires an ability to stay in for the long haul. Businesses that have been buying transactions while losing money were not sustainable, so they were likely to be shut down or sold. We have focused on being operating-margin profitable, and that allows us to sustain ourselves in an aggressive market."
Other e-commerce websites that shut down are Dhingana, an online music-streaming site that failed due to T-series not renewing its licensing agreement. Education portal Studyplaces was sold to Educomp in a distress sale. Fashion and You shut down Urban Touch, a site it acquired for a reported $30 million.
"It's time the e-commerce companies came to terms with the fact that only growth at the cost of profitability is not a wise idea on a sustained basis," says Viraj Malik, CEO and founder of PK Online, an online video streaming and digital advertising company.
"Emerging economies like India are experiencing a technology boom with many e-commerce, digital media and technology start-ups expanding at a phenomenal rate. Higher profitability, lower costs, tighter control over investments even at moderate growth rate would lower customer acquisition cost and generate investor value. What's happening currently is that companies are going all out for investment spree offering lower prices, overspending on customer acquisition and debt/equity binge amounting to widening of loses and escalation in customer acquisition costs."
Currently there are more than 900 e-commerce ventures in the Indian digital space compared with only 10-20 three years ago, according to industry sources. Experts believe only 5% of them would be doing healthy volume of transactions on a daily basis. Arvind Singhal, chairman of retail consultancy Technopak says that the consolidation is a natural process and it's nothing to get worked up about.
"It happened in many industries including software," he says. "Unless you have a sustainable model you won't survive. Eventually, the ventures that have the muscle to invest in technology, go for market share and have the patience to wait it out will survive."
Interestingly, Youtube took more than five years to see the tip of profit.