Indian e-commerce ventures must shift their focus from revenue expansion to profitability and cut back on discounts to sustain their businesses for the long term, top investors and entrepreneurs said at the Techcircle India Ecommerce Summit 2016 on Wednesday.
Panelists who took part in various discussions on the first day of the two-day event also advised entrepreneurs to develop products and services that solve real problems rather than spending all the money they raise from investors on marketing and advertising.
“Good brands are never built on discounts,” said Prashant Gupta, president and CEO at abof.com
About 300 people gathered at The Westin in Gurgaon for the summit, arguably the biggest fair for e-commerce businesses in the country. Participants included budding and experienced entrepreneurs as well as angel, venture capital and private equity investors.
The conference saw panelists discussing topics such as the options before Indian startups to achieve profitability, market consolidation, hyperlocal services, and the need to move away from discounts and focus instead on better unit economics.
“Good brands are never built on discounts,” said Prashant Gupta, president and CEO at abof.com, the fashion e-commerce venture of the diversified Aditya Birla group. “If customers wait for discounts to come back, there is a problem.”
Gupta also said that although discounts helped e-commerce businesses lure customers, the current levels of discounting are unsustainable.
Manoj Gupta, founder of Craftsvilla, concurred. He said that moving on from discounts to better unit economics is difficult and that the tradeoff is leaving scale for profitability.
Kashyap Deorah, author of The Golden Tap, offered another perspective on discounting. He said that discounts for hyper-growth in e-commerce are a Chinese invention and that deep-pocketed US and Chinese firms are using discounts to capture the Indian market.
Focus on product, hire carefully
The day’s first panel discussion focused on the path to profitability for e-commerce startups. The discussion started with Shopclues co-founder Radhika Ghai Aggarwal explaining the various metrics of profitability in an e-commerce company.
“Develop a great product that self-propagates. You can’t keep burning money on marketing,” said Amit Jain, co-founder, CarDekho.com
The panel also comprised Neeru Sharma of Infibeam.com, Nitin Nayar of Warburg Pincus India and Deepak Gaur of SAIF partners. While Neeru shed light on the vertical e-commerce company Zappos, which Amazon acquired in 2009, Nayar said payments and logistics businesses were of huge interest to him.
During another panel discussion, on how to manage quality while scaling up an e-commerce services business, CarDekho.com co-founder Amit Jain suggested that startups must first focus on building their product or service rather than selling it.
“The core fundamental is that you develop a great product that self-propagates. You can’t keep burning money on marketing,” Jain said.
Samar Singla, founder of on-demand auto-rickshaw aggregator Jugnoo, and ixigo.com co-founder Aloke Bajpai offered tips on managing human resources to startups – the latest being PepperTap — that have laid off at least 2,800 employees since the start of 2015.
Singla said early-stage startups need to focus on getting good people and building a nimble team. Bajpai said that, defore adding people for a process, startups must ask yourself if they can replace people with technology. “Hiring people should be the last resort,” he said.
At another panel discussion, PepperTap founder and CEO Navneet Singh said the company’s decision to lay off some staff and pull back from six cities was aimed at focusing on the top four markets. The focus in 2016, he said, would be on attracting and retaining customers as well as managing margins.
Participants at a discussion on market consolidation said that companies should merge wherever they see synergy. Ketan Patel, senior vice president at Kotak Mahindra Bank, said most consolidation activity in India this year won’t be company-driven but investor-driven.
Foodpanda India CEO Saurabh Kochhar, however, said getting acquired or raising funds shouldn’t be the main reason for entrepreneurs to start a business.