Top ecommerce players now focusing on turning profitable

After investing in technology platforms, logistics, supply chain, and talent acquisition, leading ecommerce players are now focusing on turning profitable. To begin with, they have reduced the discounts offered. Now players like Flipkart and Amazon have started levying delivery charges on certain products, irrespective of the price.

While the market share of e-commerce companies had remained a secret so far, a new report by Morgan Stanley says that Flipkart, founded by Sachin Bansal and Binny Bansal as an online book retailer in 2007, is ahead of others with a 44 percent share. Its competitor, Snapdeal is a close second at 32 percent and American retail giant Amazon, launched in India in 2013, is at the third position with 15 percent, according to the report. The remaining nine percent is shared by rest of the companies. However, none of them have been able to book profits so far.

Booking profits, the top focus

Till last year, the platforms were depending on heavy discount strategies to woo customers. For example, leading fashion e-tailer Myntra is looking forward to 300 percent growth based purely on customers it has acquired over the last few years. Snapdeal, which has grown 600 percent, or seven times, in the past 12 months, is focusing on improving growth momentum this year driven by fashion, electronics and home categories.

As a part of their growth strategy, online platforms are putting in efforts to increase the number of sellers as they expand their product categories to woo customers, they have been also filling senior level positions to strengthen hold over the market. They are also consolidating and strengthening their logistics and supply chain.

The e-commerce industry, valued at 17 billion dollars (over Rs 1,08,000 crores), has been growing at a compounded annual growth rate of about 35 percent each year, the study said, adding that it is expected to cross the 100 billion dollars (over Rs 6,36,000 crores) mark in five years. In 2014, the sector attracted the attention of investors, including top global firms and leading Indian industry leaders like Azim Premji and Ratan Tata, said the study.

Fashion to drive growth

In a race to be ahead while inching toward turning profitable, ecommerce companies are focusing on private labels to achieve growth targets and attract investments. For instance, leading fashion e-retailer Myntra has more than 10 in-house brands in the fashion and lifestyle category of men, women and children, which include Roadster, Dressberry, Anouk, Mast & Harbour, Kook N Keech, Yellow Kites, Invictus and HRX by Hrithik Roshan and to popularize them, the company has not only roped in celebrities but also eyeing partnerships with other ecommerce players apart from launching brick-and-mortar stores of some of these in-house brands.

Now the aim is to expand the portfolio by adding about five more such labels this year, which would also include a women’s footwear label and an innerwear brand. Flipkart too has launched various in-house products in electronics, lifestyle, and home category and it happens to be the first e-tailer to launch its own line of tablets and smart phones under the brand Digiflip in 2012.

While domestic players like Flipkart-Myntra, Snapdeal and Jabong are busy strengthening their high-margin fashion portfolio, the American ecommerce giant Amazon too is concentrating efforts on private fashion labels and fashion categories to take on the competition.

A recent report by Google-Forrester said India will have 100 million online shoppers by 2016 and India's e-tailing market will touch 15 billion dollars (about Rs 92,600 crores) by then, up from just about three billion dollars (over Rs 18,500 crores) now even as the customer base is expected to grow to 100 million by 2016 from 35 million this calendar.