Are Indian eretailers heading for the same trap that US ones did in the first Internet boom?
29-Oct-2014 •Dhirendra Kumar
Last week, Amazon came out with its financial results in the US for the July-September quarter. The ecommerce giant made a loss, as it normally does. However, the scale of the loss as well as some of its details have made investors and analysts more concerned about the company than has been true at any time for perhaps a decade. On top of that has indicated that it may make a loss during the October-December holiday shopping quarter, a time of the year when retailers in the west make up for an an entire year's bad news.Of course, in India, our own ecommerce outfits are just through with our own holiday season, and they have turned up no surprises. They're not publicly listed so we don't know the numbers, but one can safely say that they would all have lost huge sums of money because that's what they intended to do. Each one of them is making large losses and they all routinely go and get fresh rounds of money from venture funds or, as in Amazon's case, from a parent company.
There's a whole theory about why these companies must lose money because they have to purchase market share to achieve a dominant position and be the last man standing and so on and so forth. Anyone who points out that the point of a business is to make a profit is liable to be dismissed as an old fuddy duddy who doesn't understand how the new world of business works.
However, at some point, it must make you wonder, no? What, exactly, is the end game here, as visualised by those running and funding these outfits? That all but one retailer in India will shut down? Or customers will fall so much in love with a retailer that one day it will stop discounting but they won't notice? Or simply that it's fun while it lasts and when the money runs out, then we'll dust off a whole new business plan? I'm looking forward to finding out.