The finances of Indian ecommerce seem to be slowing down. Companies are finding it increasingly difficult to raise capital. Funding is on the ebb, and devaluations have marked the year 2016 as a low one. Flipkart has been scouting for investors in a (desperate?) bid to find funding. The company was in talks with Walmart and Canada Pension Plan Investment Board (CPPIB) to raise capital. However, talks with Walmart did not fructify. The company also tried to get help from investment banks.
Amazon doesn’t have money-related worries as its parent company in the US sends goody bags whenever required.
Investors getting wary, looking to recover costs
Everyone is worried about the mounting losses and the profits playing hide-and-seek. Companies like Flipkart and Snapdeal are trying to minimise expenses to offset the trickling funds. While the Diwali sales helped most marketplaces (Snapdeal unveiled a new look and tagline), the November demonetisation seems to have undone all that.
Where is the money headed?
Investors are betting on online business to business firms, verticals and rental products. Companies like Accel Partners, Sequoia Capital, Lightspeed, IDG Ventures, and Inventus have given capital to Rentomojo, Furlenco (furniture on rent), and B2B companies like Ninjacart and Udaan.
Amazon has also put Rs. 160 crores in its wholesale business. Perhaps Jeff Bezos sees merit in the general theory that B2B has great potential.
Software as a service (SaaS) is also gaining popularity among investors. Says Naganand Doraswamy, managing director of Ideaspring Capital,
“I think VCs also recognized the need to have a good balance of technology and consumer start-ups in their portfolios. But for a stellar year, we need to see exits happen in this space.”
As the old adage goes, ‘one’s loss is another’s gain’, mobile wallets have gained through demonetisation. Mobile wallets and Unified Payment Interface (UPI) are gaining popularity. Paytm and Freecharge are witnessing an increased user base.
The tide is shifting towards businesses that assure quicker returns. Online commerce is very much alive and kicking, and has a good forecast. However, the rosy dream of spectacular business traditional marketplaces like Amazon and Flipkart might be on the decline.