The need for working capital shoots up around the festive season because of the surge in demand. And to support this financial requirement, most of the ecommerce companies offer loan to sellers.
Fashion etailer Jabong recently tied up with FlexiLoans to offer working capital loans of up to 5 lakhs. Ecommerce giant Flipkart is expecting to disburse Rs 75 crore of loans ahead of the upcoming peak sales period.
But this time around, sellers are not too keen on taking out loans.
Not expecting this festive season to be as huge as previous years
A combination of reasons had lead to this decision by vendors.
Few of them are:
- Ecommerce slowdown
- Decline in ecommerce investments
- FDI restrictions
- Shift to profitability from deep discounting
Due to the above reasons, many believe that the sales of this festive season won’t be as high as last year or the previous years. That’s why sellers feel that signing up for loans won’t be a feasible decision.
“There has definitely been a slowdown in B2C (business-to-customer) e-commerce at the overall level. We have seen the growth of the vendors has reduced, however, we do not see many of them wanting to leave e-commerce. What we haven’t seen is really new vendors coming into e-commerce right now,” stated Gaurav Hinduja, co-founder of Capital Float.
Ecommerce leader Flipkart, which is losing out to rival Amazon has implemented several cost-cutting strategies in the last 3-4 months. While from the outside the marketplace appears to be excited about the Big Billion sale to be held in October, insiders have disclosed that the etailer isn’t expecting much this festive season.
While talking about Flipkart’s decision to fire employees, a source had revealed,
“There has been a marked slowdown in GMV growth, which hovers between $4 billion and $4.5 billion, a far cry from the $10 billion GMV projection; there are also no high expectations of a blockbuster Big Billion Sale this October.”
Sellers are already reeling under heavy losses
Indian Online Seller has published several news reports about how sellers are suffering heavy losses due to ecommerce firms like AskMe, Indianroots, Voonik, Snapdeal and Flipkart. Add to that, drop in overall sales as etailers are favoring selected sellers and the ones that use their services.
When the finances are tight already, vendors are not in the position to take on additional financial burden.
“Typically, vendors plan and take loans to book stocks from manufacturers and suppliers of goods in anticipation of a bumper sales during the festive season that begins in September. But this year, there has been a slump in vendors taking loans since April and the trend is expected to continue over the next six months.”
Will the sales pick up in October? Will heavy discounts come back? If they do, how will offline trade bodies and government react to it?
And online sellers, are you looking forward to the festive season? What are your expectations?