None of the e-commerce companies currently operating in India will make profits, according to K Vaitheeswaran, Co-founder of the country’s first e-commerce platform Fabmart.com. He made this observation in an interview to The Times of India on the eve of the launch of his book ‘Failing to Succeed, The Story of India’s First E-commerce Company’. He believes that Indian e-commerce players cannot fight with global giants like Amazon.
“Undoubtedly, no one (e-commerce firms in India) will make a profit. You are hoping to be the last man standing. You can never be the last man standing since there is always a person with more money than you. And 50 per cent of all customers that shop online do it for discounts and delivery. So, it’s a hard game to win. One thing you don’t want to do is fight with a global giant who will do whatever it takes to take your market,” he told the publication.
The likes of Flipkart and Snapdeal need to understand that they are a retail company, not a technology firm. Customers visit their shopping sites not because they have got wonderful features such as Artificial Intelligence. “For a retail company, the key is merchandising — selection, pricing and availability. You can have three or four areas where your selection is unique, which becomes the reason customers come to you. Whether that would be enough for us to succeed, it is hard to answer. It is tough to beat Amazon in technology. Some battles you don’t fight,” he said.
Vaitheeswaran calls himself ‘the father of e-commerce in India’. He co-founded Fabmart.com in 1999 and the firm raised over US$9 million from different VC investors. A few years later it rebranded as Indiaplaza.com. However, Indiaplaza was shut down in 2013 when Flipkart and Snapdeal were ruling the market.
Vaitheeswaran said that Indiaplaza ran into a series of incidents of fraud, duplicity and cheating, leading to the shutdown. He claims that Indiaplaza had committed investment but the funding never happened. “We were running out of cash and we were distracted with these series of events. And when you sign a term sheet, you don’t talk to others for funding,” he said.
He also said that there is a certain type of people that can start up in India — those from a premier institute, having worked for an MNC, gone to the US. If you don’t fit this profile, VCs think you are unfit to start up. All those who invest big bucks also come from the same background.
“And suddenly the whole funding system is dependent on these connections. For me, who never went to such colleges, it’s very hard to break in. You shouldn’t do pedigree investing. There are smart Indians outside these colleges. Picking a winner when you are starting a race requires hard work. Investors take an easy way out. All it takes to go to a certain college is to do well in the entrance exam,” he said.