Is a dot-com bubble shaping up in general merchandise retailing?

Internet business has definitely altered the way we shop but internet retailing will keep existing along with Brick and Mortar shops in future. Yes, “along with it”, as people will always have socializing needs as well as convenience of shopping online. I predict that brick and mortar shops will soon convert into something like life-style-shops, where people will come to have socializing time in an ambience and environment that will allow them spend quality time along with shopping goods with confidence of touch and feel. For example, there might be Mid-size or large cafes having a small-boutique store inside with a classy-touch so that women can shop while their husbands can sit down, sip a cup of exotic coffee or play games on a play station (A large-scale existing model of this is malls with shopping stores along with food and gaming stores; such models may change but will not erode away) and socialize with other people around in many ways. There can be ways to incentivize customers to socialize, network with people and refer their “experience” further; this can induce exponential demand. The whole idea is about creating user-experience because people don’t just buy products/services now…. they buy experience, whether its offline or online.


I would be delving into the internet retailing business in India to see if it’s another bubble-burst in making, more so for the top-three players that claim 70% of the market share in India viz. Amazon, Flipkart & Snapdeal and analyze who stand to win.  Among these three Amazon seems to be pacing much faster than other two. Each E-retailing company has its own strategy to increase its market share; What would help them to win would be business fundamentals rather than winning the “who-has-better-valuation-race” (based on some model, matrices and cash-flows in future….blah..blah …blah) While they are doing everything from price-slashing-discounts, Faster Delivery, exclusive tie-ups with brands, acquisitions to even backward integration in supply chain, the consumer is clearly able to get a different experience with every new move. Valuations can be subjective, over-optimistic or even completely off-the-track; what I would want to look at is whether this is again a bubble-bust scenario or is there some stability or sanity shaping in the online-retailing industry mostly driven by Amazon, Flipkart and Snapdeal.

As per industry report from various sources collated by Brand equity forum, Indian Retail Market is poised to grow at 12% per annum to about US$ 1 Trillion till year 2020 from US$ 600 billion in year 2015. Out of this B2C E-commerce is expected to reach US$ 102 billion by 2020 and US$ 220 billion (in terms of Gross Merchandise Value) and 530 million shoppers by 2025. Overall E-commerce market is expected to reach US$ 120 billion by 2020 supported by faster internet speeds and faster adoption of internet services along with increase in app-based customer base.


Brand equity

I strongly believe that any business proposition has to comply to established economic theories; Like how a country cannot keep printing its own currency at will, without substantial products, services & other fundamentals in the economy to back it up, any business also cannot be ascribed a value/assessed without strong fundamentals, products & services to back it up. Brand equity reflects a lot of these parameters as it also covers the perceived confidence of sellers and buyers. While recognition of a Brand as a performing brand, increasing market share and price inelasticity reflect a lot about brand equity, Online retailing industry is not yet  in a price controlling position (Can’t raise their margins, they don’t have any for that matter).

a) Customer’s Side


In B2C online retailing, Amazon has steadily increased its market share and has captured more than 1/3rd of the market-share, whereas Flipkart and Snapdeal combined have nearly 40% market share. If we talk about most used apps the numbers are still high for Flipkart at 34% along with 11% for Myntra and 6% of Jabong that it already owns. Amazon is installed on 21% of the mobile devices, whereas snapdeal on 16%. Noticeably Amazon seems to have picked up at the app-installation figures since November 2015, the time when Flipkart decided upon the strategy to provide mobile-friendly site for direct browsing rather than from app.


b) Seller’s Side

An important point that I would make is that assessment of any online retailer from sellers’s point is as important as it is from customer’s perspective. As per the results from a study (Neilsen’s E-commerce Sellers study Q1 2016-Jan-March) highlighted by Business Standard, starting point to assess the brand equity  is the brand-recall for most sellers (Amazon-25%, Flipkart-21%, Snapdeal-20%), second is the overall awareness (Amazon-86%, Flipkart-82%, Snapdeal-20%.). Providing a favorable platform to sellers increases the brand equity of an online retailer manifolds.


Tracxn Technologies Pvt. Ltd. Has its own list of Deadpool companies (online business) in India and has its own matrices (like shrinking team size, , suspended operations and decline in user traffic) to list them. This approach seems logical when we look at recent failures in e-commerce business like askmebazaar that suspended its operations due to lack of funds/Cash and  as reported, left 4000 employees jobless in August 2016 ,was looking out for a potential sell-out.  There have been many dead and walking dead companies in the Deadpool list of Tracxn. Looking at recent sell out of Jabong at much lesser a price than valuation (giving rise to a terminology called Jabonged) and downfall of askme bazaar there are new rounds of discussion on e-commerce bubble.

So simply building an online business & burning cash to achieve figures that help you to make it saleable (be it Plan A or Plan B) is a “well-planned-scam” under the daylight, atleast for the stakeholders (Investors, debtors, vendors, employees…..well not customer… they just have to download another app and shop like a boss). Though finance is fungible and the money can be rolled but there has to be enough cash to be rolled. A business that was not started with intent to run & sustain on its own constructs rather than just the mercy and so called loyalty of its customers is a scam as somebody is going to lose sooner or later. Abidali Neemuchwala, new CEO of Wipro (although from a different industry) interestingly said, in an interview for Mint, “I am not afraid about falling Revenue or profitability, I am excited about profitable growth, we will not buy revenue by sacrificing margins”. Most of the internet businesses focus on growth, expansion, revenues and await success that never happens. Simply put the business has to generate its own cash from margins. On contrary all online retailing companies (taken in this write-up) have negative profits.

In case of internet retailing there are lines of products mostly common across all companies (only Snapdeal, Flipkart & Amazon in this write-up) whereas services, value proposition & operations would definitely vary as per their own common or mutually exclusive strategies because each one of them is trying to differentiate & win maximum market share whether it is volumes, Revenues, Product segments etc. So to have a pulse of the industry and see which company is going which direction, we should look for their past & present operations as well as current strategies that have futuristic approach or scope for profits as well.


  • Flipkart has acquired Myntra and Jabong that have already been leaders in apparel retailing and it is going for strong private brand tie-ups (like how Myntra’s 25% revenue comes through Roadster, Mast & Harbour and Dressberry). HRX by Hrithik Roshan is a lifestyle & sports clothing brand (and some accessories) which is soon going to tie up with Flipkart (Flipkart is targeting the majority stake)
  • As per a report by A.T. Kearney and Google; fashion is expected to be dominantly, the largest product category in online retailing by 2020. Fashion segment offers much fatter margins viz a viz books and electronics and in fashion, private brand tie-ups reap larger margins than third party.
  • Flipkart is much ahead than everybody else when it comes to fashion segment (with 12 private brands of Myntra). As per a commentary by EY, having private brand tie-ups helps a company learn about merchandising and branding giving them better negotiation power with external brands. Flipkart is aggressively trying to improve in this segment as it offers fat margins and may help them become profitable.


  • Amazon is consistently improving on Revenue and market share and surpassed Flipkart in gross sales in July
  • Amazon is catching up well in Smartphone segment with Flipkart while it is already a leader in book sales.
  • Amazon is coming up with its fulfillment centers in Chennai, Coimbatore, Delhi, Jaipur and Mumbai with a total of 5.5 Million square feet storage space (adding to 2.5 million sq-ft. already existing over 21 centers in various states in Gujarat, Haryana, Rajasthan, Delhi, Punjab, Karnataka, Rajasthan, Tamilnadu, Telangana, West Bengal) for sellers which shall bring down their fixed costs. This strategy as per my opinion is going to have double impact for Amazon as it will get products at real lower rates (bringing down storage/logistics cost for sellers, also building closer association with them-80% of sellers on amazon use its fulfillment service) and consumers will keep getting lower rates on Amazon with faster delivery (two important factors in user experience). This strategy will have a strong backward integration advantage and strong geographical hold across India in supply chain.
  • Amazon Prime is a paid service that gives customer a faster delivery (1 or 2 days). This has seen success in US and other markets. But Indian consumers want more than just the faster delivery. However even a small part of the 50 million user base can be enough to give benefits.
  • Fulfillment center and Amazon Prime combined can help Amazon do away with discounts. Any company that can build a strategy around this idea will eventually see the sustainable success (profitable growth). Amazon seems to have taken a formidable position.
  • AmazonBasics (by cloudtail India pvt. Ltd.) brand selling headphones, charging cables, bags and various other accessories contributes more than 40% of its business and is set to expand it substantially this year (2016)
  • Have aggressive plans in private label offering in electronics accessories, groceries and fashion segments. If this happens they can take Flipkart head-on.


  • While GMV (Gross Merchandise Value-Value of goods sold on an online-marketplace company) has remained a dominant metric to monitor the growth, Snapdeal-CEO, Kunal Bahl said Snapdeal is focusing on net revenue rather than GMV. It has cut down discounts and cost of advertisements; helps fight cash-crunch situation.
  • Snapdeal has diversified portfolio wherein it has FreeCharge (mobile recharge), Shopo, Vulcan, Gojavas, Rupee power (online financial services platform), exclusively (luxury ecommerce site) etc. in its basket.
  • Shopo is a market place for sellers of handicraft products (with zero-commission in revenue, just a fee). It has seen good amount of success with one lakh sellers onboard in just nine months. Shopo can be a promising online shop for small businesses with logistics (connects to logistics companies) and payments tools (freecharge) embedded.
  • Vulcanexpress and Gojavas were conceptualized by snapdeal to compete with its rivals flipkart and Amazon as having in-house logistics is more economical for marketplace companies (it makes logistics reliable & scalable) but snapdeal was late to do this and has faced problems with these two ventures.
  • Freecharge has much younger customer-base 18 to 25 years (age-bracket), with 10 million app-install-base. Snapdeal has a app-install-base of 20 million and its customers belong to 25 to 35 years age-bracket.
  • While Snapdeal seems to have taken a diversified approach, success is yet to be seen in these ventures as well and focus will be shared on all such ventures, whereas its rivals are focusing to improvise on lesser diversified models.



The financials available for the online-retailing companies (on public forums and platforms) do not give a veritable insight. However, I have tried to track the fundamentals and strategies being followed by the major players in the industry.  While Amazon and Flipkart seem to have taken the formidable position of top-two players over last one year, Snapdeal despite its move to focus on profitable growth, is losing market share and its strategy doesn’t seem too focused. Snapdeal is trying to grab everything it can, Flipkart is much focused on its most profitable segment, Amazon has a sound approach of wooing both customers and sellers on its market place and is working towards weaning off the discounts. My personal opinion is that Amazon and Flipkart can be the last survivors with profitable growth. Snapdeal and other players may lose the game. It’s a boom-bust situation for everybody else than Amazon and Flipkart.

Disclaimer: This study is based on use of data from private company database, newspaper articles and internet-trends. The data collated through different sources like “similarweb” etc. have been duly credited to and are indicative in nature. The author doesn’t claim any ownership or the veracity of figures mentioned. The ideas that have been borrowed have been duly credited and other self-proposed ideas are inconsequential and meant only for the academic-engagements of the institute.

Author : Gaurav Chauhan

Senior Research Fellow, Great Lakes

Chairman Emeritus Reconnect 46 “Value Orientation to Power / Energy Sector”

My dear friends,

Life on earth has been created on so many exacting conditions.
1. The earth rotates on its axis at one thousand miles an hour. If it turned at one hundred miles an hour, our days and nights, would be ten times as long as now, and the hot sun would then burn up our vegetation during each long day while in the long night any surviving sprout would freeze.
2. The slant of the earth, tilted at an angle of 23 degrees, gives us our seasons. If it had not been so tilted, vapors from the ocean would move north and south, piling up for us continents of ice.
3. The sun, the source of our life, has a surface temperature of 12,000o F and our earth is just far enough away so that this “eternal fire” warms us just enough and not too much. If the sun gave off only one half its present radiation, we would freeze, and if it gave half as much more, we would roast.
4. If our moon was, say, only 50 thousand miles away instead of its actual distance, our tides would be so enormous that twice a day all continents would be submerged.
5. Had the ocean been a few feet deeper, carbon di oxide and oxygen would have been absorbed and no vegetable life could exist.
6. Ozone layer protects the earth from ultraviolet rays of the sun and a well-designed greenhouse enveloping the earth maintains the right kind of warmth for living beings to survive.
The above exacting conditions necessary for life on earth could not possibly exist in proper relationship by chance. There is not one chance in millions that life on our planet is an accident. In fact, it appears to be a deliberately designed system to perfect equilibrium.

Sustainability of Human Intervention in Nature’s Equilibrium
Mahatma Gandhi said “There is enough in nature for everyone’s need but not enough for everyone’s greed”. With the evolution of human beings and their multiplying population together with their intelligence and aspirations to command the nature, the question arises as to how much intervention is possible in the universe, in such an exacting relationship as described above. For instance,
1. How much we can intercept locally the nature’s hydrological cycle for irrigation and power, with repercussions on local environment, even though carbon-free.
2. How much fossil fuel we can burn for power generation and other needs since it has a very serious repercussion on emissions of carbon di-oxide which according to an estimate, if not brought down to 60% of the current level, may cause major climatic shifts and submergence of low lying lands by 2050.
3. How much we can afford emission of Chlorofluorocarbons (CFC) which have already started disrupting the ozone layer which may cause skin cancer, blindness etc. The seasonal hole in the ozone layer during Sept’1998 covered an area of 25 million KM2 (about 2.5 times the area of Europe). According to one estimate 60% of GHG is attributed to energy Sector.
4. How much technological development we can afford so as not to disrupt the nature’s supportive equilibrium. At what rate resource consumption and growth of population is possible keeping intact the regenerative and self-recycling characteristics of the nature besides carrying capacity and assimilative capacity of the Eco-systems.

Value Orientation
Human intervention needs value orientation in any sector of development. A 15-point charter of values is suggested below for power / energy sector.

1. Sense of Proportion: A respectable share of Hydro is a technical necessity of Power Grid. Present Hydro:Thermal mix of 20:80 should ideally shift to 40:60.
2. System Ethos: Voltage and frequency fluctuations causing heavy damage to power equipment and completely stalling the sensitive control equipment; speak poorly of power system ethos. Grid frequency is a critical aspect of power system operations and a function of demand and supply (when demand exceeds supply, frequency dips and vice versa). Grid frequency reflects the discipline and the stress in the system. The frequency variation for example should be brought down from 8% (48 Hz-52 Hz) at times to less than 1% (49.7 Hz-52.2 Hz) at all times. CERC now aims at 0.2%.
3. Techno-economic Sense: Techno-economically, Hydro proves several times favourable option compared to thermal keeping in view the life cycle cost, recurring fuel cost and its escalation, environmental cost and grid economy. Nuclear option exhausts our foreign currency reserves right from fuel (uranium) to technology.
4. Financial Acumen: Solar PV is the costliest option for a 50 MW scale, but it breaks even for a 50 kW plant and proves cheapest for an isolated 50 W system.
5. Sustainability: With the present rate of consumption, all oil and gas stocks would be completely exhausted in India before 2050. Fossil route cannot prime the growth which is sustainable.
6. Renewability: Ever renewed solar energy is radiating directly onto the earth, at the same time manifesting itself in several indirect forms such as wind, hydro, ocean thermal and bio-energy etc. This naturally recycled resource-base holds potential for perpetual power generation.
7. Energy Storage: Energy storage is complementary to intermittent renewables. With “Energy Storage” component, the load demand can be met much better, right from cyclic stability to daily demand pattern to even seasonal demands.
8. Environmental Compatibility: Environmental impacts net of mitigative measures place Hydro at 3 against 7 that of thermal on a 10-point scale. Carbon emissions of Hydro and Nuclear options are least compared to all other known options for power generation, considering the full energy chain. Their carbon emission compared to coal option is in the ratio of 5:270. Hydro:Thermal SO2 emission is in the ratio of 1:1000.
9. Interweaving of Technical and Commercial Values: Higher tariff for peaking power could be an attempt towards optimising technical and commercial values of power.
10. Security Concerns: Longevity of imported fossil fuels is extremely doubtful since globally the oil and gas stocks are going to exhaust fast with the rate of consumption growing with population and their aspirations. National energy security concerns call for indigenous and renewable options to be developed.
11. Optimizing Demand-Supply Gap: Present peaking power shortages in India could have been completely eliminated under the same MW installed (under the same investment) had the country gone for a judicious Hydro:Thermal mix. Demand side management and energy efficiency measures on utilization side can also narrow down the demand supply gap which at present is in the range of 2.1 % energy shortage and 2.6 % peaking shortage during 2015-16, in respect of present electricity connected consumers.                                   12. Smart Grid: A smart grid is an electrical grid which includes a variety of operational and energy measures including real time smart meters and other appliances, renewable energy resources, and energy efficiency measures. For instance, improvement of tail-end grid voltages can be achieved through Solar Panels. Computer intelligence & networking abilities and automation make it interactive right from generator to consumer. Optimization of energy use on real time basis with resultant economy and comfort are obvious benefits of smart grid which should soon be made available to all the electricity customers.
13. Decentralisation: It may be uneconomical to extend the grid to the remotest areas and therefore off-grid electrification with localised generation and distribution system viz. ‘mini-grid’ should be equally respected and encouraged. Stand-alone systems can also help in avoidance of transmittal of that much of power over long distance with attendant losses.
14. New Capacity Vs. Upgradation: Upgradation comprising renovation, retrofitting, uprating and modernisation is cheaper, faster and environmentally friendlier option for coping with the increasing demand than the new capacity addition and should therefore get priority in the power sector.
15. Conservation: We generate 4 units for ultimate utilization of just 1 unit of electricity, 25% being T&D losses and 66.7% being the end conversion losses in some crucial sectors like agricultural pump-sets. Energy efficiency measures should lead to conservation of precious energy resources.

Sustained Value Addition
R&D should expand to R&D3 meaning Research and “Development, Demonstration & Deployment”. Such a countenance would provide an orientation to take research activity right up to its logical end. R&D3 program would involve Research, Technology development, Engineering and Business Management strategies, all together with an integrated approach. India should see more and more innovations through the entire R&D3 chain in the 21st Century for maximization of indigenous value addition which would not only make the nation proud but would rapidly strengthen our economy.

Concluding Remarks
Rather poor “Techno-Economic-Environmental-Operational ethos” of our Power System calls for value orientation- a conscious introspection linking the present ills and shortcomings to the values and ethos and strategic envisioning of corrective measures. Values chartered above for producing a credible blue print of a formulated vision for India’s Electrical Power Sector can be of generic importance applicable to other sectors of development also, with due modifications.

Let us appreciate that value based introspection and corrective action planning are crucial for development.

Best wishes and Regards,

Dr. B.S.K.Naidu

BE(Hons), M.Tech., Ph.D., CBI-Scholar, D.Engg. (Calif.), FNAE, Hon.D.WRE (USA)
Chairman Emeritus, Great Lakes, Gurgaon, NCR, New Delhi, INDIA
Former Director General (NPTI & CPRI / REL), Ex. Director (REC) / Executive Director (IREDA)

No job is small or big, the way in which you do, makes it small or big (c)