Carcasses Of Startups Pile Up As E-Commerce Gets More Competitive

After 2015 saw the launch of massive number of startups led by the e-commerce and mobile boom, the obvious that people were questioning on a possible shakeout is increasingly becoming a reality for the burgeoning sector.

So far this year, several early stage ventures have shut down their businesses despite having raised funds in the past few months. Bangalore-based fashion etailer Fashionara has recently shut down operations, followed by a host of startups in diverse sectors within the ecommerce space that are staring at uncertainty.

Purple Squirrel Eduventures, an education-technology company, too wound up after massive cash burns. The Mumbai-based venture's key objective was to organise industrial visits for graduate students. frankly.me that was touted to be India's first video only social network too closed shop after raising funds in January 2016. The site was used by a host of politicians and celebrities such as Arvind Kejriwal and Javed Akhtar to interact with their fans through video blogs (which are now known as velfies or vlogs).

If the current situation is a precursor to what lies ahead, many startups operating in the country's e-commerce space are in for shakeup going forward amidst intense competition and a 'problem of plenty' in the sector today. Too many startups have mushroomed over the last 2-3 years. Not all of them have the bandwidth to scale up and take their businesses to the next level. Take frankly.me for instance. The venture failed to achieve a sustainable product market fit in the country.

"Sectors such as mobile and online services offer tremendous opportunity. The nature of the business here is such that on an average even if one out of 10 becomes a blockbuster, the purpose is served," Arvind Mathur, President at Private Equity and Venture Capital Association (IVCA) told BW earlier.

Lack Of Strategy?
Despite availability of capital, a bevy of early stage ventures in the last couple of months have had to take drastic measures to keep their bottonlines intact, while some have also had also to shut shop. The first phase shakeout in the sector emerged last year with ventures such as Dazo, SpoonJoy, Foodpanda and TinyOwl, among others deciding either trim their operations or actually shutting down shop.

Today, problems that most startups are facing are somewhat similar: how to get enough margins, how to be price competitive and how to keep customer acquisition costs low. While most of the firms are being successful in raising money, lack of a continuous revenue model is leading them to wind up businesses. Of these, a lot of ideas were built on the "me too model of business". Take online food market for instance. Most of them have similar business model and perhaps explains why only a handful are succeeding who are the "fittest".

Among some recent home food delivery startups that have closed down include ZuperMeal that was backed by chef Sanjeev Kapoor and Bangalore-based online meal service provider iTiffin. In other sectors firms such as Apparel rental start-up Klozee and Delhi-based Murmur app, that was used to curate content from popular blogs & news sites have also gone kaput.

Road Ahead
The startup community in India has undergone a massive makeover over the past one year paving the way for a large number of young, budding entrepreneurs to come forward and join in on the domestic consumption story. In a country like India, startups and entrepreneurship are the only solutions to growth challenges, job creation going forward.

"India is best positioned to capitalize on the entrepreneurship opportunity with the advent of the latest emerging technologies that help Indian professionals to play on the global stage with our technology skills, language advantage, large domestic market, ability to develop very cost-effective solutions for the price-sensitive consumer and a population that is wide and diverse from a social, economic and geographic location standpoint," says Ganesh.

India has a large and robust startup ecosystem with over 20,000 emerging businesses and 350,000 people employed. Going forward, the number of entrepreneurs is set increase with active participation coming in from today's students who are graduating from colleges wanting to chase their entrepreneurial dream rather than standing in queue of becoming jobseekers.