Nikesh Arora, the former Google executive and President & Chief Operating Officer of SoftBank Corp stated that the valuation of e-commerce companies is ‘far ahead of reality’ may be the first indication that the bubble has reached its peak. Though the statement is self serving,
Softbank has recently moved out from funding startups to do more of late stage funding. This results in inflation in the e-commerce funding but the sector is set for another round of disruption.
This disruption is coming from many directions. Regulatory, legal, incumbent retailers, and even the ecosystem is fast changing with the emergence of new players.
The organised retail players saddled with expensive real estate and huge debt are already witnessing sluggish sales as consumers are fast moving online to meet their requirements. For instance, consumers visit shop, compare prices online resulting in loss of sales at malls. As a result of this, small brands are exiting malls to sell their goods only online.
The organised retail players, who invested heavily in building large malls, too, are also struggling. Experts say, that over the next three years malls will have to reinvent themselves. They will have to devote 60-70 percent of their space for food and entertainment segment and the remaining to accommodate high-end brands.
In a bid to help dealers avoid a squeeze on their margins, several brands have prohibited e-commerce companies from selling their products online. On the other hand, several new brands are bypassing the dealer or distributor route, and are selling their products through an online distribution model.
To stay in the competition, organised retailers are planning to roll out their own omni-channel strategy of delivering products at home. Some are even tying up with e-commerce retailers to deliver, like the recent arrangement between Snapdeal and Shoppers Stop. The old organised retailers are trying to ride on the logistic networks that e-commerce companies have developed.
Free delivery is something that is expected to change sooner or later, as it is the biggest cost factor for e-commerce companies. Currently, the companies are bearing all the cost of delivery while the consumer is benefiting from the same. The organised retailers are planning to use their stores as quasi-warehouses or logistics hub, and unlikely to offer free delivery.