Falling Sales Despite of Rise of Internet Users

This year has not been a bed of roses for the start-ups across the country. A constant dip in the online sales has been evident throughout. It has been a constant struggle to figure out ways to make money, either through ads, by selling products and services or maybe content. Honestly speaking, nothing seems to work in the favour of the ecommerce companies. Now this is a serious issue which has to be dealt as soon as possible or else for all those tall claims by companies to attract the potential customers or users to the investors may seem worthless.

As per the Kleiner Perkins Caufield Byers report, (a Silicon Valley venture capital firm), there has been a 40% increase in number of Internet users in India. Though there is a surge in the number of internet users but we cannot say the same about online shoppers said investors and start-up executives. Although the huge internet base in India seems attractive but then making money from users is completely different route, they said.

According to executives at some of the top e-commerce firms, for the first time in many years, the online retail sales in April were at a lower level as compared to December of the previous year. Now coming to, the Gross e-commerce sales which included the discounts, it was at an annualized $15 billion in December, states the research and consultancy firm RedSeer Consulting.

As reported by Mint, Snapdeal and Flipkart, both haven’t seen much growth and are losing their market share to Amazon over the past 15 months. The E-commerce firms have started adopting a new route to raise fresh funds by cutting down the advertising spending and discounts. With the implementation of new FDI(Foreign Direct Investment) rules, online market places are prohibited from influencing the product prices. Thereby putting on hold the sales events, though things might change soon as they figure out a new method of discounting. 4G services by Reliance Jio Infocomm Ltd were supposed to boost to the  E-commerce industry but that will take time.

It won’t be an exaggeration referring to this chaos as a storm. Currently, e-commerce is in a perfect storm.

Rutvik Doshi, director, Inventus (India) Advisors, a venture capital firm said “It seems like investors and analysts have overestimated the growth of e-commerce.” Though e-commerce will definitely grow, but not at the same rapid pace that the investors expected.  With the growth of e-commerce, we can see simultaneously see the expansion of other internet businesses like advertising-led start-ups, he further added. .

“First, you have e-commerce and then advertising and then other businesses. Everyone has figured out by now that getting Indian Internet users to pay is very tough. Overall, I still think the Internet economy will grow fast, just not the speed at which people were expecting earlier,” Doshi said.

Flipkart and Snapdeal are yet to respond to the emails seeking answers and comment.

However, in an interview on 23 May, Flipkart chief executive officer Binny Bansal said that although the demand has been weak till now, yet he expects to see a significant leap in maybe the next six months.  

Mr. Bansal further added that there has been terrific growth in the last 24 months. The last 3-4months might show things a little differently but overall in the last 8 years, the market has seen a good growth. Innovation has paved way for high growth rate. And that Flipkart has changed the way cell phones were sold in the country. In the next 6 months one could witness many more such changes which will in turn lead to growth.

According to the spokesperson of the Amazon, the company has seen“tremendous growth in three years of our operations in India”. “In 2015, we grew by more than 250% YoY (year-on-year) and have grown over 150% YoY in Q1 2016 despite a larger base. Today, we are the most-visited e-commerce site and the most-downloaded shopping app in the country,” said the spokesperson through his email.

The report by UBS AG, a financial services firm that came out last April States that by 2020 online retail would see a huge growth, say about $48-60 billion from the $4.47 billion in the year 2014-15. There were speculations and assumptions that by June 2015, Reliance Industries Ltd would launch its 4G services. UBS didn’t respond to an email seeking comment on whether the firm was revising its estimates.

Now that investors have slowly seen signs of decline, lots of them have opted out of the projects that they had invested in. The estimated budget invested is about 9 million. The slowdown in funding has led the start-ups to try really hard to make their money from users through ads or by charging fees for the services they provide.

As per the documents by the Registrar of Companies, last year March, the sales generated by classifieds site Quikr India was Rs.24.78 crores. Though by then they had raised almost $200 million.

 “It’s not like there’s no potential for monetization in India but had we been in the West, the same 35 million users that we have would easily earn 3 or 4 times the revenue that we are earning in India,” said B.G. Mahesh, managing director and founder at Greynium Information Technologies Pvt. Ltd. He further said “Digital ad spending in India still needs to pick up for more monetization to happen.”

 “The difference is between users and daily users; to get real growth we need 10 times the current daily active users, because we monetize time spent on the platform,” said Farooq Adam, a fashion e-commerce app Fynd’s co-founder. “We’re hoping smart phone users become daily internet users once Reliance Jio launches 4G cheap data plans.”

Coming to education, even here the number of users who actually pay for the services that they use isn’t encouraging at all.

“We have had people request us to make our videos available offline because they only get to use the Net intermittently,” said Abhishek Patil, CEO, Oliveboard. “These pain points frustrate the user and make them give up on services. Though it is true that a larger number of people using the internet definitely mean a huge user base but for monetization we have to work upon the fact that people have to leave behind that hesitation to pay online for the service that they use.


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