Flipkart's Impact On The Indian Startup Ecosystem - ED | The Youth Blog | ED | The Youth Blog Flipkart's Impact On The Indian Startup Ecosystem - ED | The Youth Blog
  • Check out our new reading mode

    Flipkart’s Impact On The Indian Startup Ecosystem

    By

    December 20, 2016

    Rishank Dabra

    flipkart

    Flipkart has been devalued for the 4th time by Morgan Stanley to $5.6 billion, which is 40% lower than the value earlier.

     

    Recently, Flipkart has been devalued for the 4th time and this time it has been devalued by Morgan Stanley to $5.6 billion, which is 40% lower than the value earlier.

     

    Is the era of huge valuations of Indian companies coming to an end? Will we see the demise of the unicorn term in the startup ecosystem by 2020?

    It could go either way depending on how the existing and upcoming businesses base their business models on. So far, the consumer traffic from the brick and mortar segment has been driven by the following trends.

     

    Trends Driving E-Commerce

    Firstly, there has been widespread digital dissemination over the past few years with number of internet users in India increasing from around 15% of the population.

    Although the number of active users are close to 330 million today, the handsome growth in the same period has enabled rapid growth in consumers hopping on to the bandwagon of digital adoption and exploring the trends.
    Secondly, although the digital dissemination has grown but still around 75% of the population remains out of the ambit of the active internet population.

    Furthermore, if we look at the attraction of the e-commerce purchase it is primarily driven by the deep discount model and most of the firms are still operating on losses and attracted customers with value proposition as prices.

    So, in the initial years many firms despite operating on losses acquired enormous valuations. Thirdly, in the past 2-3 years we have witnessed a startup boom with a number of startups bringing new ideas and entering in the market such as Ola, Paytm, Zomato, Quikr, InMobi, Mu-Sigma, Practo and more are coming into the picture and experiencing rapid growth.

    So, this tech revolution drove sacks of cash from PE and VC firms towards them. Since everyone started investing in these firms so it created a multiplier effect and drove the valuations of these firms to gigantic proportions.

     

    Beginning Of Transformation Phase?

    So, these few trends did drive the consumers and change their buying behaviour towards e-commerce and now, with increasing smartphones dispersion towards m-commerce.

    flipkart-re-l

     

    However, with most of these firms operating on losses and following deep discount model there had to come a day when investors had to ask for returns as the startups were focusing on maximizing revenues and losses.

    And now, we have seen the investors locking their purses and with firms like Flipkart unable to attract investments were likely to see devaluation because they were in fact overvalued from the beginning. With many firms operating similarly, we are bound to see the trickle-down effect and see not devaluation but actual valuation.

    This is in essence because a sustainable business model is based on not just on prices and convenience as their value proposition but also other benefits.

    Real Experience With Virtual Touch

    Many people still want to experience the shopping when they go to purchase themselves. When people went to crowded places to shop it also fulfilled their need to socialize and be a part of different events.

    With e-commerce and m-commerce that has been taken away. As we saw recently the amazon’s idea of building robotized grocery store called ‘Amazon Go’ introducing in 2017, similar ideas could be introduced by Indian startups in their business models to attract and retain customers.


    Rishank is an MBA guide, currently staying in Mumbai. He likes reading and writing and loves challenging the status quo by voicing his eccentric opinions.


    Read On:

    Views presented in the article are those of the author and not of ED.

    Liked reading this article? Subscribe to us.
    In Economy