The Indian e-commerce sector has attracted both investors and detractors. The sustained Bull Run in this segment has given rise to at least six companies with valuations of over a billion dollars. Snapdeal, Flipkart, Paytm, Quikr, InMobi and OlaCabs have all touched the magic number.
While most e-commerce players, at least till now, have found raising capital to be relatively easy, voices raising concerns on their future are getting shriller.
Critics argue that a majority of the companies are neither making profits nor do they have a business model that will ensure profitability in the near future.
Without a clear strategy, they claim, it doesn’t make sense for investors to put in money, and they readying to pull the plug.
However, it would be wrong to write the epitaph of e-commerce so soon. The players may not be making money today but make no mistake. The sector is at an inflection point. Investors are pumping money into e-commerce companies today with an eye on their disruptive capabilities tomorrow.
When Facebook splurged a whopping $22 billion to acquire WhatsApp, the latter was not making any profits. After eight months of the acquisition, Facebook disclosed the financials of the deal, and even then WhatsApp was making losses.
The reason Facebook acquired a simple messaging service like WhatsApp was not based on financial numbers. It was because of WhatsApp’s ability to look into phone contacts of its users.
This disruptive feature drove the investment. The underlying interest point for Facebook was where WhatsApp could reach from its level at that time.
Similarly, BMW, Audi and Diamler are collaborating with each other to offer about $3 billion for Nokia’s mapping division – HERE. That the division has had a chequered past is no secret. For the last three years, it has been running into losses. But the troika have their sights on the future. They are betting on HERE’s ability to enable driverless cars, which will be the future of automobiles.
The situation for the Indian e-commerce players is not too different. Today Flipkart is an online store but the day is not far when it will become your bank also.
It can become your hotel reservation resource too. What stops Airbnb, Flipkart and ICICI Pockets (a virtual bank, which can be linked to any bank’s account and any number of accounts) to work together in a single application framework? A Flipkart with ICICI Pockets can enable you to not just do shopping but drive your experience around lodging, traveling etc.
And who hasn’t heard of Amazon. The e-commerce company started as a bookstore. Today it is giving one of the world’s biggest information technology companies, Microsoft, a run for its money. The investments into the sector are not about what it is doing today. It is all about the possibilities of tomorrow.
