Smaller ecommerce sites are shutting, leaving online merchants in a quandary
New challeges for small etailers
It's bad news for the Indian ecommerce industry as smaller etailers struggle to stay afloat. After collectively racking up around $400 million in investor capital, in the past few months a clutch of smaller online marketplaces such as ShopClues, Craftsvilla, Voonik, Wooplr and Elanic are shutting shop, pivoting their business model or opting for outright sale.
Missing the target
Most of these web retailers were targeting non-metro shoppers and selling wares from smaller merchants. But with the growth of the Indian ecommerce market slowing and Amazon and Walmart-owned Flipkart dominating the industry, the second tier of etailers is now faced with an existential crisis. Investors and executives ET spoke to indicated that these businesses have struggled as they sold inferior products and had a weak supply chain and inventory, leading to high returns and close to zero customer repeats, making them unviable.
Among the best funded in the group, ShopClues, which built its business as a long-tail marketplace, is in the final stages of closing an all-stock sale to rival Snapdeal, as ET reported last week. ShopClues has in all raised $250 million from Tiger Global and and Nexus Venture Partners among others but has not been able to shore up equity capital since 2016.
The All India Online Vendors Association, a lobby group that represents small online merchants, said shipping costs are Rs 65 on average and reverse shipping costs another Rs 75. “A lot of the time, damaged products come in return shipments, for which sellers are unable to penalise consumers due to marketplace policies,” said a spokesperson for the grouping.
Parting of ways
The small stores, popularly known as the mom-and-pops, that have long relied on Amazon for a steady stream of orders will have to learn a new way of doing business on the web store. Rather than selling in bulk directly to Amazon, they'll need to win sales one shopper at a time. It's one of the biggest shifts in Amazon's ecommerce strategy since it opened the site to independent sellers almost 20 years ago.
Hands off the wheels
The vendor purge is the latest step in Amazon's “hands off the wheel” initiative, an effort to keep expanding product selection on its website without spending more money on managers to oversee it all. The project entails automating tasks like forecasting demand and negotiating prices which were predominantly done by Amazon employees. It also involves pushing more Amazon suppliers to sell goods themselves so Amazon doesn't have to pay people to do it for them.