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Indian ecommerce 'a game of investors'

News, 01 April 2015

MUMBAI: Marketing expenditure by India's ecommerce businesses will rise in 2015 as they chase new customers, but some observers consider the industry little over a year away from a major correction.

The ecommerce sector was a major contributor to growth in adspend during 2014 and is expected to do so again in 2015. As media agency Group M noted earlier this year: "There is increased competition in this sector and no dearth of funding."

That view is widely held by those in the industry. "Ad spends will definitely go up," according to Bikky Khosla, chairman of the e-commerce committee of ASSOCHAM and CEO of tradeindia.com.

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"To get new users for online buying, they [ecommerce businesses] will have to spend," he explained to Impact. "Today, about 32% of internet users are using e-commerce and buying online, but to get that number to grow, they will have to do some branding and advertising."

The CRO and founder of online fashion retailer Jabong concurred. "The industry will have to invest in branding and communicating value propositions that are present to their consumers," said Arun Chandra Mohan.

He took a broad view of the sector – large youth population, growing internet penetration, more use of mobile – and concluded that "definitely the future is bright and we are very excited to be in the space where we are".

But in the midst of all this optimism, Khosla sounded a note of caution, pointing out that the consumer's understandable desire for a bargain was being addressed by discounts and sales. "I don't know for how long this can continue because if this goes on, they will not be profitable," he said.

Investors have been pouring significant sums into India's ecommerce sector which has so far helped sustain a breakneck rate of growth. 


But one industry expert suggested that at some point in the coming 12 to 15 months one of the major businesses would be unable to raise further funding and then "the whole market will start correcting itself" with the search for customers rapidly becoming a search for profitability.

"It's a game of investors, not really of entrepreneurs," the anonymous expert said.

Data sourced from Impact; additional content by Warc staff