India's online growth story remains strong with key drivers being increasing Internet users, increasing smartphone penetration, faster connectivity, greater online penetration and a young demographic, says Sharat Dhall, president Yatra.com.
Why do you think the e-commerce bubble wont burst in 2016?
The Indian start up and e-commerce sector has witnessed a phenomenal year of growth in business and valuations as well as funding. The size of the funding raised by some of the large players has been bigger than ever and valuations have grown rapidly, leading some people to believe that it is a bubble that will soon burst. But these valuations are very justifiable. India is still undergoing a smartphone revolution which has driven Internet access in Tier 2 and 3 cities. Overall, while there may be some cases where valuations are ahead of performance and potential, there are a lot of very strong e-commerce businesses being built across sectors where the valuations are only likely to rise from here. There are a lot of very strong e-commerce businesses being built across sectors where the valuations are only likely to rise from here.
How long can e-commerce companies continue to be unprofitable?
E-commerce is still a very small part of the total market in most sectors and driving online penetration is a key goal for online companies. This inevitably means a higher level of spends and customer acquisition costs and hence a lack of profitability in the short-term. Businesses that are focused equally on building customer loyalty through superior user interfaces and customer experience will see high lifetime customer value offset the initial customer acquisition costs and emerge with a strong brand franchise and long-term profitability.
How will 2016 be different from 2015 for the e-commerce sector?
There is a lot of talk about future money flows slowing down and hence I think there will be a definite focus on improving efficiency of spends, improving margins, reducing costs and driving revenues rather than just focusing on growth. There have been a number of start-ups that have been funded in similar spaces and that will probably mean a certain level of consolidation is round the corner as well. However, the India online growth story remains strong with the key drivers being increasing Internet users, increasing smartphone penetration, faster connectivity, greater online penetration and a young demographic, and all this points to continued growth for companies in the online space in 2016.
Source: Computerworld India
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