BENGALURU: Snapdeal’s recent announcement of lay-off of its employees, in a bid to churn profits could just be the beginning of more job cuts, which is to follow in the e-commerce sector. Industry professionals and experts say more companies will get leaner in the coming months, as the sector is running entirely on an unsustainable model of cash burn.
While the intent was to create a convenient digital alternative for the offline market, e-commerce in India has turned its focus entirely on discount offers, making it non-viable. From an investor’s’ perspective, it only makes sense that some of these companies consolidate, to make it viable. This would mean more jobs cuts, pointed out Vivek Lohcheb, co-founder of Trupay.
“The Indian scenario for e-commerce was a bit different from how e-commerce developed in the West with companies like Amazon. Here, the industry faced over-competition and companies had to continue offering attractive discounts to retain customers. So eventually, in India, because of the competition, it turned out to be not a convenient option but a discount portal for customers.
Today, not a single e-commerce company is making profits. The more they sell, the more cash they burn. But, they cannot stop their sales. Now these companies will look at consolidation to create profit margins, which means that a significant amount of employees could become redundant,” he added.
Devesh Rai, CEO and founder of Wydr, said that leaner structures are inevitable. “Building a lean structure, which is able to leverage technology and generate greater cost efficiency at scale is a must for any new age technology company.
At Wydr, we have always believed in building a lean structure right from the beginning. In fact, ‘Frugality’ is one our Core Values which emphasises on assessing return on investment before spending on anything. Even at this early stage of our company, GMV per employee for us is at Rs. 15 lakhs per employee, which at scale will grow 50 fold. That is the kind of cost leverage we look at.”
‘Salaries will come down’
The salaries at which some of the companies were hiring, were mind-boggling. This will come down. There was definitely a need to bring this down. In the light of growing too aggressively, one can end up ‘over hiring’ too, the effect of which we are witnessing now, said Saahil Goel, CEO and co-founder, BigFoot Retail Solutions, which owns KartRocket, ShipRocket and Kraftly.
He noted that this was part of the growth and not the end of the road for e-commerce in India. “In a start-up environment, re-engineering is a given.
Start-ups are known to be game-changing and risky. At the same time, there needs to be some restructuring in e-commerce in general. The first few years have been spent in bringing consumers online, which has been an achievement, even if it was by inducing discounts or lucrative services.”