At a time when media reports are overflowing with news on e-commerce players claiming to turn profitable or targeting sales as high as USD 10 billion, two of India’s biggest business veterans are emphasising that e-commerce is a bubble that will burst sooner than later.
In a high-voltage session at the recently concluded India Retail Forum on September 16, Future Group Founder and Group CEO Kishore Biyani and Raghav Bahl, Former TV18 managing director gave a reality check to the fledgling e-commerce space.
The session was moderated by BS Nagesh, founder of TRRAIN, who set the tone with a debate on online vs offline retail.
“Whether the business is physical or digital, the principle remains the same. We are all ultimately in the business of consumption and their is no point running it without profitability and viability,” said Kishore Biyani.
“Our young enterprenuers are thinking very small, and this needs to be changed. E-commerce is creating businesses of less than Rs 1 crore. I find entrepreneurs coming up with ideas that can barely give them business beyond a time. What is the point of having a venture like this if you cannot build value or scale?” he asked.
Echoing this view, Raghav Bahl noted, “The e-commerce bubble is going to burst. History has been witness to this time and again. For the past 100 years, these bubbles have been created from the Tulips, to the dotcoms and now e-commerce.”
“Ultimately, businesses run on cash flows and profits and not on just ideas with high valuations, ” he added.
Speaking strongly about the need to ease laws for smooth functioning of business in India, both Biyani and Bahl agreed that the regulatory environment would have to be more conducive in the country.
“The regulatory environment is challenging and what the regulators bring is a ministerial mindset to regulation, which I believe is incorrect. Regulators need to understand the business, which is often not the case in India. Leadership also needs to be younger,” Bahl asserted.
Biyani said the single most difficult issue the retail industry is facing is ‘ease of doing business’. “There is a need for structural reform. For instance, we have 11 to 13 cases against us for using the term ‘mfd’ instead of manufactured on our products,” he said.