Competition to get hotter for e-tailers: Mohandas Pai

India’s e-commerce players will witness tough competition in the next two years, and a section of them including big names may shut shop unless they create a sustainable business model, says tech investor T V Mohandas Pai.
“E-tailers are realising now they can’t go on using capital to subsidise consumers to give deep discounts and grow the topline because the moment they withdraw the discounts, the topline falls. So they have to create a sustainable model where the top line keeps growing because they give better goods and better efficiency at decent prices,” the former Chief Financial Officer, HR Head and Board member of Infosys said.
“The next one-two years, there will be very tough competition for e-tailers. We may see some people failing. Even big guys could fail, yes. It depends on who is willing to fund them to lose more money. They (e-tailers) have to cut costs, make them efficient and make their money go a longer way, and create sustainable models,” Pai said.
On the startup scenario in the country, he said getting money has become tougher for startups after the euphoria of last year.
“So, all the investors are telling startups to become viable, to demonstrate sustainability of the business model which is very, very good because last year there was euphoria, people were pumping in money,” Pai, a prominent angel investor said.
“Even startups go through bursts of over-optimism and bursts of pessimism. These are very natural. Last year valuations went ahead of value creation, this year venture capitalists are asking for value creation before they give valuation,” he said.
On prospects for startups over the next one year, he said good startups who have got a solid business and are working very hard would succeed; startups who are just fluffy and just throwing money would have a hard time.
“Startups need to become more efficient, increase customer delight, create revenue and sustainable business model, because 90 per cent of them are doing business, they are not in deep technology,” Pai, who is also Chairman of Manipal Global Education Services, noted.