The businesses that give preference to profitability from day one and try to help suppliers and vendors grow too have a better chance of tasting success, said panellists at News Corp VCCircle E-commerce Summit 2017.
Founders of e-commerce ventures should aim to grow organically. Burning cash to acquire customers helps to a certain extent but at the end of the day it is about creating value for stakeholders, including investors, consumers, suppliers and employees, they said.
“If you are focusing only on gross merchandise value (GMV), you are not doing any good to anyone,” said Ambareesh Murty, founder and CEO of Pepperfry.com. “Also, it is your relationship with suppliers and vendors that will make all the difference in your growth. If you engage and help your sellers and vendors grow, they will scale up and your business, in turn, will grow.”
Sankalp Agarwal, CEO of Travel Triangle, said focusing on EBITDA and profitably is prudent than going after cash-burn-driven growth. “When we started the business, investors asked us how we will make it work since the industry is crowded with online and offline players. But the venture was EBITDA profitable from the beginning,” said Agarwal.
However, according to Chinmay Agarwal, co-founder and CTO of Jugnoo, whether one focuses on GMV or gross profitability depends on the need of the hour. “It also depends on the sector. There are sectors where acquiring consumers or suppliers by burning cash creates long-term value,” he said.
According to Sandeep Aggarwal, founder of Droom.in, e-commerce is different from brick and mortar businesses and to grow, the companies need to focus on fulfilment, delivering goods in the right condition. “Also, those who focus on last mile delivery will be more profitable or scalable in long term,” said Sandeep.
Often, a major chunk of investment the startups in the ecommerce space raise initially goes into marketing and advertising instead of product development, he added.