Physical stores will continue to beat e-retail in India: Biyani
29 September 2014
Even as the Indian media was going ga-ga over the visit of Amazon chief Jeff Bezos, organised retail leader Kishore Biyani of the Futures Group questioned the rationale behind investors committing billions of dollars to India's e-commerce sector.
"These days, the media only looks at e-commerce. However, you must also ask if gross margins of any such company are positive or not. They can survive only if their gross margins are positive. I'm not saying it is sustainable or it is not sustainable," Biyani said.
"They're getting private equity money in the hope that one day they'll have their own products and brands," he added, pointing to the fact that, most e-retailers act as marketplaces selling other companies' brands, or through exclusive tie-ups in certain categories.
Biyani is credited with making the organised retail sector in India a force in a country whose policies pretend to favour small grocers, but do nothing to make them more profitable.
Flipkart, Amazon's closest Indian rival in e-retail, recently raised $1 billion in a new round of funding at an enterprise valuation of $7 billion.
The Flipkart announcement was quickly followed by Bezos's dramatic entry into India waving a $2 billion cheque (See: Amazon to outdo Flipkart with fresh $2-bn investment in India).
Supporting Biyani's view, experts say that gross profit margins are low when retailers act merely as sellers of goods manufactured by others, but tend to increase when retailers sell their own brands.
Biyani told PTI that the online medium is "only technology for getting orders". He also dismissed speculation that he would launching a major e-commerce initiative soon.
"We're launching a promotion. It's not e-commerce," he said, reacting to reports of an imminent announcement of an e-commerce initiative.