Saturday, June 28, 2014

The "gross margin negative business model".

The recent article in ET on "How success of e-commerce start-ups are making traditional retailers rethink their model" was interesting reading, however, what was more interesting was the view of Mr. Biyani. On this one (the two points he makes) I agree with him.

The darling of everybody at this point in time is "the great ecom experience", however, the business viability & margins on transactions are the elephants in the room that are getting ignored. The gross margin negative businesses are not sustainable and are completely dependent on the VC funds for survival - a fact validated by a number of business leaders who were unable to raise a 2nd or a 3rd round and ended up shutting the once 'viable ecom' business.

Another article worth reading on the subject is Issues with Inventory models .  

Looking forward to see how the category progresses and the models that will finally sustain.  

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