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BW Businessworld

Selling Online Version 2.0

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Between 1998 and  early 2000, at the peak of the first dotcom mania, dozens of young and middle-aged entrepreneurs set up online shops and marketplaces. Several traditional companies also got into the game. There were booksellers, auction sites, shops dealing in specialised goods and people trying to make a business out of group buying. All of them had three distinguishing features. First, they were burning cash  — mostly raised from venture capitalists — to build their brands as they chased "clicks" and "eyeballs". Two, they were all selling stuff at massive discounts. And three, all were losing money hand over fist.

When the bubble burst, many of them shut shop. I remember meeting the senior management of an online retailer called Firstandsecond.com at the height of the boom. It had ambitions of being the Amazon of India. I also remember Businessworld doing an article on Baazee.com, which was following the eBay model. I think Firstandsecond.com flamed out — at any rate, no one talks about it. Baazee was acquired by eBay. Other players such as Indiaplaza limped along. Most group buying businesses of 1999 vintage closed down. The reason given at the time of the dotcom bust was that the country's consumers were not ready for online shopping.

Since 2011, we are seeing another boom in e-tailing. Dozens of new entrepreneurs and several old players are desperately trying to build and scale up their businesses. Some things have not changed — most of the new entrepreneurs have venture capital backing and all the online retailers bank heavily on discounts to attract customers and all of them are piling up losses, much to the consternation of their investors. Some things have changed — online shopping is now well accepted and is in fact growing exponentially. But as the war intensifies to woo the online shopper, how many of the current generation will survive? My bet is that many of the high-profile brands which are making waves will eventually close down as losses become too big.

In our cover story this issue, senior correspondent Shrutika Verma looks at the three basic models of e-commerce that have emerged and the companies that are following each of these models. And also, the state and the shape of the market in the e-tailing wars 2.0.

(This story was published in Businessworld Issue Dated 20-02-2012)