The question to ask about internet businesses today is: Are they truly creating artificial demand, like most critics claim, or are they in the grey area of building a new kind of revolution?
“You remember the time we would get these quirky bookmarks whenever we would order a book on Flipkart,” asked a friend. He was referring to a time when people refused to go online to shop. Today, the world is different. However, in the current scenario of markdowns, mass firings and eBay talks, most have forgotten the major shift that has taken place in consumer behaviour.
Digital now isn’t just a part of the economy; it is the economy. And while it entails limitless opportunities for some, it also means disruption and displacement for others. Customers no longer simply expect ease of use, they’re now expecting proactive experiences.
Vikram Gupta, Managing Partner, Ivy Cap Venture says,
“There is a fundamental shift happening in the way that consumers are behaving not just in India but across the globe. Anyone who is above the age of 45 today knows a time when he or she would make and receive trunk international calls. Today, the Gen X and millennials are used to a world of online interactions, messages, selling and buying. In the next 10 years they will be the ones surviving. So it is safe to assume that online is the way forward.”
An app not just brings your food, it also shops for you and even completes tasks for you. Yet, today, it is with a sense of wariness and scepticism that people are watching most of these startups.
The world of internal tug-of-war
It started around the end of 2015 and early 2016 when the funding started drying up and the Tigers began to slip into hibernation. The larger cheque sizes soon became far and few. One heard of delivery boys revolting, and the drivers protesting even today.
It’s all etched in the mind. How the delivery boys ransacked the Runnr office last year, or how the drivers of the cab aggregators broke into the Ola and Uber offices! How the cab drivers who earned close to Rs 1 lakh had their incentives slashed, and were asked to do more rides for incentives; or how the delivery boys who earned close to Rs 30,000 a month had to now do with Rs 18,000!
But even with their earnings slashed, the drivers and the delivery boys are making more money than they have ever made in the past. Thirtyone-year-old Srinivas, who currently works for Runnr, says,
“My first job was in a courier company. I was earning around Rs 10,000 a month, which wasn’t enough. One day, a friend recommended me to Runnr. I am glad I joined. In the first month, after working only for 15 days I got Rs 18,000.”
Delivery boys have an option of working either in the e-com or the foodtech delivery markets. There’s a big difference between the two, though.
“My experience has been that people are more keen to take up foodtech delivery rather than e-com delivery. These deliveries are usually on-demand and are single orders. Plus, the delivery guys do not have to carry too much weight,” says Dinesh Goel, CEO of Aasaanjobs.
New game, new rules
All sorts of questions are being asked in the wake of mass firings, lack of money and funding dearth at startups. Many are questioning the business models of startups. Will any of the business models work if discounting is removed? Have we created artificial demand? Where are the norms and rules of the traditional businesses? But then again, internet businesses cannot be compared to traditional businesses.
Today, businesses have created convenience. In an age where people are losing patience and have an attention span of a goldfish, internet businesses are giving us one of the most valuable things – time. The internet businesses in India are created by creating a lot of supply and convenience. It is after creating convenience and habit that a business model is created.
Initially, when Flipkart started in India, it came in with the view that somebody has to create this market. Unless you’ve experienced something it is very hard for the consumer to put a price to it. Says Vikram,
“The Indian market wasn’t ready to even start buying online. The only way it could be done was to let the consumer try it once, even at the cost of making losses, once the consumer appreciates the whole experience then they are ready to start paying. That is how most of the businesses have to go through the cycle.”
Physics of the business
People were definitely asking how the Flipkarts of the world could sell at a price that was significantly lower than the selling price. Vikram believes that it was a deliberate ploy to get people to come online and experience it.
While the model definitely isn’t sustainable, it is a cycle that every sector goes through. Business model by business model, you need to go through the cycle and there aren’t any shortcuts there. In the bigger picture, when people experience more online buying, other online models benefit. This is true for any business…