India’s E-commerce market is buzzing with startup activity as Internet usage skyrockets. But, as the market becomes increasingly saturated with startups, many Indian entrepreneurs say that they find themselves in the middle of a tech bubble, and that it’s close to bursting. We spoke to Quantified Commerce, a vertically integrated company within the beauty E-commerce market, on how building a bootstrapped company is the way to go if you’re trying to build a sustainable business.
There was a dot-com bubble in the United States in 1997, which burst between 2000 and 2002. The rate of Internet usage was rapidly growing in the U.S., as it is now in India. This lead entrepreneurs and venture capitalists to see enormous opportunity in the market. Sadly, thousands of startups overestimated that opportunity. Not many fledgling dot-coms survived the burst … except of course Amazon and eBay.
Since the situation in India so closely parallels what happened in the U.S., entrepreneurs fear a similar fate. A recent report that surveyed 170 entrepreneurs across 15 industries revealed that 65% of them feared that India was at the center of an expanding tech bubble.
Despite many thinking that it is in the center of a bubble, within the last two years, over 40% of Indian startups have shut down. That’s about 1,000 startups that closed up shop. Most cited a lack of funding. But, their failures may be because of operational inefficiencies and touting a high gross merchandise volume (GMV).
GMV is essentially a vanity metric. It is flaunted as a measure of success and often talked about like it’s the same as revenue. The GMV is the sale price charged per item multiplied by the number of items sold. The only revenue is the commission they make off the sale of the item. Many of these failed companies were relying on GMV instead of considering cash flow and working capital.
The E-commerce sector was among the hardest hit. Online apparel retailers like Fashionara and DonebyNone were two major casualties of the segment. But, despite the failures of some, there are still ample opportunities for many.
While China is steadfastly holding the number one position for the largest E-commerce market in the world. India is coming up as the fastest growing. The market is expected to grow 1,200% by the year 2026. This presents itself as an irresistible opportunity for the entrepreneurially-inclined. The fastest-growing segment is beauty and wellness, where Quantified Commerce is deeply-rooted.
Despite the failure of many startups within E-Commerce within the last couple of years, Quantified Commerce has been experiencing legitimate growth from year to year. They’ve experienced 100%-300% growth each year for the past three to four years. “Our focus is on
efficiency,” says Ryan Andreas, co-founder of Quantified Commerce.“We could be growing a lot faster, but we believe in profitable growth and we do not want growth just for the sake of growth like most vc-funded companies. We have not lost money in a single year of operation in the Indian E-commerce space, and we have reinvested all the profits. We are completely bootstrapped”
Andreas suggests becoming more self-reliant. “We are bootstrapped for a reason,” Andreas said. “The problem with a lot of these Indian start ups is that they’re burning through VC-funding without using their creative problem solving skills and ingenuity. India is a very different market and you cannot simply copy what happens in the west blatantly. Throwing money at problems is always the easy way out, but usually not the best idea.”
Another reason why Quantified Commerce has seen the success it has is because it’s basing its growth on real metrics as opposed to vanity metrics. “We don’t base our growth on things like the number of times our social media posts were viewed, or how many times we were tweeted about, or how many visitors we had on our website” says Andreas “Our growth is based on real-hard data like profits and revenues and customer feedback. We use lean startup on every part of the business model and test every idea before we invest in it.”
Quantified Commerce is run at peak efficiency, by streamlining the supply chain and focusing on peak performance in all their processes, including automation in the manufacturing phase. “Surviving a VC-bubble in India is possible, if that’s what this actually is, but startups need to calculate legitimate growth, be more efficient, and self-sufficient, for that matter.”
While a VC-funded bubble in India is still speculative, there are things that a startups can do to make sure they remain stable if the market takes a sudden downward turn. Basing growth on real metrics and not vanity metrics, and making your company as lean as possible will help startups survive a potential burst.