Business

Are acche din for the Indian consumer about to start?

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Vivek Kaul

Half of the expenditure of an average Indian family is on food. In case of the poor it is 60% (NSSO 2011). This proportion comes down as income levels go up. Nevertheless, if food prices go up, the pinch is fell by almost everybody except the upper middle class and the rich.
This has an impact on consumption given that incomes don’t always rise at the same pace as food prices and overall inflation. People then cut down on their expenditure on other things leading to a slowdown in consumption growth.
In 2012-2013 and 2013-2014, private consumption growth was at 4.9% per year. In comparison this had been at 8.4% in the preceding five years. This was primarily because both food inflation and inflation as measured by the consumer price index(CPI) were at greater than 10% levels. As people spent more money on things they consumed on a daily basis, the growth in expenditure on non-essentials slowed down.
As Crisil Research points in a research note titled A Rs 1.4 trillion consumption kicker looms: “Sales growth in air-conditioners, washing machines and refrigerators nosedived from 18-20% in fiscal 2010 to 3-4% in fiscal 2014. Passenger vehicle sales plummeted to an average 6.2% in fiscals 2013 and 2014 compared with 29% in fiscal 2011.” This clearly tells us that many people postponed the purchasing things that were not essential for everyday living.
Things have changed in the recent past. The consumer price inflation for the month of February 2015 stood at 5.4%, well below the double digit levels. Food prices remained flat during the course of the month in comparison to February 2014.
Over and above this, oil prices have also fallen big time in comparison to where they were last year. On March 18, 2014, the price of the Indian basket of crude oil was at $104.47 per barrel. On March 16, 2015, around a year later, the price of the Indian basket of crude oil was at $52.11 per barrel or 50% lower. The entire fall in price of oil has not been passed on to the end consumers. The government has increased the excise duty on petrol and diesel. Nonetheless, there has been some relief for the end consumer. The retail price has fallen by Rs 12.3 per litre for petrol and Rs 6.8 per litre for diesel, since April 2014.
Crisil Research expects lower food inflation and lower oil prices to do the trick in pushing up private consumer expenditure growth: “The fall in food inflation and lower fuel prices will together yield additional ‘savings’ (or increase in spending power) of Rs 1.4 trillion in fiscal 2016 compared with nearly Rs 509 billion in fiscal 2015. Savings on fuel expenses alone will be Rs 300 billion, while on food it will be more than thrice that at Rs 1.1 trillion.”
Another factor that should help is a fall in inflation expectations(or the expectations that consumers have of what future inflation is likely to be). In the inflation expectations survey released by the Reserve Bank of India(RBI) for September 2014, the inflation expectations over the next three months and one year were at 14.6 percent and 16 percent.
In the latest inflation expectations survey for December 2014, these numbers crashed to 8.3% and 8.9%. A belief among consumers that prices will not continue to go up at the same rate as they have in the past, is very important to get consumption going again. Hence, a fall in inflation expectations should help.
What will also get consumption going is the fact that increasing disposable income will help people to borrow more, given that their capacity to repay will go up. As Crisil Research points out: “The household sector in India is under-leveraged, with the household debt (from bank and formal non-bank sources) to GDP ratio at just 12% compared with close to 80% in United States. Household debt from commercial banks and non-banking financial companies was nearly Rs 14 trillion as of March 31, 2014, including housing and educational loans. This is just 22% of household consumption. Moreover, most of the debt was accumulated in the last decade and more than 60% was taken to buy houses. If we exclude these housing loans – which do not form a part of consumption — then the ratio falls to 8%.” What this means that there is a huge scope for the Indian consumer to borrow and spend.
All these reasons will essentially ensure that in the financial year starting next month, the Indian consumer will make a comeback with his shopping bags. Crisil Research expects private consumption to grow by 7.8% in 2015-2016. “An increase in purchasing power led by declining inflation and improvement in incomes will ensure a gradual but steady pick-up in consumption demand next fiscal. At the sectoral level, we expect passenger vehicles sales to grow by 9-11% in fiscal 2016, up from 3-5% growth in fiscal 2015. Similarly, household appliances sales are forecast higher – television sales at about 9% compared to a 0.3% decline in fiscal 2015, air conditioners at 15% compared to 9%, and refrigerator at 10% compared to 5%.”
What can spoil this upcoming party for the consumer? The recent unseasonal rains in the Northern states will push food prices up in the coming months. As economists Taimur Baig and Kaushik Das of Deutsche Bank Research point out in a recent research note: “Disinflation in food prices have ended and it is more likely than not to expect higher food prices from March onward, especially given the recent unseasonal rainfall, which may have impacted some crops.”
Despite this negative, it looks like acche din for the Indian consumer are about to start.

The column originally appeared on The Daily Reckoning on Mar 18,2015

SBI’s property e-auction: Why not show same aggression to corporate defaulters?

George_Orwell_press_photo
The Motihari born George Orwell wrote a lot of sensible things during his lifetime. One of them was a book called Animal Farm. My favourite sentence in the book is: “All animals are equal, but some animals are more equal than others”.
More than a sentence this is a phenomenon which is visible at various points of time in the society that we live in. Currently this phenomenon is at play at the State Bank of India(SBI), which has made a decision to e-auction 350 repossessed residential and commercial properties amounting to a total of Rs 1,000-Rs 1,200 crore.
The repossessed properties had been pledged as collateral for housing and other business loans taken from SBI. Reuters reports that “many of” these properties “were put up as collateral by fledgling entrepreneurs.” They were taken over by SBI under the the Security and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act for non payment of dues.
“The SBI auction will be the biggest nationwide online sale to date,” Reuters reports. “We are now a lot more aggressive,” Parveen Kumar Malhotra, a deputy managing director at SBI, who leads a special unit managing stressed assets, told Reuters.
Commercially this makes immense sense and SBI should have been aggressive about defaults from day one. A bank is not in the business of losing money it lends out. It has a certain responsibility towards depositors whose money it is lending out. It needs to ensure that returns are generated on this money that is loaned to those who need it.
Nevertheless, India’s largest bank has not shown the same aggression when it comes to recovering money from big defaulters. In that sense the entire thing is very Orwellian—all animals are equal, but some animals are more equal than others.
As of December 31, 2014, the gross non-performing assets (NPAs) of the State Bank of India stood at Rs 61,991 crore or 4.9% of the total loans given by the bank. Of these gross NPAs of large and mid-corporates accounted for Rs 27,504 crore. The large corporates accounted for Rs 1,074 crore whereas the mid-corporates accounted for Rs 26,430 crore of bad loans.
The gross NPAs accounted for by large corporates has fallen from Rs 3,658 crore to Rs 1,074 crore between December 2013 and December 2014. On the other hand gross NPAs accounted for by mid-corporates grew from Rs 26,191 crore to Rs 26,430 crore, during the same period.
Gross NPAs from retail loans fell from Rs 4,103 crore to Rs 3,082 crore. Gross NPAs accounted for by small and medium enterprises fell from Rs 17,382 crore to Rs 16,427 crore. In fact, the gross NPAs accounted for by agriculture and international lending have also fallen between December 2013 and December 2014. Interestingly, the gross NPAs of every form of lending other than lending to mid-corporates has come down, data from the bank shows.
What this tells us very clearly is that the bank has been going aggressively after all forms of bad loans. The total gross NPAs have come down from Rs 67,799 crore or 5.73% of total loans to Rs 61,991 crore or 4.9% of total loans. But SBI hasn’t shown the same aggression when it comes to recovering loans from mid-corporates. Why is such special treatment being given out to corporates?
This is something that the Reserve Bank of India governor Raghuram Rajan had clearly pointed out in a speech he made in November last year. As Rajan said, India is “a country where we have many sick companies but no “sick” promoters.” “In India, too many large borrowers insist on their divine right to stay in control despite their unwillingness to put in new money. The firm and its many workers, as well as past bank loans, are the hostages in this game of chicken — the promoter threatens to run the enterprise into the ground unless the government, banks, and regulators make the concessions that are necessary to keep it alive. And if the enterprise regains health, the promoter retains all the upside, forgetting the help he got from the government or the banks – after all, banks should be happy they got some of their money back!”
And since banks can’t and don’t do much about corporate loans that have gone bad, they go with all guns blazing to recover loans from their smaller defaulters. As Rajan put it “The SARFAESI (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests) Act of 2002 is, by the standards of most countries, very pro-creditor as it is written. This was probably an attempt by legislators to reduce the burden on debt-recovery tribunals and force promoters to pay. But its full force is felt by the small entrepreneur who does not have the wherewithal to hire expensive lawyers or move the courts, even while the influential promoter once again escapes its rigour. The small entrepreneur’s assets are repossessed quickly and sold, extinguishing many a promising business that could do with a little support from bankers.”
This is precisely how SBI’s decision to auction 350 residential and commercial properties in order to recover bad loans is playing out. And George Orwell saw it coming.

The column originally appeared on www.firstpost.com on Mar 16, 2015

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek) 

The mess in public sector banks will not be easy to sort out

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The finance minister Arun Jaitley met the chiefs of public sector banks yesterday for a quarterly review of performance. Media reports suggest that among other things the banks were also asked to cut interest rates on their loans.
The Reserve Bank of India (RBI) has cut the repo rate by 50 basis points to 7.5% during the course of this year. Repo rate is the rate at which the RBI lends to banks. But banks haven’t passed on this cut to their end consumers.
There are multiple reasons for the same. Typically when the RBI increases the repo rate, the banks match the increase very quickly. But the same thing is not seen when it comes to a scenario where the RBI cuts the repo rate. Banks are normally very slow to pass on cuts to consumers.
As Crisil Research points out in a research note: “Lending rates show upward flexibility during monetary tightening but downward rigidity during easing. Between 2002 and 2004, while the policy rate declined by 200 basis points, lending rates dropped by just 90-100 basis points. Conversely, in 2011-12, when the policy rate rose by 170 basis points, lending rates surged 150 basis points.”
But there is a little more to it than just this. The balance sheets of public sector banks are in a big mess. As thelatest financial stability report released by the RBI in December 2014 points out: “PSBs [public sector banks] continued to record the highest level of stressed advances at 12.9 per cent of their total advances in September 2014 followed by private sector banks at 4.4 per cent.”
What this clearly shows is that public sector banks are not in great shape. The stressed asset ratio is the sum of gross non performing assets plus restructured loans divided by the total assets held by the Indian banking system. The borrower has either stopped to repay this loan or the loan has been restructured, where the borrower has been allowed easier terms to repay the loan (which also entails some loss for the bank) by increasing the tenure of the loan or lowering the interest rate.
What this means in simple English is that for every Rs 100 given by Indian banks as a loan (a loan is an asset for a bank) nearly Rs 10.7 is in shaky territory. For public sector banks this number is even higher at Rs 12.9.
Also, as the following table from Credit Suisse shows, 46% of public sector banks have a tier I capital of less than 8% and un-provided problem loans greater than 100% of their networth. 

62% of PSU banks have Tier-I < 9% and
Un-provided problem loans > 100%

Source: Company data, Credit Suisse estimates


What this clearly tells you is that banks many public sector banks do not have enough money to cover their losses. The public sector banks are hoping to recover some of these losses by cutting their deposit rates but staying put on their lending rates. And this leads to a situation where even though the RBI has cut the repo rate once, it hasn’t had much impact on the lending rates of banks.
Further, banks do not have enough capital going around. Take the case of Tier I capital mentioned
earlier. It is essentially sort of permanent capital that the bank has access to andincludes equity capital and disclosed reserves.As the RBI master circular on this points out: “Tier I capital consists mainly of share capital and disclosed reserves and it is a bank’s highest quality capital because it is fully available to cover losses.”
As the following table shows the average tier I capital of public sector banks is less than 8%. While this is the more than 6% tier I capital that banks are required to maintain under current norms, it is very close to the 7% tier I capital that banks will have to maintain under the Basel III norms, which need to be fully implemented by March 31, 2018.

Average Tier-I for PSU banks is less than 8%

This lack of capital has and will continue to constrain the ability of the public sector banks to lend and keep growing. The PJ Nayak committee report released in May 2014, estimated that between January 2014 and March 2018 “public sector banks would need Rs. 5.87 lakh crores of tier-I capital.”
The report further points out that “assuming that the Government puts in 60 per cent (though it will be challenging to raise the remaining 40 per cent from the capital markets), the Government would need to invest over Rs. 3.50 lakh crores.” In the next financial year’s budget the finance minister Arun Jaitley has committed just Rs 7,940 crore towards this. 
As analysts Ashish Gupta, Prashant Kumar and Kush Shah of Credit Suisse point out in a recent research note: “The amount allocated is almost the same as our estimate of total dividend likely to be paid by all PSU banks to the government in FY16. This indicates that government capital infusion going forward could be a function of only the profit generation ability of PSU banks.”
Also, by allocating a very small amount to towards public sector banks recapitalization, the message that the government seems to be giving the banks is that they are on their own. This in a way is good, given that the government clearly is not in a position to commit the kind of money required to recapitalize the public sector banks.
Nevertheless, many public sector banks are not in a position to raise money on their own, given the mess their balance sheet is in. As the Credit Suisse analysts point out: “Smaller/weaker PSU banks with limited ability to raise capital from markets will be worst affected as there is very little likelihood of getting capital next year as well.”
So what is the way out? The only way out for the government is to sell off the weaker banks. There is no reason that the government of India should be running more than 20 banks. It simply doesn’t make any sense. Mergers of the weaker banks with the stronger ones is not a feasible option for the simple reason that it will tend to pull down the well performing banks as well. 
Of course politically this will be difficult to implement. But that is the kind of strong governance that Narendra Modi promised the people of this country. It is now time to deliver.

The column originally appeared on The Daily Reckoning on Mar 12, 2015

Why all deodrant ads commodify women and diamond ads don’t

diamirza-wildstone

Vivek Kaul

This is another column which is different from the usual stuff that I write. Over the last few years I have been observing a few advertisements that tend to commodify women and few which don’t and have been wanting to understand, why things are the way they are. This column is a result of that.
Take the case of deodorant advertisements. These ads are like item numbers in films. They titillate and present women as one dimensional objects of sexual desire.
The only difference is that at the end of the deodorant advertisement the hero usually gets the girl because he has had the foresight to spray the deodorant on his well built body. The woman gets attracted by the smell of the deodorant and is hooked on to the guy.
One such advertisement was that of Wild Stone deodorant which featured the out of work but still stunningly beautiful actress Dia Mirza. As the formula for such advertisements goes, Mirza is seen getting attracted to a well sculpted male model who has applied the Wild Stone deodorant.
In real life it would be foolish to think that beautiful women are attracted to men on the basis of just a brand of a deodorant. But this ad, like most deodorant ads, is not targeted towards women. It is targeted towards men.
As brand guru Martin Lindstrom writes in Brandwashed –Tricks Companies Use to Manipulate Our Minds and Persuade Us to Buy: “in general women tend to more easily persuaded by ads that are more romantic than sexual… Men, on the other hand, respond to sexual innuendo and women in bikini.”
In fact when it comes to deodorants a lot of research and thinking has been done to arrive at these clichéd advertisements. As Lindstrom told me in an interview when I asked him what the ultimate male fantasy was: “A man sitting in a hot-top-spa with two naked ladies on each side – popping a bottle of Champagne. Unilever, the manufacturer of AXE discovered this very observation based on thousands of interviews and observations of men worldwide – realising that this very fantasy indeed seems global – and today explaining why AXE uses this very imagination as the foundation for all their ads.”
And that explains to a large extent why all deodorant advertisements are one and the same. Geoffrey Miller, a professor of evolutionary psychology has an explanation for this in his book Spent –Sex, Evolution, and Consumer Behaviour. He writes “Biology offers an answer. Humans evolved in small social groups in which image and status were all-important, not only for survival but for attracting mates, impressing friends, and rearing children. Many products are products are signals first and material objects later.”
Deodorant ads work on this evolutionary trait and tend to project the smell of a deodorant as a sexual mating signal from the male to the female. This is primarily because biologically the best strategy for a man is to be promiscuous and try and attract as many women as possible. “The more women with which he mates, the greater number of children containing his genes are possible… Thus, a man’s biological criteria can be simple: 1) she must be healthy; 2) she must be young; 3) she must be receptive; 4) and she must be impregnable,” writes Richard F. Taflinger in You and Me, Babe: Sex and Advertising.
While a man may want to be promiscuous it may not be always possible for him to do so because of societal pressures. But even with that a subconscious need may still remain. And that is what marketers who commission sexually loaded ads, play on. A great example is the chocolate man ad of Axe Body Spray, which had multiple women swooning over one man.
The other product that has taken on to sexually loaded advertising is the male ganji. A typical ad shows a guy wearing a ganji (these days chances are that this could be a filmstar) always getting the girl in the end. What is true about ganjis is also true about the male underwear.
An ad that went overboard with sexual innuendo was the Amul Macho underwear ye to bada toing hai. The ad showed a woman, who was probably newly married, going to the village river to wash her husband’s underwear. And in the process the other women around her were shown to get sexually turned on. The ad again played on the promiscuous nature of men even though it did not feature a man and ended up demeaning women through its one dimensional projection.
In fact automobiles are another area which tend to get sexually loaded advertising. This phenomenon is still to take off in India where most car advertising tends to concentrate on the family and if not the family, then the double income no kid couple.
But in the developed countries this mode of advertising has been around for a while. Lindstrom points to a Volvo ad showing a silhouette of a Volvo’s driver’s seat with its parking brake extending in the air – precisely like an erect penis – over the tagline, “We’re just as excited as you are”.
One thing that is common to this track of advertising is that they tend to project women as bimbos. As Madhukar Sabnavis of Ogilvy & Mather puts it “Do Axe commercials project women as bimbos, or are they a light-hearted take on the man-woman relationship? I would prefer to think it’s the latter…The judgement is subjective and qualitative, and so it cannot be cast in stone.” While the advertising industry might say that they are not projecting a stereotype, the evidence is clearly to the contrary.
But what about women? Why don’t they take to direct sexual advertising and tend to be swayed more by romantic advertising?
A few years back Tanishq released an advertisement featuring Adil Hussain and Tisca Chopra which had all the settings of romance—a couple in a restaurant with the candles lit, saxophone playing in the background and a man getting ready to gift a solitaire to his wife of ten years.
So why do these kind of advertisements work well with women? As Taflinger puts it “Women…have a far greater physical, physiological and temporal stake in producing children. This means she must be highly selective in her choice of men if she wishes to produce the highest quality children in her reproductive lifetime. If she selects just any man that comes along, she could waste all that time and energy that pregnancy and rearing require on a possibly weak or nonviable child. She thus aims her biological criteria at getting the best possible man. The sex act, and his participation, being so brief, doesn’t have to be of any particular interest to her. What is important is the quality of genes he brings and the help, if any, she will have while carrying, bearing and rearing the children.”
Now that does not mean that the sexual desires are strong only in men. As Taflinger explains “She also has sexual desires as strong as a man’s. However, she will often subordinate that desire. That is, she may desire a physically attractive man, but she will not actually have sex with him until he has satisfied more than physical criteria.”
Hence, women are more careful than men when it comes to entire ritual of mating. But that does not mean they don’t send out sexual signals. They do that, but not in a way as direct as men. The entire cosmetics business is built on this insight. As Miller puts it: “The whole cosmetics business is focused on helping women appear younger, more fertile, healthier, and thus better able to bear offspring. The evolutionary background of cosmetics is that in most primate species,sexual selection focuses very heavily on facial appearance. In assessing women’s ages, men apparently evolved to pay close attention to facial and bodily cues of being in the young-adult phase of peak fertility. So women could evolve to fake their fertility all the way from around age twelve to around age twelve to around age sixty.”
And how cosmetics help? “One way of faking fertility across a broader age range is to apply cosmetics that amplify facial fertility cues that peak in young adulthood, such as plump lips, large eyes, prominent cheekbones, smooth and radiant complexion, thick and glossy head hair, and minimal facial hair,’ writes Miller.
This explains why you will see more deodorant ads stereotyping women in the time to come. But you will never see a diamond ad doing the same.

The column originally appeared on The Daily Reckoning on Mar 11, 2015

E is now mc2: The changing face of Indian ecommerce

flipkartThis is a slightly different column from the ones that I usually write, given that it has no hard core economics in it for a change.
In February earlier this year I was in Bangalore at a literature festival, moderating a discussion titled old retail versus new retail. And this discussion along with some recent family experiences and reading leads me to believe that some interesting things are happening in the Indian ecommerce space.
I first discovered ecommerce when I started ordering books on Rediff.com(of all the places) sometime in 2007 or 2008 (I don’t remember when). I found the process very convenient and ended up finding a large number of books which weren’t available in book stores. During those days the discount phenomenon hadn’t really caught on.
While ordering yet another book on Rediff I discovered a small advertisement (if my memory serves me right) of a website which offered discounts on books. I had never heard of the website before and was sceptical ordering from it.
But the discount finally did the trick and I placed a order. The book was delivered a few days later. And that’s how I discovered Flipkart.com. In the days to come I discovered other book websites like Infibeam.com, Uread.com and so on.
All my book shopping moved online and I stopped going to bookstores like Oxford(at Churchgate in Mumbai), Landmark(at Phoenix Mill in Mumbai) and Crossword(at Kemps Corner in Mumbai). This is how things stayed in the years to come.
My tryst with Indian ecommerce was limited to buying books. Nevertheless, the Indian ecommerce scene has changed dramatically over the last six years. The kind of goods that are now available (and are being bought) online, was absolutely unthinkable six years back. I came to realize this after I saw my mother buying everything from towels to cup-plates-spoons from e-commerce sites, using the cash on delivery option. This gave me the confidence to buy a water filter online, which was delivered within 24 hours. I even ordered a pair of spectacles online recently. The process was extremely convenient.
Everything from furniture to electronics to shoes to clothes, is now available online. The feeling prevailing in 2008 was that people needed to touch and feel a lot of things before buying them. Hence, ecommerce would never move beyond selling books and a few other goods. But that is not how it has turned out.
So, the question is why are people now comfortable buying those goods online which nobody thought they would six years back? I feel there are two major reasons for the same. The first is of course price. Professor Rajiv Lal of Harvard Business School who has studied the retail business all over the world explained this to me in an interview when he said: “Basically the margins that are build up because some of our retail chain are inefficient. Think about the amount of inventory that is being held in the Indian apparel business. It is humongous. Stores are full of inventory and most of them don’t even know how much inventory they are holding. All that stuff is being reflected in the prices that we pay.”
The e-commerce companies don’t have to maintain huge inventories. If they manage to build up an efficient supply chain network, they can keep ordering goods as they go along. Hence, they do not to have maintain a large inventory like the offline players. This helps keeps costs down.
Also, like offline players they do not need to maintain a huge physical infrastructure like showrooms, godowns etc., to sell their goods. They can also buy goods directly from companies producing them and get a better deal in the process. These goods can be then directly sold to prospective consumers without having to go through an elaborate distribution channel.
As Lal told me: “even situations that we think that it doesn’t make sense for people to buy things on the internet because of the inefficiencies in the Indian retail system, the price is so appealing that people are willing to compromise on other things.”
Further, the second reason for the success of ecommerce companies in India is that they follow a very flexible return policy. This allows consumers to touch and feel the product that they want to order. Let’s say a consumer wants to order a pair of shoes. Instead of ordering just one pair, he can order four pairs, see which one fits and looks the best, keep that, and return the other three.
While this is a logistical nightmare for ecommerce companies it has become an important part of the business model that has evolved, allowing the consumers to touch and feel the product.
Ecommerce companies can reach all parts of India even where old retail does not. A friend of mine narrated an interesting story about ordering diapers online for his newly born child. The ones that he wanted were not available in the small town that he lives in.
In Bangalore while moderating the discussion, the CEO of an ecommerce company which specializes in women’s inner wear told me that they deliver to all pincodes in India. It wouldn’t be possible for an old retail company to have that kind of reach through physical stores.
Also, as people get used to ordering stuff online, the ticket sizes of what they order are going up. “The biggest solitaire we have sold was priced at Rs 20 lakh,” the CEO of an ecommerce company which sells jewellery online told me in Bangalore.
Interestingly, Indian ecommerce now needs to be rechristened as mcommerce. Akhilesh Tilotia of Kotak Institutional Equities makes this point in a recent research note titled e is now mc2: “India’s new internet users [are] coming primarily via mobiles…Flipkart said that ~70% of its transactions take place on mobiles across all categories (from electronics to fashion) and freecharge indicated that this number was ~90%.”
And in case you wondered why every ecommerce(oops I should be saying mcommerce) company keeps advertising their mobile apps, you now know the reason.
In fact, ecommerce companies now even want to set up physical stores. I came to know about this at Bangalore. Tilotia suggests the same in his note: “Online channel players (especially in high-value or experiential verticals such as furniture, jewelry, and beauty products) pointed out the challenges that they face in bringing the correct and complete experience to the customer. Issues such as the need to touch and feel a product, trust, dispute resolution, and handholding and demonstration need a physical outlet. Companies that started as online-only portals are now developing an omni-channel strategy.” Such stores should take care of the need of a consumer to touch and feel a product to some extent.
But that’s the good part. What nobody seems to be talking about is whether the ecommerce companies are actually making any money? Or when will they start making money? Right now, with money available at low interest rates in the developed world, private equity and venture capital firms are falling over one another to invest in Indian ecommerce. The question is for how long will that continue?

The column originally appeared on The Daily Reckoning on Mar 10, 2015