It looks like e-commerce woes are far from over in the country. Several e-commerce firms like Flipkart, Jabong and Zovi are laying off employees in a bid to cut its costs, reports The Economic Times, citing multiple sources with direct knowledge of the development.
The report states that Flipkart has laid off 250 employees, which accounts for 10% of its entire workforce, while Jabong has reduced its workforce by a similar number, although the company apparently employs less than 1,000 employees at present. A Flipkart spokesperson told the publication that these 10% of the employees were non-performers and were let off as part of the annual appraisal process, while Jabong co-founder Pravin Sinha claimed that it has laid off only 20 employees till now, as indicated by the report. It also cites sources to report that Inkfruit has reduced its workforce by 80 employees, following its merger with the online private label Zovi.com in February 2013.
Over the past year or so, the e-commerce segment has been extremely volatile in the country, with several companies struggling to break even with its existing business models and finding it difficult to raise investments due to India’s FDI In retail policy which prohibits foreign investments in e-commerce.
This has led to several firms merging with other e-commerce ventures like the Zovi-Inkfruit merger or a bigger company acquiring other e-commerce businesses having common investors like Flipkart acquiring LetsBuy or Tradus acquiring BuyThePrice or companies shutting shop since they were not yet profitable.
This has also forced several e-commerce firms to change its business models in India – from direct-to-consumer retail to a marketplace model (since marketplaces are allowed under the current FDI norms). Among a few companies which has pivoted include Flipkart, Infibeam, Snapdeal, BuyThePrice, and Healthkart among others. In fact, the only major exceptions seems to be the fashion and lifestyle e-commerce firm Myntra and Network18-backed Homeshop18, although Myntra is apparently considering a hybrid marketplace model in the future. A part of the layoffs might also be due to a shift in model from e-commerce to marketplace.
As an aside, it looks like Jabong has also removed its board from its Gurgaon office. Shifting? (hat tip – Sunaina Khurana)
Do read our white paper explaining the Structuring of Foreign Direct Investments In eCommerce in India.
– A Rant On India And E-Commerce
– Sanjeev Bikhchandani: Not Enough Indian Capital To Support E-Commerce In India
– The Funding Environment For E-Commerce In India – K Vaitheeswaran, IndiaPlaza
– #NAMA Video: Binny Bansal & Sundeep Malhotra On Building An E-Commerce Business In India