Spyker now has to do its own marketing in order to pull people to its website. With each transaction, Infibim earns a few basis points. On average, across the board, the company makes 0.3-0.4% of every transaction that goes through its ecosystem. Or charge a subscription fee, which costs more or less.
A merchant can select and use any part of Infibim Services. Accordingly a charge is made. Everything’s fine.
Infibeam provides this service not only to merchants but also to Amul and the government. To facilitate these transactions and own the entire universe of e-commerce shopping, Infibeam is making very smart purchases. It purchased CCAvenue and Unicommerce to enter its system. All this makes for a good story until Mehta complicates things up a bit. “We don’t sell the head, we sell the tail through these channels,” he says. When he says tail, he means unpopular products. This could mean anything from previous season wear to the phone that launched a few months ago, which many haven’t found. “There is a market for value in this country,” adds Mehta. And Mehta doesn’t bother with short sellers. “We want to deal with big brands and merchants.”
What is the impact on earnings?
Now, with all this in mind, let’s look at Infibime numbers once again.
Of the Rs 839 crore earned in FY18, Infibeam has raised Rs. 541.4 crores (1,79.1 million) came from IWS. This includes the proceeds from CCAvenue and the rest from Build a Bazaar. In FY17, CCAvenue earned Rs 163 million (Rs 24 million), and in FY16 it earned Rs 113 crore (.5 16.5 million). 44% growth per year. For the sake of argument, CCAvenue has a flat year in FY18 and can add less than 30% to its topline. It provided just over 200 crores (.2 29.2 million) to Infibeam’s top line. This translates into Build Bazaar, which generates revenue of Rs 340 crore (. 49.7 million).
Now, for the sake of simplicity, Infibeam has made 0.30% for every transaction. This means that the total gross merchandise value (GMV) of Infibim’s partner websites is Rs. 100,000 crore (Rs. 14.5 billion). GMV is the total value of goods sold on a platform and not the actual revenue that an e-commerce company makes from that sale. All this while selling tail.
“That number is too high,” the former Flipkart executive said. He asks not to be named because his current company is not allowed to speak to the press. “There is a golden rule in all e-commerce companies, the same way you sold a fashion or flap phone last year for five cents to the dollar.” That is, she only wants to buy it if the customer sees tremendous value in it. “And if you cut to 80%, forget the margin, you can’t afford the cost of logistics. You can’t sell tail in India, ”he says.
There are two other problems with the proposal:
Manufacturers don’t like holding
inventory Unsold inventory goes back to recycled headquarters. It’s rare for retailers, distributors or manufacturers to catch a dead list
- Now, go into the e-commerce business. Mehta uses the same principles.
- Sell the tail at Infibim.com, and this time, at no marketing cost.
- There is no discount. In spite of all this, Infibeam generated revenue of Rs 298 crore (.5 43.5 million).
It’s a lot of income.
There are companies like ShopClues that sell tail in India. And it is struggling to live up to its original promise. After spending Rs188 crore (.5 27.5 million) on marketing and advertising, it was able to generate revenue of Rs 180 crore (.3 26.3 million).