Goafest 2015: There'll be a bubble burst in e-commerce industry in 12-18 months: Ashish Hemrajani

Some of the e-commerce companies today are spending despite being EBIDTA-negative and their valuations are not credible, says Ashish Hemrajani, CEO, BookMyShow

e4m by exchange4media Staff
Updated: Apr 13, 2015 8:38 AM
Goafest 2015: There'll be a bubble burst in e-commerce industry in 12-18 months: Ashish Hemrajani

Day two of Goafest 2015 witnessed the most interesting session of Ashish Hemrajani, CEO, BookMyShow, who spoke on the changing face of the e-consumer. He also shared with the audience the tough circumstances that he went through to get to a point where BookMyShow is an EBIDTA-positive company. He explained why everyone should examine the valuation that some of the e-commerce companies in India have today. He also predicted through experience that there would be a bubble burst in the ecommerce industry in 12-18 months.

Hemrajani shared valuable insights into how difficult it really was to not only create but grow this e-commerce platform over 17 long years. Hemrajani further spoke about how he had already faced two bubble bursts and said that he expected another bubble burst of the ecommerce industry soon. “By 2001, the dot com burst happened and I had reached to 150 employees. In 2002, I ran out of money, Newscorp (that was an investor) couldn’t find a buyer with me. So I had to wind down my operations. It was easy convincing them to leave their jobs and join me. The toughest was when I took them to a park as I did not have even money to take them anywhere else and I had to tell them I had to lose them. So I let go 144 people and I retained 6 including an office boy,” he said describing the rough times for the company.

Though he had to move to a smaller office in Bandra from Prabhadevi, he started to see growth in 2002 as he left the whole call centre ticket booking service to invest in building the ecosystem. With no money, he put his house on mortgage and started building things for the entertainment industry. “I started putting software, started building CRM, I started running the call centres and home delivery on a cost plus basis. But what we always knew as the ecosystem changes, these scruffs and peaks will keep coming and now you are seeing this whole bubble of this dotcom boom. It’s a bubble waiting to burst and have a pullback which is very healthy as I have been through two of these,” he said.

He further said that his experience of bubble bursts had brought a lot of insights to him as he was looking at everything from end to end himself. One of this insights was that if you look through the consumer data, you can come to know everything about them. This was in spite of not asking a lot of information from the customer, but only through their buying behavior. Through this information, they learnt how to customize and improve their offerings to customers and as a result their services improved.

He shared a few numbers on where BookMyShow now stands. It gets 1 billion page views, 50 million visits, its sells 6 million (60 lakh) tickets a month and has sold Rs.1,700 crore worth of tickets as on March ended 2015 and he said are going to hit Rs.2,500 crore.

He further said though there is great headroom in the ecommerce business in India today there is also a reality which we need to be aware of. He said that there are only 18 million credit card users in this country. “So while we talk about ecommerce, this bubble, while there is a headroom, there are only 18 million people with credit cards. The total ecommerce population in this country is 45 million who have ever done an ecommerce transaction. Twenty million have done it on credit card and the rest 30 million at best are cash of delivery (COD). 50% is the rejection ratio on COD. That is the reality,” he said. He said that many ecommerce companies are not calculating the discounting and the returns in their financials. As a result of this the valuations of this are not credible.

He finally said that they are a lean company and that companies need to cut back at spending where it is not needed. Giving example of efficiency achieved through cutting back spends he highlighted how some of the other ecommerce companies today are spending despite being EBIDTA negative. He ended by saying, “More companies are dying of indigestion than starvation.”  

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