Source |Rediff .com | BY:K Vaitheeswaran, co-founder of Indiaplaza
Online retail, if run smartly, needs negative working capital and, to achieve this goal, we had negotiated average 40 per cent gross margins at 90 days’ credit with most book publishers.
Flipkart, only an online bookstore then, started shipping large volumes by selling below cost and with free shipping.
Flush with early funding, they paid vendors in advance which destroyed any chance we had of continuing business with publishers.
With no funds, the online bookstore we had built over eight years with great passion and strong fundamentals rapidly went downhill.
Other categories were worse.
Electronics, our largest category by value, had low margins and lower credit periods which meant that, if we could not manage books, we could not manage any other category.
Recently, I read an interview by a couple of unicorn founders and learnt, albeit several years late, that back then I too could have requested for government protection since we were a vulnerable Indian start-up being undercut and destroyed by predatory commercial terms from competitors who were indulging in capital dumping backed by foreign funds. LOL!