eCommerce Blog

eCommerce Blog – Opportunities in US and India (by Darpan Munjal)

E-Commerce in India – Is it really Profitable??

Posted by Sachin.Singhal On May - 3 - 2008
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In one of my previous posts, I had extended the invitation to Commercewiki readers to contribute to this blog. This post is by one of the readers – Sachin Singhal who has done a great job in articulating the profitability situation of eCommerce in India. Thanks Sachin for your contribution – comments are welcome from everyone.

Yesterday I was listening to Avril Lavigne’s song “Tomorrow is a different day” and certainly believe it to be true when it comes to e-commerce industry in India.

No Doubt, Travel portals are outperforming in India. Travel alone constitutes 50% of Rs 4800 crore online market in 2007-08. Recently MakeMyTrip has touched whopping Rs1000 crores of turnover. It around 20% of total e-commerce market. It’s expected that travel portals will grow 65% annually. We are experiencing an exponential growth in this vertical. Are these companies making profit or able to break even? How much is the average cost of acquisition? Well these questions still lingers me. The average cost of acquisition in E-commerce industry is around Rs 1100. If the average order size on these travel portals is Rs 4000 and typical net margins are 6-7% (That too on the higher side), these portals will make only Rs 300 on average. That’s far below the cost of acquisition.But the big question arises how the Non-Travel Portals are performing in India? Read the rest of this entry »

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