Why I suspended Oyethere Delivery!

This was an idea that I set out with while studying at NIIT in 1996, that one day I would be able to order pretty much anything on my computer and it would reach my doorstep within minutes or hours. That it took me 20 years to realize that dream is another story. Thus was born Oyethere.com, my hyperlocal ecommerce marketplace which delivered (yes, we are past tense right now) products to customers within 30-300 mins from the time of delivery. We started with Tender Coconut, being the only website in the world where you can order one, and moved on to Patanjali, Grocery, Household, Books, Baby products and more. We delivered special T-Shirts with pics of matinee idol Rajnikanth and his signature dialogues printed on them ahead of the release of Kabali. In Sep. 16, we delivered authentic eco-friendly Ganeshas (Clay Pillaiyar) for the Chathurthi festival. And then we shut down. Meanwhile, we got noticed on media, print, radio and Tv for our unique efforts. But potential investors remained myopic. A few of my friends came forward to support me with small sums of funding when I reached out to them around Aug. 2015. That investment came along for a year. We were not “burning” money; no full page Ads, no high-decibel paid digital campaigns and so on. We did not even hire the so-called elite and erudite Digital Marketing Agencies who sadly learn their business at our cost.

 Meanwhile, Swiggy, by far one of the most funded hyperlocal delivery companies in India reported a 65-fold increase in losses as per a report on Live Mint. Yes, you read that right. Here is a quick analysis of what they did;

Revenue for FY 2016: INR 23,59,00,000 (commission on transactions)

Revenue per day in FY 15-16: INR 6,55,278

Daily Transactions: Approx. 21,843 @ Rs. 30 per transaction as commission

Losses for FY @015-16: INR 131,18,00,000 (INR 131 Crores)

Which means, Swiggy spent Rs. 204 (Edited) to get a transaction!  This is Wow.

In the meanwhile, Oyethere was revenue compliant from day one. We made Rs. 5 per tender coconut from the roadside vendor. And 5-25% margin from our partners such as Patanjali, CDS Supermarket, Odyssey, Brown Tree & so on. We had between 1-4 delivery boys at the max and were delivering between 1-10 orders per day. We broke even our Opex from Day one. Absolutely NO CAPEX. I was spending frugally on Marketing offline & online, while also meticulously building PR & positive visibility all around. Sadly, we didn’t have backers. Those who promised the moon and beyond (on investments) backed out citing market conditions. We didn’t have access to popular and noteworthy Entrepreneurs & Angel Investors who funded startups out of Delhi, Mumbai & Bangalore.

On Nov. 1, 2016, I decided to suspend operations temporarily until we get a decent amount of funding. Talks are on currently with various people, but sadly most Investors neither understand Retail nor Investing. So there is a big gap between what I propose and what they understand. For sure, Oyethere will not make losses like others. No way I shall allow that to happen. But that, only when we get the next round of funding. Till then, I am on a break. 

FDI in Ecommerce

The Govt. of India has recently affirmed through a circular through DIPP that Foreign Direct Investments in E-Commerce companies is allowed upto 100%. There is cheer among a few although there are clauses and causes for worry for many. The notification says that 100% FDI is allowed only in companies that operate as a Marketplace and not on those who operate with their own Inventory. 

Let me clarify this with some examples;

Amazon, Flipkart, Snapdeal and PayTM are the big Four Marketplaces in India and so is my own startup Oyethere.com. In these models, the company doesn’t own any inventory and merely facilitates the sale of products between Retailers/Sellers and Customers. Marketplaces bring together the above-mentioned two parties and complete the transaction. There are several variations here too. For instance, some marketplaces merely connect the buyer and seller (OLX) and the money is paid by the buyer to the seller directly. A majority of them including Flipkart and Oyethere.com collect the money from the customer while the Retailer provides a Bill/Invoice to the customer. The Marketplaces then repays the Retailer with its Sales value after deducting commission, if any. However, there is a catch for the big two companies, Flipkart & Amazon. Flipkart has a subsidiary company by the name WS Retail which is the largest seller on its own marketplace. Similarly, Amazon has a 49:51 JV with Cloudtail which is owned by Catamaran ventures, which is in turned owned by the family office of NR Narayanamurthy, Chairman, Infosys. These two companies could face issues because the DIPP Notification on FDI states that no more than 25% of Sales can be derived from one seller in the marketplace. This could be a potential spanner in the scheme of things until these large companies find a legal way out.

The most affected ones would include the likes of ZivaMe (lingerie), Urban Ladder (Furniture), Hopscotch (Baby Care) YepMe (Fashion) which has Shah Rukh Khan as Brand Ambassador and is also an Investor, Myntra (Fashion) owned by Flipkart and many other small and budding Ecommerce players who have already received foreign funding or are in the process of raising one. These companies are legally not allowed to receive FDI more than 49% which would never be possible.

Having said the above, the biggest beneficiaries would be the offline Retailers like Viveks Ltd. (Consumer Durables) who have already been selling online through Marketplaces. Oyethere.com also enables offline retailers like Café Coffee Day, India’s largest café chain with over 1,500 cafes across the country, Brown Tree (Organic Food), CeeDeeYes Supermarket, Smiling Baby (baby shop) and many others to sell their products online through its portal thereby facilitating the sale between the Retailer and consumer. I am personally meeting several Retailers to convince them to come on board our startup Oyethere.com and benefit from the incremental business opportunity without spending a dime on Marketing or Business Development.

There is a deterrent to Marketplaces as well – they are not allowed predatory pricing, meaning they cannot unduly discount the prices of products and ensure that the prices are merely competitive. This brings a lot of trust on marketplaces like Oyethere to Retailers because they are sure that they, and not the marketplaces, have a final say on the final pricing of products.

One of the promises of the Narendra Modi Government in their election mandate was that they would not allow 100% FDI in Multibrand Retail. And they have stuck to their guns. However, Ecommerce is seen by the Government as an enabler of trade and not a threat and hence this move which is expected to benefit very large marketplaces like Amazon and Flipkart and newbie startups like Oyethere.com.

Look forward to some interesting days ahead in this space.