Online retailers like tweak business model

Online retailers in India are fast changing their business models in an effort to stay afloat and turn profitable . Over the last six months there has been a strategy change effected by many players as fund infusion slows down in an industry which was piping hot for investors till last year. Snapdeal, a daily deal site that offered discounts largely on services such as spas and restaurants, expanded into selling electronics, fashion and lifestyle products recently . FashionandYou, a flash site which started off with apparel and accessories, has now become a pure-play e-commerce entity selling everything from homewares to kidswear as it broadens the portfolio. Single category e-tailers , which sprang up by the dozen last year, are also now expanding their offerings with the likes of SAIF Partners-backed Firstcry, a baby products retailer , now diversifying into selling beauty products through Goodlife.com. "Single-category e-tailing was the most attractive proposition till last year but the cost of acquiring customers is very high compared to the return one makes from each transaction," says Niren Shah, managing partner, Norwest Venture Partners, a US based-VC fund which has invested in several e-commerce ventures. Specialty retailers have bled heavily acquiring customers often spending as high as 50% of their revenue. "We started off as a 'deals' company but now we are a fullfledged e-commerce entity. We have seen that after expanding our offerings the frequency of purchase has gone up significantly by one customer ," says Snapdeal's VP (marketing ) Sandeep Komaravelly, adding that the site expects to clock revenues of Rs 500 crore by this year end on the back of the restructuring. For FasionandYou, expanding into kids and home and electronics was largely aimed at cashing in on women who form almost 60% of its consumer base. "We were doing apparel and accessories and then we thought we could offer a greater variety to the fashion conscious consumer. The electronics that we sell is largely high-end ," says Asheesh Mediratta, sales director at FashionandYou. The founders of another fashion flash sales site Exclusively.in are now focusing their resources on private online fashion brand SherSingh. Most of the strategy changes are induced with plans to conserve capital and accelerate the route to profitability. A lot of funding was expected to come in for specialized e-tailers that mushroomed last year but VCs have tightened follow-on investments since then. Pepperfry-. com, floated by former eBay India country head and ex-Cadbury professional, Ambareesh Murty, along with another eBay executive, Ashish Shah last year, stuck to having multiple categories. "It was very difficult to start a venture in the horizontal space as everyone was asking us questions as to why we were not in the specialty play," Murty says. But today we are not regretting having a wider range of products, he says. "There are a lot of challenges like warehousing, procurement , last mile delivery in being a pure play e-commerce player which is not there if you are a deal site but you will see many deal sites go this way to gain volumes," says Gautam Sinha, director (technology & e-commerce ) at Indiatimes Shopping. Avendus Capital's recent report on the digital consumer sector said that mass merchant sites have the advantage of a higher lifetime value of the customer, due to the multiplicity of products which it can sell to the same person.