It was ahead of its time and for a while it seemed to thrive against the wind. Launched in 1999, Indiaplaza.com was a pioneer in e-commerce and at a time when few things were in its favour - internet speed, payment avenues or online consumers - it barrelled on, surviving the dotcom bust in early 2000 and then the recession of 2008. In March 2011, it still seemed to be doing fairly well and market conditions were far more favourable than they had been in the past. According to reports (like this one which details the travails of founder Kothandaraman Vaitheeswaran), it clocked a GMV (gross merchandise value, which indicates total sales through the market place) of Rs 14 crore and revenue was around Rs 4 crore; its reported loss was somewhere between Rs 11 to 12 lakhs, which is par for the course in the e-commerce space. It also managed to raise $5 million from NEA-IndoUS Venture (now rechristened as Kalaari capital).
When new players enter the field, the old-timers are simply not worried enough; it's a form of fatal arrogance.
So, what happened?
At the outset, let me say that this piece is neither an academic dissection nor a detailed analysis of what could have gone wrong, but is a speculative piece intended to tease out some lessons for entrepreneurs from the fate of Indiaplaza.
1. First mover mindset
Indiaplaza was one of the first players in India's e-commerce market and over time carried with it what I call "first mover mindset" -- because the promoters have been in the business for so long, they think they know the market and a false sense of complacency sets in. When new players enter the field, the old-timers are simply not worried enough; it's a form of fatal arrogance. Indiaplaza had survived plenty of new entrants in a period of more than a decade so they perhaps did not take competitors such as Flipkart and Snapdeal seriously enough and rested on their laurels. The current LinkedIn profile of founder K Vaitheeswaran includes a statement - "It is satisfying to be referred to as the father of e-commerce in India" - that hints at such a mindset.
2. Not adapting to changing market dynamics
It's a no-brainer that the dynamics of the market are always changing, and have a far-reaching impact on businesses. The key is to be aware of these changes and shifts in trend and adapt or adjust practices and business strategies accordingly. However, from the looks of it Indiaplaza wasn't moving with the tide. For instance, as the market evolved and cash-on-delivery gained traction, Indiaplaza was slow to catch up, moving forward and backward on its adoption. It's vital that changing winds are deciphered ahead and adjustments made, rather than obstinately stick to an old point of view.
3. Lagging in adoption rate
New entrants were putting more emphasis on the technology, UI (user interface), backend, alliances, out of box ideas for marketing, et al while as Indiaplaza, barring a few changes in look and feel, was moving at a snail's pace compared to the new hares in the race. The rate at which they should have adapted to the new developments was pretty slow, if not missing.
4. Missing the forest for the trees
Somewhere in August 2012, K Vaitheeswaran was asked to name few competitors that he saw as a threat to Indiaplaza. You might be surprised at his answer: "I would say Landmark, Crossword, Shoppers Stop, Croma, eZone." He strongly believed that offline players would eventually come online and pose a threat. While that line of thinking is not entirely without merit, Flipkart and Snapdeal were at that time consolidating their position and were in a funding blitz. Vaitheeswaran's assessment revealed a colossal misunderstanding of the online market. Another example that gives us a peep into the dissonance between the market and Indiaplaza is Thinkdigit, a microsite created by Indiaplaza for technology products. During that time, platforms were getting consolidated into single offerings for customers, while Indiaplaza was going in a completely different direction.
In hindsight, one could argue that an entrepreneur who wants to stay afloat should perhaps try to scale down the business, in this case to the pre-investment mode...
5. The timing and amount of funding
Indiaplaza for years ran without external funding, and then one fine day, around $5 million was raised from Kalaari Capital. The market at that time was starting to explode in terms of funding -- both in valuation and absolute numbers, raising a pertinent question: was the amount optimum, did it bear relevance to the market dynamics. Was funding too late? Don't we have to factor in the overall market scenario while raising funds?
6. The challenge of follow-up investment
Funding in place, Indiaplaza went into an expansion spree, and as expected, the burn rate increased drastically and it was in the market again for funds. Two questions arise. Did they go to the market too late for funding again and did not factor in how much time it would take? Also, if the existing investor doesn't follow up its own investment (barring if their funds have dried out) raising funds is always difficult. In this case, Kalaari was making fresh investments elsewhere at that time. Indiaplaza approached about two dozen investors but nothing fructified into a transaction. In the current scenario, it will be interesting to see the decision of Info Edge to not to make further investment in Zomato will impact their valuation and fund mobilisation.
7. Excessive focus on finding investors
The biggest drawback of equity funding is that it becomes an addiction. When Kalaari snapped shut its wallet, Indiaplaza's went to close to around 25 investors, expending a lot of time and management bandwidth. Again in hindsight, one could argue that an entrepreneur who wants to stay afloat should perhaps try to scale down the business, in this case to the pre-investment mode where the burn rate was manageable. By sticking around longer in an ever-ripening e-commerce climate, the business could have been sold profitably. Alternatively, it's worth questioning if perhaps scaling down and finding alternative funding can happen simultaneously