Flipkart and Snapdeal are a decade away from making it big because Indians aren’t rich enough yet

Longer wait.
Longer wait.
Image: Reuters/Abhishek Chinnappa
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Internet companies in Asia’s third-largest economy are still 10 years away from becoming “mega-businesses” capable of making large profits, Google India’s top boss has predicted.

Indian consumers still lack the purchasing power that can help Indian startups earn significant revenues, the Economic Times newspaper reported Rajan Anandan, head of Google India and Southeast Asia, as saying.

“(India has a) very large (internet) user base but a very small addressable market for the businesses we have decided to build so far,” Anandan said at an event organized by IDG Ventures in Bengaluru last week.

“Every single Indian internet company that we have tried to build till date has tried to mimic a US or a Chinese business model, which actually have significantly higher households with disposable incomes,” he said.

In 2009, e-commerce companies like Alibaba began flourishing in China where the GDP per capita touched $3,800. In India, even seven years down the line, the GDP per capita is less than half of that at $1,581. And it would take India a decade to catch up, according to Anandan.

“That’s when we will be able to build companies that not just have large user bases but have large revenues, and most importantly large profits,” he said.

Anandan’s forecast comes at a time when valuations of India’s largest internet-based companies, including Flipkart, have been trimmed by existing investors who have begun demanding profits. Companies such as Flipkart and Snapdeal have also been finding it difficult to raise fresh funding, with investors negotiating hard for lower valuations.

For e-retailers witnessing a slowdown in sales as they go easy on discounts to chase profitability, Anandan’s forecast couldn’t have come at a worse time.