Vertical ecom majors like Pepperfry, Nykaa feel the squeeze post Covid-19 outbreak, Retail News, ET Retail


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Bengaluru | New Delhi: Vertical online goods and services companies, including Urban Company, BookMyShow, Pepperfry and Nykaa, which do not feature in the government’s list of notified essential services, have been hit hard by the Covid-19 pandemic, with businesses plummeting to near zero in some cases.

This comes at a time when India’s leading online marketplaces Amazon and Flipkart have also seen a steep decline in sales, having shuttered their flagship categories, such as smartphones, electronics, and large appliances, which contribute more than 70% of sales. They are now largely attempting to meet the essential needs of customers.

“(In India) we have gone from 50,000 orders a couple of weeks back, to zero right now,” said Abhiraj Bhal, CEO of Urban Company.

The company will end this financial year at between Rs 225 crore and Rs 230 crore, an almost 100% growth year-on-year, but is steeling itself for a rough fiscal year 2021.

“Our view is that it will take a full year, at the minimum, for things to go back to normal,” he said.

Urban Company, Pepperfry, Lenskart, BookMyShow and Nykaa, which are collectively valued at between $5-$5.5 billion, are hoping their cash reserves will see them through most of calendar year 2020.

All of these companies have raised significant capital in the last 12-18 months from global financial and strategic investors.

Earlier this week, ET reported that the downturn caused by the virus outbreak is expected to trigger consumers to defer discretionary spending, with companies cutting marketing costs and discounts to increase their cash runway.

“Business is down almost 50% from what it used to be just prior to the pandemic,” said Ambareesh Murthy, CEO of Pepperfry. “All numbers are off the table right now. It’s impossible to project any GMV (Gross Merchandise Value) numbers right now. We are expecting, over the next two weeks at least, a 50%-60% drop in business,” he said.

India’s multi-channel vertical ecommerce companies have already shut down their retail stores and supply-chain operations.

“Earlier, we were trying to do deliveries where they were possible, but now with the central government’s lockdown notification, we are not. Our warehouse and delivery operations have both ceased,” Murthy said.

Pepperfry operates more than 70 physical stores across the country.

Emails to Lenskart and Nykaa, a significant portion of whose sales come from offline channels, did not elicit any response till the time of going to press.

According to Forrester research, the Indian vertical ecommerce space is pegged at about $10 billion, not including ecommerce services or sales recorded by ecommerce companies from offline channels.

Flipkart-owned only fashion retailer Myntra is also not accepting any new orders.

“In support of the PM’s announcement regarding national lockdown, we are temporarily not accepting any new orders,” the company said on its app page.

Nykaa and its subsidiary Nykaa Fashion continue to accept orders.

On the app, the company said that due to the current Covid-19 situation deliveries are likely to get delayed by two weeks. “We are trying to deliver your order ASAP,” the app notification said.

SoftBank Vision Fund-backed FirstCry, too, is accepting orders, but only pre-paid ones to ensure contactless delivery.

“To ensure your and our delivery partners’ safety, cash on delivery has been deactivated from our site temporarily,” the company said on its homepage.

FirstCry sells baby products, which can be termed essentials. The company, however, has a significant offline presence which has been impacted due to the shutdown.

Lenskart also put out an advisory on its portal saying it would only deliver essential eyewear and reduce its merchandise costs by 30%. “We shall deliver sunglasses post removal of the government lockdown. Home Eye Checkup and Trial facilities shall also remain suspended until then,” the company said.

Businesses like BookMyShow are embracing the lockdown and giving people alternative entertainment avenues.

“We never thought we’d be saying this, but success for us today is getting you to stay home,” said Ashish Hemrajani, CEO, BookMyShow. The company has launched a special series of online shows curated by Big Bad Wolf Entertainment, from March 25 to April 1 to keep users engaged.





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