Premium products power online sales as mass-market hit by slowdown; ISRO grey cells fuel spacetech startups

Kevin Colleran

1 year ago

Ecommerce sales — excluding smartphones — have surged 24% in Q2. Industry insiders and research firms indicate that the growth in smartphones is driven by premium devices. This and more in today’s ETtech Morning Dispatch.

Also in this letter:
■ Data Bill may give govt power to lower the age of consent
■ Foxconn ends Vedanta chip JV
■ CarTrade to buy OLX’s India’s auto business

Ecommerce logs 24% Q2 growth as premium products click; slowdown hits low-priced items

Ecommerce sales volumes have grown about 24% in the April to June quarter, excluding smartphone sales, per data from ecommerce-focused warehouse solutions provider Unicommerce. Meanwhile, smartphone sales — which are about a third of all online electronics sales — have declined 20% over the past six months, per Counterpoint Research.

While certain segments like pharma and eye wear have grown at a faster clip, senior ecommerce industry executives said that there is an emerging trend of a slowdown in online sales of low-priced items across categories like fashion, appliances, and others.

Also read | Online sales likely outpaced offline in food, fashion in Q1: ICICI Securities

Smartphone segments: For smartphones, the premium segment, which comprises models costing over Rs. 33,000, had seen about a 50% jump in sales over the past six months. In contrast, phones costing under Rs. 12,000 had seen volumes decline by over 20%, with phones in the Rs. 8,000 to Rs. 12,000 range being the worst hit. Sales under the Rs. 8,000 price point also declined.

“Post-pandemic, the perceived return on investment on a phone has become extremely high, and people are willing to invest more”, said Neil Shah, VP, Counterpoint Research. Other factors such as increased sales of second-hand phones and wider availability of financing options have been pushing a chunk of mass-market buyers to upgrade to pricier devices.

Offline vs. online: “A large number of ecommerce customers are pretty fickle — they had been forced online by the pandemic and they went back to physical retail the first chance they got. The key here is that physical retailers correctly anticipated that return and offered enticing discounts, further driving that move. As a result, we’re seeing the correction in online sales’’, said Abhishek Maiti, director at market research firm 1Lattice.

Also read | As shopping spree slows, ecommerce not clicking as it did

Similarly, the share of online in total smartphone sales had fallen to 44.5% over the last six months, as opposed to a 47% in the calendar year ended December 2022, Shah said. In 2021, at the height of the pandemic, online sales comprised 53% of total smartphone sales, per Counterpoint data.

Spacetech startups harvest ISRO talent

Indian spacetech startups are all reliant on talent from national space agency ISRO. ETtech spoke to six such firms.

The upshot: Spacetech startups are increasingly relying on the ISRO for hiring grey-haired grey cells, both on a full-time basis and for consultant roles, given the expertise that the deeptech category requires. A spokesperson of the space agency confirmed the development to ET.

The six: GalaxEye and others such as Pixxel, Dhruva Space, Bellatrix Aerospace, Agnikul Cosmos, and Skyroot Aerospace offer a win-win proposition for both sides: the startups get domain experts who, in turn, receive attractive compensation packages from new-age firms backed by the likes of Google.

Quote, unquote: “Nothing like having people who have retired from the ISRO help us, because they have actually built rockets. The difference is quite perceptible, between someone from ISRO versus someone not from ISRO,” Agnikul Cosmos founder and CEO Srinath Ravichandran told ET.

Data Bill may give government power to lower the age of consent

The central government may lower the age of consent for children to as little as 14, as per a revised draft of the Digital Personal Data Protection bill of 2023, reviewed by ET. However, this would be applicable only to certain companies that can demonstrate their safe and verifiable data processing practices.

The age debate: Lowering the age for consent under the proposed law was one of the biggest demands of internet companies like Facebook and Google, as that affects their user base significantly.

According to a senior government official, the updated provision would grant the government the authority to permit the processing of the personal data of children only when it directly benefits the child. For example, in sectors like healthcare, where the child is the direct beneficiary, internet firms may process the data of children, but it cannot be used to serve ads or any harmful content.

The switch: Allowing children’s data to be processed in some circumstances is in variance with the draft released by the ministry of electronics and information technology in November last year. In that, the government had set the age of consent at 18, and mandated that data of any user below this age must have explicit parental consent.

While the government has retained the concept of cross-border data flow, in another switch, it has gone for a “blacklisting” approach in terms of countries with which the data of Indian citizens cannot be shared. Earlier, the government had adopted a whitelisting approach.

Foxconn, Vedanta pull the plug on chip JV

In a blow to India’s plans, Vedanta and Foxconn ended their joint venture (JV) to make semiconductors in India by “mutual agreement”. The government was quick to reassure that this would not dent India’s ambition to be a semiconductor powerhouse.

What happened? Taiwan’s Foxconn withdrew from a $19.5 billion (about Rs 1.5 lakh crore) semiconductor JV with mining baron Anil Agarwal’s Vedanta Ltd, as the venture struggled to onboard a technology partner to make chips.

Sources told ET that differences had cropped up between the two over this, and also that the government had suggested that Foxconn look for another partner.

‘Committed to India’: “Foxconn is confident about the direction of India’s semiconductor development, and (it will) establish a diversity of local partnerships that meets the needs of stakeholders’’, the Taiwanese company said.

Also read | Timeline of the $19.5 billion Foxconn-Vedanta chip plan in India

Meanwhile, Vedanta said it has “lined up other partners to set up India’s first (chip) foundry”.

Govt allays fears: Minister of state for electronics and IT Rajeev Chandrasekhar said on Monday that Foxconn’s decision to pull out of the JV has no impact on India’s semiconductor fabrication plans. The minister said that both Foxconn and Vedanta have significant investments in India and are valued investors who are creating jobs and growth.

Similarly, union minister of electronics and IT Ashwini Vaishnaw tweeted, “Both the companies Foxconn and Vedanta are committed to India’s semiconductor mission and Make in India program’’.

Partnerchip: In February 2022, Foxconn partnered with Vedanta to make semiconductors in India in a bid to diversify its business. In September, the companies signed pacts to invest $19.5 billion to set up a semiconductor and display production unit in Gujarat.

ET had reported on June 26 that the JV was on shaky ground and that Foxconn had started sounding out other Indian conglomerates as potential partners to further its chip-making ambitions in the country.

CarTrade to buy OLX India’s auto business for Rs 537 crore

CarTrade Tech, a Mumbai-based used cars platform, has announced it will fully acquire OLX India’s auto sales business for Rs 537 crore. The acquisition will be completed in an all-cash deal, the company informed the bourses.

Divestments and layoffs: Dutch investment firm Prosus last month announced its intention to find buyers for both OLX classifieds and its used-car listing business. OLX has already ceased operations in certain south and central American countries, and has pruned its headcount by 800.

As per the filing with the exchanges, Sobek Auto (the entity that houses OLX’s auto business) reported a turnover of Rs 1,110.4 crore for FY21-22, up from Rs 592.3 crore in FY20-21.

CarTrade financials: For the year-ended March 31, 2023, CarTrade Tech reported operating revenues of Rs 363.73 crore, and a net profit of Rs 40.43 crore.

CarTrade Tech’s shares ended 1.7% lower from its previous close of Rs 486.85 at the BSE on Monday.

Dunzo may cut more jobs to pare costs; defers 50% of June salary

Dunzo founder and chief executive Kabeer Biswas told staff in a recent town hall that their June salary would be delayed due to a cash flow issue related to lenders. In addition, the quick commerce startup may shed more jobs, sources told ETtech.

Dunzo’s difficulties: Sources said that the pending salary would be transferred by the middle of July. Dunzo’s difficulties underscore the challenges startups have been facing amid a funding squeeze and stronger demands from investors to conserve cash and extend the runway.

Cost conscious: “They (Dunzo) have been told to run a tight ship and continue to optimise on costs. Every quarter, the firm is looking to cut costs by 5-7%, but it could be more in the ongoing quarter’’, a source said.

Layoffs and rejigs: This comes after Dunzo fired about 30% of its workforce, or over 300 people, in April, as reported by ET, while simultaneously planning a shift in its business model. The April job cuts were the second round of layoffs at the firm in 2023. As part of the rejig, Dunzo had planned to close 50% of its dark stores after the April job cuts and run only those that are or can be profitable.

FrontRow shuts down: FrontRow, a learning platform for non-academic skills, has shut its operations. It is likely to return the remaining capital — around 20% of what it has raised overall — to investors after failing to attract a buyer, sources told ETtech. The startup, which has raised $18 million since 2020, had laid off 90% of its employees over two rounds to rein in costs amid a failing business model, before finally shutting shop in June.