Slamming huge discounts and cashback offers from e-commerce players as "subsidies", Chairman of Manipal Global Education T V Mohandas Pai has said the industry may see a shakeout in the next two years, or "even earlier".
He faulted the business model adopted by e-tailers, which he said promotes growth without building customer loyalty. Biggies such as Flipkart and Snapdeal are just trying "to grow fast by giving subsidies, which is wrong because there is no customer loyalty".
"And in the last quarter we have seen. Amazon has overtaken them because it has superior technology and better processes. Snapdeal has fallen back," Pai, the former director of Infosys, told PTI in Hyderabad. "I think, a very good shakeout may come, maybe, in the next one or two years. Some of the weaker players will fall."
On the start-up growth scenario, Pai said: "Many of them will die because they are not competitive. They are being kept alive by dollars of money." According to him, the country currently has 18,000 start-ups creating a value of USD 75 billion, with three lakh people being employed in the space.
He projected 1,00,000 start-ups with USD 500 billion of value and generating 3.5 million jobs in 10 years. "Those who copy successful start-ups will die and many others would fall by the wayside. Top 10-20 per cent (of the start-ups) will rise and become major companies", he predicted.
On the Indian IT sector, Pai said the challenge is to change the business model to boost the digital economy and the market. "They (Indian IT companies) have to go to the new digital era. Some of them are struggling. That's the challenge. They should be doing more digital," he suggested.
Pai played down suggestions from some quarters that India's IT employees are "overworked and exploited". "When you have 18-20 per cent attrition (rate), where is the exploitation? It (suggestion) is ridiculous", he added.
Disclaimer: Mohandas Pai is an investor for YourStory.