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  1. #1
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010
    Posts
    18,473

    [EN] GMV is vanity, profit is sanity

    For almost a decade, gross merchandise value, or GMV, was the buzzword as tech startups gained popularity.

    The metric that Indian startups once swore by is now being blamed for all the sector’s ills

    Itika Sharma Punit
    February 27, 2017

    Till a few years ago, profitability received the step-child treatment from Indian e-commerce entrepreneurs.

    From 2013 to 2015, any probing on this metric would inevitably evoke sniggers and lectures from founders on how online retail was not about making money too soon, but about increasing the market share. On several occasions, the industry’s posterboy and co-founder of Flipkart, Sachin Bansal, proclaimed that profitability was neither the top priority nor a focus.

    Three years on, things are very different.

    Profitability has assumed great importance. Flipkart’s fashion arm Myntra has repeatedly told the media that it is looking to turn profitable by March 2018. If anything, other online players like Ola and Pepperfry, too, have set deadlines for this.

    And in the meantime, a metric that was the darling of Indian consumer internet companies till recently has seen a drastic fall from grace.

    For almost a decade, gross merchandise value, or GMV, was the buzzword as tech startups gained popularity. It was bandied about as a symbol of success and a proxy for revenue.

    Privately-held startups, not obliged to publicly disclose their balance sheets, flaunted GMV numbers to describe their size and success. Flipkart and Snapdeal, among others, competed for GMV-supremacy, sharing ambitious targets.

    GMV is often confused with revenue, though it is anything but that. For beginners, GMV is the total value of goods sold through a marketplace. The metric is used to value online consumer businesses in their early years when they aren’t making any substantial revenue or profit.

    GMV = sale price charged per item X number of items sold

    Revenue is the (small) commission they earn on the sale of that item.

    In short, it is a convenient metric used to window-dress even a loss-making, low-revenue business. Around mid-2016, though, it began losing its charm.

    Last week, GMV finally turned into the full-fledged villain.

    On Feb. 22, Snapdeal co-founders Bahl and Rohit Bansal wrote an email to their team admitting the mistakes they had committed in running the company. “Let’s remember—GMV is vanity, profit is sanity,” the duo said in the email.

    On Feb. 23, when home-stay aggregator Stayzilla announced its decision to suspend operations, GMV was again blamed. “In the last three-four years, though, I can honestly state that somewhere I lost my path. I started treasuring GMV, room-nights, and other ‘vanity’ metrics instead of the fundamentals of cash flow and working capital,” Stayzilla co-founder and CEO Yogendra Vasupal wrote in a blog post.

    The rise and fall

    Flush with funds in 2014-15, Indian internet businesses pampered customers with deep discounts, often subsidising buyers from their own pockets. It was a convenient arrangement for these cash-rich companies: bigger discounts led to more transactions, translating to higher GMV figures that could be flaunted before investors and the media.

    But as funding began drying up in 2016, discounts became unaffordable and GMV growth harder to come by.

    In April 2016, Gurugram-based Snapdeal declared that it was dumping the metric. “We believe that GMV is an important metric, but it’s an outcome metric. It’s not what you chase as a company,” Snapdeal co-founder and CEO Kunal Bahl said. A month later, rival Flipkart also abandoned it.

    Over the last year, the contempt for GMV has only deepened.

    Right or wrong?

    Some believe entrepreneurs made a mistake by depending too much on it. “GMV is a perfectly fine metric. That said, it’s never a good idea to rely on any one metric as a golden metric,” Kartik Hosanagar, professor of technology and digital business at University of Pennsylvania’s Wharton School, told Quartz in May 2016.

    Others, however, are completely opposed to it. “While startups did extremely well by using their public relations muscle to ensure that GMV becomes the industry’s darling, it’s no more than a cover up for numbers that aren’t good enough to be reported and may well point to the lack of a sustainable business model. GMV as a metric should never have been reported because it conveys absolutely nothing. It is absolutely flawed,” said Sanchit Vir Gogia, chief analyst at advisory firm Greyhound Research.

    However, even when Flipkart and Snapdeal gave up on GMV, all they did was to shift to other pointless metrics. Last year, the two companies said they had chosen customer-related indicators as their focus: Flipkart went for net promoter score (used to gauge customer loyalty) and Snapdeal for daily users.

    So, the new terms, too, hardly say anything about the businesses, Arvind Singhal, chairman and managing director of consulting firm Technopak, had told Quartz. “Are they saying that they were not focusing on customers so far?” Singhal asked. “It’s true that you won’t get business if you are not focused on customers, but giving importance to your customers alone won’t help either.”

    Prepared for profits?

    Snapdeal’s Bahl may have declared that profitability is what his company will chase going forward, but this shift from “vanity” to “sanity” may not be easy.

    Industry analysts and experts are divided over GMV.

    “Let’s keep our expectations real,” Gogia of Greyhound said. “Profits have been a part of internal discussions at several Indian startups for some time now. But they can’t talk about it externally because they hardly have anything to show. I don’t think that’s going to change in the near future.”

    “When the profits for companies like Infosys move even 3-5%, they face so much scrutiny. You think startups in the country have the appetite to face that kind of a close watch?”

    https://qz.com/918337/indian-e-comme...profitability/

  2. #2
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010
    Posts
    18,473
    Stayzilla will reboot its operations

    Yogendra Vasupal
    Feb 23

    I would like to announce today that we would be bringing to a halt the operations of Stayzilla in its current form, and looking to reboot it with a different business model.

    This has been one of the toughest decisions that I have taken so far but it is the right thing to do. The hardest part is saying goodbye to a perfect team that has accomplished a lot ...

    ...

    The last 11 years has been a great learning experience.

    The initial 7 years were all about having negative working capital, positive cash flow and a sustained ability to fund our own growth. Those were the only metrics we tracked. In the last 3–4 years, though, I can honestly state that somewhere I lost my path. I started treasuring GMV, room-nights and other ‘vanity’ metrics instead of the fundamentals of cash flow and working capital.

    ...

    New bookings on all Stayzilla platforms — website and app — are now suspended. Bookings with check-in dates on or before 28th February 2017 will be honoured. Any booking with check-in after that date will be cancelled and the guests will receive 100% refund.
    Nós tivemos um cliente que inventou a métrica "Promessas de Compra". Sério. Ao final de cada dia a empresa comemorava o número de interessados que diziam para os vendedores que "iriam comprar porém ...". As vendas efetivadas eram miseras e o empresário preferiu delirar. Veja quanta gente interessada! O produto é bom, os vendedores são bons, o preço está correto. Faliu.

    Lembra o caso de um conhecido que tem "comissões a receber" da DigitalOcean que daria para comprar uma Ferrari mas por enquanto apenas 4 dos cadastros resultaram em pagamento. Não apenas reforça que interessados que recebem créditos para experimentar "sem custo" não podem ser contabilizados como clientes, assim como não podem aqueles que pagam com garantia de ter a quantia devolvida. Gargantear números podres, mentir até ser verdade, pode até ser do jogo de alguns; o empresário acreditar nas próprias fabricações, é desastre certo.

    BTW

    Facebook, Google Try Again to Prove Ads Help Stores

    Cory Weinberg
    Feb. 07, 2017

    Facebook and Google are trying to keep their mobile ads businesses humming by executing what they’ve largely failed to do so far: prove to brick-and-mortar retailers that their ads drive customers into stores.

    Both companies say this will be a big investment year toward solving the problem. They’re marshalling data scientists and engineers, as well as building hardware like beacons or investing in mapping data, to make precise estimates about store visits. Both want to expand the measurement services to midsized and smaller businesses, which make up a bulk of their ad dollars. Convincing retailers, consumer brands and small businesses that mobile ads work is critical for them and other mobile ad businesses like Snap’s because more than 90% of commerce still happens offline, analysts say.

    https://www.theinformation.com/faceb...ds-help-stores
    Última edição por 5ms; 05-03-2017 às 05:47.

  3. #3
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010
    Posts
    18,473
    The industry tends to create fanboys out of those who have taken the VC route and enjoy fancy valuations not real revenue.

    Sanchit Vir Gogia
    February 26, 2017

    In the recent past, there have been numerous reports on startups either shutting shop or sacking employees in the hundreds. If one was to look a little closely, the genesis of all these announcements is an idea backed by a poorly constructed business model and injected with large sums of investor money. Irrespective of whether the Founders accept their mistakes or not, the fact is, the ride on the back of free-flowing investor money is over and hiding behind meaningless numbers isn’t going to work anymore.

    While startups did extremely well to use their Public Relations muscle to ensure that GMV becomes industry’s darling, it’s no more than a cover up for numbers that aren’t good enough to be reported and may well point to the lack of a sustainable business model. Pardon my honesty on this topic.

    Over the past 6–9 months, I’ve given numerous statements and interviews in the media on the back of our research to reiterate the point on GMV not being a tangible number that can be reported. It’s about time startups share more tangible numbers like Revenue, Profits, Cash Flows, NPS among others. Other than being real, these numbers eloquently talk about the strengths (and weaknesses) of startups. I’ve also spoken (enough and more times) on the need for startups to seriously consider process orientation being core to scaling — an issue that almost always gets less attention than it deserves.

    Being known for innovation is one thing and ensuring the same innovation leads to invoices over a sustained period of time is another.

    ...

    https://svg.world/2017/02/26/one-testimonial-at-a-time/

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