India is the third largest economy in Asia. In this economy e-commerce companies are still far from climbing profits.

Investors who invest millions of dollars in these companies are now pressuring good results, companies like Flipkart and Amazon are still aggressively spending a lot of money on advertising and attracting huge discounts to attract customers.

Amazon said that during the financial year 2015-16 it has suffered a loss of Rs 3,572 crore ($ 52.5 million) in India. This figure is double than last year.

The reason for this is also clear. Amazon has invested heavily in infrastructure and technology in India because India is second largest market for Amazon.

Nowadays the prevalence of e-commerce has increased greatly. Everyone is talking about this because investors have invested trillions of dollars in Amazon, Flipkart and Snapdeal, while this sector has not given any indication of earning profits so far in India. Everyone is anticipating that when will this sector be a profit maker?

Why is it that Amazon USA has made profits for eight consecutive quarters, but Amazon India has not given any indication of profit yet, while the parent company invested $ 2 billion in Amazon India.

This situation is because India's retail market is different in comparison to the US.

For decades, the United States is seen as a widely organized modern retail market. There are some leaders in every category of online business, which are quite occupied with market share.

Instead, the Indian retail market is operated by the Mom and Pop Store of 1 crore 20 lakhs family traders. This big difference can not be ignored.

America's modern retail marketing model is fairly large and spacious, with great stores on different floors of shopping malls, which cost more. There the owners of the shops have to spend a lot on the shop rent and other basic cost, maintenance of the list of online goods, and appointment of employees in every category for customer service. This list is quite long and the retailer has to make significant expenses other than the cost of the product before earning profits.

On the other hand, Amazon's spend on online model is very low because the products are kept in a highly automated warehouse, whose rent is much less than any good place. Apart from this, other expenses are also much lower. Consumers are solved online only if they have any complaint or question. Needless to say, Amazon's online business is relatively cheap compared to the physical retail market in the US and is therefore promoting better. The results are quite clear.

Now look at the scenario of India, which is exactly the opposite. In India, 90 per cent of family traders (mom and pop stores) occupy the retail market. These stores are operated by their owners themselves. They pay a lot less rent than the showroom in the mall. There are fewer employees in it. The salary of these employees is very low. These showrooms are used with very low margins. They contain fewer things and the goods are arranged when they are a customer. They have no online presence. They do not even have to work on digitizing and cataloging of online accessories. That's why their expenses are low and they work on very low margins.

Apart from this, there is an additional problem that according to government guidelines on FDI on multibrand retail, market place operator can not be seller. This means that they can not sell goods to purchase directly from sellers. They can only operate Market Place, which connects vendors to buyers.

So in the end a retailer or distributor sells goods on the online portal, but the current model of online commerce has increased significantly. There are several costs involved in picking up the product, keeping them in the warehouse, delivery, cash on delivery (COD) management and online and offline branding.

Who will fulfill these expenses? The capacity of the retail chain is not increasing with the existing online model, nor can any savings be made to fulfill these expenses. Venture Capital has to cover all the expenses and that is why continuous losses are being faced by online business even after decades of operation in India.

In short, it may be said that instead of adopting e-commerce models of the Western world and cutting and pasting, India needs to develop its own new e-commerce model, from which 1 crore 20 lakhs retailers benefit from it. Get a chance to pick up and reach the online buyers without spending much more.

We have to bridge the gap of the digital divide. It does not have to be extended. We need a model that can create more jobs and every participant on the retail industry has the opportunity to make profits. Only those few people should not get the benefit of this, who receive huge amounts of fund from international investors and who spend money in order to raise resources from their own interest.

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