Six real reasons behind AskMe shutting down

On  August 19, e-commerce company AskMe decided to shut shop which left about 4,000 of its employees  jobless. AskMe's principal investor Astro Holdings said it will appoint a forensic auditor to review the books of the startup's parent firm Getit. Earlier, a similar forensic audit was ordered by Rocket Internet in its investee firm Jabong.

A late entrant in e-commerce, AskMe thought it could make up for the lost time by tapping its massive database of 15 million small and medium enterprises (SMEs).

A variety of reasons, from weak technology to aggressive acquisitions, are responsible for the online retailer's failure:

1. Lack of focus: At the heart of the problem was company's lack of focus. AskMe tried its hand in almost every online segment - ecommerce, grocery, furniture, classifieds and payments - losing out to the more focused players in each of these categories. In these segments, it was neither a leader nor a challenger.

2. Needless acquisitions: According to experts, AskMe possibly tripped as its owners went about buying start-ups, minions in their segments, to build a mega start-up. First, they bought BestAtLowest, an online grocery business, and launched AskmeGrocery in May 2015. It was followed by the acquisition of online furniture website MebelKart. Back in 2014, investors were falling over each other to fund e-commerce start-ups, and so acquisitions were easy to fund. But, this is not the case in 2016.

3. Weak technology: Managing such diverse businesses requires a great deal of management bandwidth and expertise, both in technology and logistics. Multiple sellers, customers and former employees whom Business Today contacted for the story Walking the Tightrope said technology was the weakest link in AskMe.

4. Inconsistent strategy: Harminder Sahni, Founder, Wazir Advisors told Business Today before the website had shut down that AskMe was like JustDial, and then it decided to be like Flipkart, and then like BigBasket. "They have lost the plot. Their strategy is changing every three months. In an ideal situation, you change the strategy when you are exhausted. If they are adding new verticals, it shows that the previous strategy has not worked," he said.

5. Cash crunch: AskMe's parent company, Getit Infoservices' revenues more than doubled from Rs 23.4 crore in 2011/12 to Rs 51.2 crore in 2014/15, as per the Ministry of Corporate Affairs data. Net losses ballooned from Rs 54.3 crore to Rs 300 crore during the period. With such a high cash burn rate, it needed a fresh round of funding to keep going but Astro decided to pull the plug on funding. In May, Manav Sethi, Group CMO, AskMe India told Business Today that the company is on the verge of closing a big round with a new set of investors. But that never happened.

6. Single investor: According to experts dependence on a single investor has hit the company's ability to raise funds. This is because a big investor keeps tight control over the company and does not give new investors much say in decisions. Getit Infoservices Private Ltd is around 95 per cent owned by Malaysian billionaire T. Ananda Krishnan's Astro Holdings.

To read Business Today Magazine's full version of the story click here.