Cash crunch takes its toll on ecommerce, Buildzar shuts down

India’s broad-based ecommerce players have been on a downward slope this year after the highs of last year. Valuations have plummeted for Flipkart and Snapdeal, and follow-up funding has been hard to come by. Now, it appears the rash is spreading to niche marketplaces as well.

One-year-old Buildzar, a marketplace for building materials operating in the Delhi NCR (National Capital Region) area, is shutting down, says co-founder and CEO Vineet Singh. It raised US$4 million from industrialist Puneet Dalmia in January, tied up with leading vendors, and had plans to expand to other cities.

Around the middle of the year, Buildzar switched to business sales rather than consumers, but it still gained little traction. The team then struggled to raise a series A round – which was vital to build out its supply chain, logistics, and payment collection.

It will take at least three years for sellers to get aligned for doing business in a new way in the cashless ecosystem.

Finally, India’s sudden clampdown on cash in early November sounded the death knell for Buildzar. The real estate business in India has traditionally involved a big cash component. Sellers have preferred to circumvent bills to avoid paying huge taxes. This has become hard to do with the current demonetization drive in India.

“The cashless ecosystem will have a positive bearing on this business, but it will take at least three years for the ecosystem to settle in and for the sellers to get aligned for doing business in a new way,” Vineet told Techcircle.

Other notable players in this space are Industrybuying, Tolexo, Moglix, and Mjunction. But they operate more as wholesale sites for procurement of industrial supplies, including building materials. Buildzar depended on internet consumers, and that proved its undoing.

See: Can’t eat paper profits: India’s startup ecosystem has a vital cog missing