THE CYBER WAVE: IS IT EVER GOING TO BE BRANDS Vs PURE ONLINE RETAILERS!!

THE CYBER WAVE





Going online is proving to be imperative for everyone selling anything from electronics to apparel as the ecommerce juggernaut gains speed in India...

 

About 40 minutes. That is all it took for Chinese mobile maker Xiaomi to sell 95,000 Mi3 phones in India through ecommerce site Flipkart in six flash sales, signalling the growing power of online retail in the country. The episode also proves that you can be the biggest retailer in the country or a smartphone maker trying to boost sales, but without a concrete presence in ecommerce, all your plans and strategies may not count for much."Xiaomi has challenged the traditional retail route in India,and passed on these overhead costs to the end consumer" said Manu Jain, Head-Xiaomi India.

Ecommerce in India, with its over 250 million internet users and 900 million mobile subscribers out of which Smartphone penetration is as high as 257 million, and all of this is only going to expand further. Realising this, even traditionally offline retailers such as Aditya Birla-led Madura Garments and Kishore Biyani's Big Bazaar are choosing to enter the online terrain.Revenue pie  from online sales via sites such as Flipkart and Jabong is on the rise.Brands like Indus League has started its own e-shops, where users are re-directed to online portal Fashionara for payments. Online Retailers like Jabong, Flipkart, Fashionara, etc has helped these Brands to save costs in creating their own back-end infrastructure.

Arvind Singhal, chairman of retail advisory firm Technopak, said the move by traditional brick-and-mortar players towards online is a good one. “It makes sense for (traditional) retailers to have their own portals instead of depending upon other marketplaces like Flipkart and Snapdeal as these are already cluttered with multiple brands.“ He said retailers would do well to follow in the footsteps of US retail chain Macy's and create differentiated merchandise for online and offline.Online retailing, both direct and through marketplaces, is expected to touch Rs 50,000 crore by 2016, according to ratings agency Crisil.

Gujarat-based Arvind Mills, which markets brands such as Arrow, Lee, Wrangler and Tommy Hilfiger in India, has started its online venture Creyate. The site lets users customize shirts and jeans online. “There is no point in being just another online marketplace where the competition is already so intense,“ said Tejinder Singh, chief operating officer of Arvind Internet. By next year, Arvind Internet is looking to compete with the likes of Myntra by launching a multi-brand online portal, where it will sell other brands as well.
The Tatas-led Croma set up its online store CromaRetail.com two years ago. It now earns revenue of Rs 1.5 to Rs 2 crore per week. Experts said such moves could give existing players, such as Flipkart, a run for their money in the coming years. “The Tatas, Biyanis and Birlas have already made investments of over $2 billion (Rs 12,000 crore) each in retail. They can garner enough cash pile to take-over online players such as Flipkart and Amazon,“ said Harminder Sahani, managing director of retail consultancy Wazir Advisors.


Some who entered the online segment years ago are reviving their Web strategy. Mobile retailer Sangeetha entered the online space eight years ago but re-launched its online platform last year. The unique value proposition that Sangeetha's online portal shopno47.com is that it delivers in 47 minutes or less.It has more than 250 outlets across the country. Currently, its website serves only Bangalore, but the retailer has plans to cover all of South India by next year.But cracking the online market isn't easy. Future Group's online retail venture FutureBazaar, launched in 2007, failed. “We were too early in the market with FutureBazaar back in 2007,“ said Vivek Biyani, director of Future Group, who is in charge of the digital business.

Ecommerce is also a factor in the offline expansion strategy in India's $518 billion (Rs 31.5 lakh crore) retail sector. Aditya Birla-led Madura Garments, which owns brands such as Louis Philippe and Van Heusen, has launched TrendIn, an ecommerce portal that supplies across India. Even small traders are now ordering on this channel. “The online channel is a big source of data collection.We learn great insights to what products are working in which geographies,“ said Shivanandan Pare, head of ecommerce at Madura Fashion & Lifestyle. “This helps us in our offline expansion.“

So these Brands are getting smarter. Till date they were complementing the pure play Online Retailer`s Business Model , but now they have also started exploring their own, individual ONLINE GTM (Go To Market Strategy). So competition in this space is going to be hot up for sure, and this time from substitutes also....Keep Watching & Keep Exploring!!

Ref: An ET Article

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BRAND EQUITY AGENCY RECKONER:2014

 Source: ET

         

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Has eBay Really Been A Laggard Or Does It Have A Flank In Its Armour!! Its 40% Stake in Snapdeal...

First Mover, But Not Prime Mover

Much before Flipkart, Amazon and Snapdeal even showed up on the Indian e-commerce landscape, there was eBay. But, today, eBay India is missing in the e-commerce conversation.

A first mover has the opportunity to craft a competitive edge. It can become a figure head, it can capture customers , it c a n erect entry barriers, it can make mistakes and correct them. In the happening Indian e-commerce space, such an association is usually made with Flipkart, which started in 2007. Except Flipkart, for all the ways it has been the marker of e-commerce in India, wasn't the first mover.Three years before Flipkart made a non-descript beginning as an online book store, there was eBay.in, the Indian subsidiary of the $16-billion US company. It bought local auction platform baazee.com for $55 million in 2004 and transplanted its American business model -an online marketplace where sellers engage directly with buyers, with eBay only serving as a hosting platform -to India.
It had a lot going for it: a profitable parent, a team that wrote the code for online marketplaces, a brand synonymous with this medium of shopping. Yet, in the ecommerce din today, eBay India is hardly in the conversation. The talk is, instead, centred around Flipkart, Amazon and Snapdeal, and their fund-raising, investments or valuations, while eBay, though growing at a rate that would be the envy of most companies, is trailing its peers in this high-growth sector.
In 2012-13, the latest period for which comparable numbers are available, Flipkart grew 476% in value of goods sold. By comparison, eBay's revenues stood at `81 crore for the year, against `51 crore the previous year -a growth of about 60%. Globally, in 2013, eBay earned 8% of the value of goods transacted as marketplace revenues. Extrapolating that to India yields a value of goods sold of around `1,000 crore in 201213. That is close to the `1,180 crore that Flipkart did that year.

But the others appear to have hit a sweet spot and seem to be breaking away from eBay. For 2013-14, Flipkart says it maintained that scorching pace, without disclosing numbers. In terms of unique visitors, in July, eBay trailed both Flipkart and Amazon, according to data from ComScore (See graphic).
“When eBay started in India, it was ahead of its time,“ explains a former country head of eBay India, on condition of anonymity. “The Internet user base was less than 10 million and few people were willing to shop online. However, things changed in the last few years and eBay has been surprisingly indifferent.“
The indifference this former country head, one of the six eBay has had in 10 years, is referring to is its reluctance to pivot with the times to capture more business from the 200 million-plus Internet users in India today, 10% of whom shop online. For example, eBay was the last to switch to cash on delivery, the preferred payment mode of Indian consumers, about three months back.

Ahead Of Its Time
This reluctance to change partly stems from its unique business model. EBay is an open marketplace (OMP) -a technology-based, asset-light model. It merely hosts sellers, of new and, in a small percentage, used goods, and connects them to buyers. EBay does not handle logistics beyond alerting its partners in this space via an automated process. When goods move from sellers to buyers, they don't pass through an eBay warehouse.
By comparison, its three main competitors -Flipkart, Amazon and Snapdeal -all follow the managed marketplace model (MMP), where they control delivery and returns, and don't do used goods. “We opted for MMP as the question of trust comes in OMP,“ says Kunal Bahl, founder-CEO of Snapdeal, in which eBay owns a significant stake and which could emerge as a more significant expression of its business interests in India in the coming years.
According to Mukul Arora, vice president of SAIF Partners, a venture fund, MMP helps control customer experience and is more suitable for India. “OMP is relevant in a mature ecosystem where sellers, logistics partners and buyers all are tech-savvy, and there are strong customer redress systems in place,“ he says. In 2013, eBay posted a net profit of $2.9 billion on an income of $16 billion, 70% of which came from US, Germany and UK, all mature markets.
Sanjeev Aggarwal, senior managing director of Helion Venture Partners, sees three phases of evolution in marketplaces. The first is inventory-led, where the e-tailer controls everything. The second is MMP, where the e-tailer does not own the products, but controls delivery, quality and returns. Lastly, there's OMP where the e-tailer is merely a hosting platform. India is now migrating to the second stage.A pure OMP is about a decade away.
Agreeing with that broad assessment, Nathani insists there's a case for OMP in India even now.“OMP is the right model for India as we are a country of merchants,“ he says. “I agree that not all 50,000 (sellers on eBay) have robust backend systems. There's a digital gap, which will be bridged as more people start using the Internet.“
Boston Consulting Group sees 500 million Internet users in India by the end of 2015.
“Given its model, eBay is not doing badly,“ s ay s Rachna Nath, leader, retail & consumer, PricewaterhouseCoopers (PwC) India. “The market still has plenty of headroom to grow.“ Adds Niren Shah, managing director, Norwest Venture Partners, who was also part of the original leadership team of Baazee: “Amazon has made an impact in just a year. It's not tough for eBay to come back.“
Too Many Heads
But to do so, eBay also has to align itself to the Indian market better and with greater continuity. Six country heads in 10 years have not helped it. The first of these was Avnish Bajaj, the founder of Baazee who left in 2006 to head venture fund Matrix Partners. In a 2012 interview to a portal, Bajaj said: “I think Flipkart is a clear winner (in e-commerce). They have done a great job. I am not sure about almost everybody else.“ An e-mail to Bajaj went unanswered.
Ambareesh Murty had the long est stint, between 2008 and 2011.He introduced PaisaPay, an escrow service for payments, and multiple products check-out. “The latter was taken globally by eBay.Before that, a customer could buy only one thing at a time,“ says Murty, who is now the co-founder cum-CEO of Pepperfry, an online furniture marketplace.
“In a growing market, you need consistency at the top. That was clearly missing here,“ says the unnamed former head of eBay India quoted earlier. Adds Nathani, 45, who has been at the helm since May 2013: “Long tenures (at least four to five years) help in building markets.“
Continuity is especially critical in a fast-changing market. “That is where an entrepreneur-driven company has an advantage,“ says Aggarwal of Helion. “E-commerce is a speed-oriented business and you have to empower the local head to take decisions and there has to be consistency. In this respect, Amazon, which came in late, has proven better.“
Aggarwal cites the example of cash on delivery, which is far from the global norm but is a necessity in India today. Murty says he was suitably empowered and eBay was focused on localising its business model in his time, an example of that being PaisaPay. “We are as empowered as any start-up and are empowered to localise,“ maintains Nathani.

Open Or Managed?

The competition is heating up.On July 29, Flipkart secured $1 billion more in funding. The next day, Amazon promoter Jeff Bezos allocated $ 2 billion to its India business without specifying a time frame. “The competition is too intense,“ says Pragya Singh, associate director, retail and consumer, Technopak, a consultancy.
“They (eBay) need investments that go into pushing the market.“
Nathani feels eBay is very much in the mix. “We are adequately funded from our parent,“ he says. “We are shooting for big, bold goals like having the largest number of sellers.“ He cites the example of the partnership eBay entered into in April with the Confederation of All India Traders (CAIT), which represents 60 million traders. “This increases our reach,“ adds Nathani.
“The key is how many (sellers) are active,“ says Aggarwal. His estimate is that less than one-third of sellers who sign up on marketplaces are active. “In India, retailers are not technology-savvy and they don't have smart connectivity,“ he adds. For example, data from the central bank shows that only about two million retailers have credit card swipe machines.
Meanwhile, both buyers and sellers point to the relative disadvantages of the OMP model in the Indian context. “eBay says logistics is automated,“ says Pooja Kapila, founder of Erato, a garment retailer on eBay and other platforms. “But every time I receive an order, I have to call FedEx myself. For eBay, India does not seem to be a priority.“
Such relative disadvantages are compounded as the last three years have seen the emergence of robust options in the marketplace space. Another eBay seller, who wished not to be named, says his electronics and computers business has grown from `60 crore to `100 crore in the last year. But his share from eBay has dropped, while that from Snapdeal and Flipkart has more than doubled.

“As an OMP, it does have a long tail -you can find things that are nowhere else,“ says Arun Sridesh mu k h, co -founder of Fashionara.com. “They should move to a managed marketplace model if they are serious.“ One way is to increase its involvement in Snapdeal (See box). Its firstmover advantage is long gone.

Can eBay now regain ground to be a prime mover? eBay India is Growing, But Not as Fast as Peers The revenue numbers below are not comparable. eBay has always been a marketplace, earning a cut of goods sold as revenues while Flipkart had a part-inventory model in 2012-13.The contrast in rate of growth, however, remains. And it's lost customer traffic in the last six months 

Ref: An ET Article

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Digital Dividend: Internet Penetration In India & Its Impact on GDP

DIGITAL DIVIDEND





Hamlets that already boast online connectivity offer glimpses of the transformation that Modi's plan to internet-enable 2.5 lakh villages by 2019 can achieve 

Mark Zuckerberg would be very glad if he visited the sole internet centre in Chandauli, a dusty village in Rajasthan's Alwar district, about 170 km northeast of Jaipur. A third of the 20odd kids glued to their laptop screens are visibly excited by the world wide web, and all of them, without exception, are on Facebook.Thirteen-year-old Vishal Kumar rapidly scrolls down his timeline and stops at a photo posted by a friend.Asked if his Facebook friends are all from his school, he says, “No, no, I have other friends, too.“ He can type in English but does not understand much of it, but that is no impediment as he quickly shows us how Google Translate comes to his aid. He answers all our questions but never once takes his eyes off the screen. A few feet away, his friend Nasrat Sapwan says he is quite conversant with Facebook and has now got himself a Twitter account, though he is still learning the ba sics of the micro-blogging site.“We check our results online,“ says Sapwan.
About 10 km away, in Vijayamandir, Sonu Yadav, a final-year graduate student of political science and Hindi literature, is making a poster on Microsoft Paint. It is going to take him a few more weeks to be as comfortable with Facebook as Kumar and Sapwan though he is seven years older than them, but it is a welcome start.Yadav hopes to help his father in his real estate business with his computer and internet knowledge, according to his instructor.

Grand Plans
These boys would not have been able to enjoy what is taken for granted among their counterparts in the cities had it not been for the efforts of the Digital Empowerment Foundation (DEF), a 12-year-old non-governmental organization whose objective is to provide last-mile connectivity in In dia's hinterland. It operates 50 community information resource centres (CIRCs) across 20 states that train people in the basics of the computer for free or for as low as `200 for a twomonth course. The CIRC in Chandauli is wirelessly connected to the CIRC in Vijayamandir, which relies on a BSNL broadband connection.
The United Progressive Alliance (UPA) government showed some intent on digitally connecting India's villages when it announced the National Optical Fibre Network (NOFN) in 2011. But it may not have been a top priority for a government besieged by a multitude of troubles and is now three years behind schedule. Howev er, the current Narendra Modi-led dispensation has made it one of its focus areas, with the cabinet approving the ambitious `Digital India' programme last week. As part of the plan, the government has set a target of providing broadband connectivity to 2.5 lakh villages (India has about 6.41 lakh villages, according to the 2011 Census) and making as many schools Wi-fi-enabled by 2019.Digital India will be the umbrella programme for the government's initiatives in the area and will entail an expenditure of `1.13 lakh crore in existing and new plans.

Not Enough Connections
About a third of India's 252 million internet users, and a fourth of mobile internet users, are in rural areas. But internet penetration in villages, at 8.6% compared to 37.4% in cities, has a long way to go, and this is the statistic Digital India hopes to change.Broadband in India is currently defined as a connection with a minimum download speed of 512 kilo bytes per second (kbps), and India's broadband penetration is a lowly 2%.As per a World Bank report, a 10% increase in a country's broadband connections leads to a 1.38% rise in its gross domestic product.
The government would do well to ride on the work already done by the private sector and civil society. Ganesh Natarajan, chair, Nasscom Foundation, which started the National Digital Literacy Mission in 2012 with Intel, Microsoft and other IT companies, says the initiative will now be aligned with the government's efforts.The target of the mission is to make 10 lakh people digitally literate by end-2015. There have also been other private sector initiatives like ITC's e-Choupal which links farmers to the web.
Internet access in hitherto-unconnected areas does not only empower the local population but also makes them a lucrative market for businesses like financial services and e-commerce in the long run. “The target [of connecting 2.5 lakh villages by 2019] is very achievable if the corporate sector also spends on it. Everybody's business is reliant on last-mile connectivity,“ says Osama Manzar, founder-director of DEF.Rekha Jain, a professor at the Indian Institute of Management, Ahmedabad, says while the investment may not fetch corporates a high return initially, it will eventually.
Multiple Benefits
Business potential aside, digital connectivity impacts rural folk in more ways than one. Kids currently are taught to use the computer not with a computer but with a book. “They are taught theory but they never get to use the computer,“ says Mohammad Ameer, the Alwar coordinator of DEF. Nearly 1,400 school students in Chandauli have been trained to use computers since February. “Without computers there is no education, and everything is online these days,“ says Liaqat Ali, a resident of the village.Ameer says even some women in Chandauli have started using the centre, despite initial resistance: “They come to the centre wanting to know when the next train leaves from Alwar to Delhi.“ Delhi is 160 km from Alwar.
Another focus area in the Digital India programme is e-governance. Besides making government services available on internet and mobile platforms, the key challenge will be to Take the 2.5 lakh panchayats in the country online.The government in 2007 launched the `e-Panchayat Mission Mode Programme' with 11 software applications which help in digitizing a panchayat's documents. DEF also has its initiative, called `Digital Panchayat', which aims to make every panchayat member digitally literate.“There are three lakh panchayat members in the country and a third of them are women, and by educating them, you are also empowering the women,“ says Manzar.
Moreover, thanks to the internet, people in far-flung areas have access to better healthcare; and communities dependent on the arts and crafts, which were losing their way, are also getting a leg up in preserving and enhancing their local culture and traditions, which sometimes has economic benefits, too. For instance, Chanderi in central Madhya Pradesh, known for its handwoven sarees, has come a long way in the past four years, thanks to DEF's efforts, with over two-thirds of its youth digitally literate having access to Wi-fi and, earlier this year, the launch of a website to sell its wares. Similarly, in Mungaska near Alwar, folk musician Umar Farooq is relying on the internet to ensure his Mewati community's rich musical heritage is not lost. “We have recorded our traditional songs and will soon put them up on a website,“ says Farooq, who got an invitation to play in Dubai next month on Facebook.

Carping Critics
Despite the obvious benefits of Digital India, it has its fair share of detractors. Rahul Khullar, chairman of the Telecom Regulatory Authority of India, in a recent interview to ET, said the plan was short on specifics. “Is it possible to get a birth or a death certificate online in Delhi? If not, what sort of applications are we really talking about? A lot more thinking and resources must be devoted to flesh out these applications instead of simply calling them e-health or e-education,“ he observed. A noted academic with one of the country's top educational institutions, requesting anonymity, says the current bandwidth of 100 mbps per panchayat is not sufficient. “It should be at least 1 gbps given that it serves three villages of around 10,000 people and videos are in HD [high definition] now. You can't keep laying new fibre and the current architecture does not allow for the bandwidth to be revised. This is for the next 25 years. They should have thought this through,“ he adds.
Jain says the government should allow private players to do the last-mile connectivity. Subho Ray, president of the Internet and Mobile Association of India, says the involvement of private operators is key to the success of Digital India.“The government should look at the PPP model to ensure robust last-mile connectivity. For private players, price point has been an area of discontent, wherein they are questioning economic viability for sustenance,“ he adds. But experts believe it is only a question of time before internet service providers find value in their rural clientele. But first it is up to the government to flesh out its plans and bring millions of India's rural folk onto the information superhighway.

Ref: An ET Article

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Something About Flying Machines: Drones

Flying Machine : Drones





Drones are small flying machines that can reach inaccessible areas at low cost. They are without a human pilot, with controls on the ground. In India, they are used for wildlife surveys, shooting movies, disaster management and site surveys by builders 

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Symbiotic Ecosystem & The Affiliated Marketing......E-Commerce Players Are Innovating Synergies for Co-Existence & Super Growth!!

Online Friendships

India's top internet companies are increasingly partnering with each other in an attempt to reach out to a larger customer base and offer a greater variety of services in a cut-throat market.





In the battle for supremacy, internet companies in India are turning to the most unlikeliest of allies -each other -as they look to become leaders in one of the most competitive consumer markets globally.Flipkart, Uber, redBus and OLX are just some of the top internet companies that have joined hands to assist each other to leverage their strengths and attract more consumers to their platforms.

Last month, Flipkart, India's largest e-commerce company, and OLX India, an online and mobile marketplace for used goods, announced a marketing partnership that allows potential customers to sell their used products on the latter while buying new ones on Flipkart.
“With this partnership with OLX, we will be able to provide an end-to-end solution to customers, especially in the Electronics categories where selling old products is an integral part of the buying process,“ said Ravi Vora, senior vice-president ­ marketing at Flipkart.
Industry experts believe that such tie-ups will be par for the course going forward for the internet companies in India. “These are the new barter marketing tactics. They are constantly looking to come up with ways to grow disproportionately in a very short period of time. In other words, growth hacking,“ said Alok Goel, chief executive of Sequoia Capital-backed online recharge and coupling venture Freecharge, which has a similar partnership with e-commerce players Amazon and Snapdeal.
For OLX, a portfolio company of South African diversified media conglomerate Naspers Group, such a tie-up could give it a significant advantage over its peers, given that it now has access to Flipkart's 25 million users. Naspers is also an investor in Flipkart.
Successful conversions can be tracked through special tracking codes, according to industry experts.
“They could also issue coupons which can be redeemed on the affiliated website,“ pointed out Nitin Chhabra, founder of e-commerce consultancy Ace Turtle. There is, however, no clarity whether there is a revenue sharing agreement between Flipkart and OLX.
Online bus ticketing venture redBus and on-demand taxi transportation app Uber also announced a partnership in August that allows customers, after making a booking through redBus' mobile app, to avail two free rides in an Uber cab, valued at Rs 300 each, in six cities -Mumbai, Pune, Bangalore, Hyderabad, Delhi and Chennai.
For Uber, which launched its services in India last year, a strategic partnership with redBus makes sense, given that the latter sells more than a million bus tickets every month, and has over 2 million registered users.
“This goes to the limits of traditional marketing, using our marketing strategy to get users to experience Uber for the first time,“ said Akshay BD, communications manager for Uber in Bangalore.
While Uber refused to disclose the exact number of users that have availed of the offer, company executives said the tie-up had seen a `significant' rise in number of users.
According to Ashish Kashyap, head of the Goibibo Group, which acquired redBus from its founders for about Rs 800 crore in 2013, the initiative had been a runaway success for Uber, with the company reaching out to about 150,000 users transacting through redBus mobile app users.
“The partnership becomes highly symbiotic.redBus is enabled to deliver value to its online bookers and Uber is enabled to cross-sell to a targeted set of consumers who already have a need to avail such a service and is a mobile transacting user,“ Kashyap said, adding that there is no revenue sharing agreement between the two ventures.
Others, such as real estate venture CommonFloor, have tied up with taxi services providers like Olacabs and TaxiForSure.
“We have tie-ups with them to arrange site visits for our customers. The service is free for our customers, since we take money from our builder contractors. At the same time, we get discounted rates from these aggregators since we use them very often,“ said Sumit Jain, cofounder of CommonFloor.
The barter marketing tactics are further examples of internet companies in India looking to get a stronger grip on the consumer's wallet, in a hyper-competitive market, which is currently estimated at $2 billion (Rs 12,000 crore) but which could touch $38 billion (Rs 2.3 lakh crore) by the end of the decade, according to retail consultancy Technopak.
“This is almost unique to India. You don't really see this in the more developed markets such as the US, Europe or Japan,“ said Goel, who, before taking over at Freecharge in 2013, was the chief operating officer at redBus.
With an internet user base that is expected to cross 400 million in the next five years, driven by mobile, the stakes for companies such as Flipkart are high, given that they continue grapple with wafer-thin margins, high customer acquisition costs and fickle consumers.
Partnerships with traditional or offline companies are increasingly in vogue as well.
While Uber has partnered with multinational financial services behemoth American Express in India, Goibibo has tied up with insurance company Bajaj Allianz as well as a number of restaurant chains, such as Papa John's and Subway.
“This strategy works for us,“ said Uber's Akshay. “We look to partner with companies people identify with, and where we can offer an end-to-end consumer experience.“

Ref: An ET Article

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E-Commerce : The Flavour Of The Month....Still Its Scratching The Surface...Big Industrial Houses Joining The Race...

E-retail: you ain't seen nothin' yet

While Flipkart and Amazon go on a fund-raising spree, the real battle will begin once big industrial houses such as the Tatas, Reliance and the Aditya Birla group join the race

E-Commerce is the flavour of the month. First, homegrown Flipkart raised $1 billion from private equity funds, which valued the e-retailer at over $7 billion. The very next day, Jeff Bezos, the founder and CEO of Amazon, announced an additional investment of $2 billion in India. This sparked off speculation that another prominent Indian e-retailer, Snapdeal, could be planning something similar. Though Snapdeal co-founder & CEO Kunal Bahl has maintained he does not believe in the herd mentality, news reports suggest that his company may attract funds from Ratan Tata, the former chairman of Tata Sons.
Talk to experts and they will tell you the battle has hardly begun. "There's no war yet in e-retail," says Arvind Singhal, chairman of Technopak Advisors, a leading consultancy in the retail sector. According to him, the stakes in the sector will increase manifold when big industrial houses such as the Tata, Mukesh Ambani and Aditya Birla groups join the bandwagon. He also expects global powerhouses like China's Alibaba and Japan's Rakuten to enter the Indian e-retail market.
The big Indian groups could get going soon. Tata Sons, Reliance Industries and Aditya Birla already have well-established retail brands and are capable of pumping in large sums of money into the promising sector. The Tata group, the $138-billion car-to-salt conglomerate, wants to invest $35 billion in the next three years for expansion in sectors such as retail and defence. E-retail is expected to be a significant recipient of this investment, and the group is busy finalising the details. Reliance Industries, with revenues at around $66 billion, already has a profit-making retail business; it has ambitious plans to expand it and make e-retail integral to its businesses. In fact, the Mukesh Ambani-run company has announced that it will enter e-retail by the end of the year. The $40-billion Aditya Birla group, which runs the More and Pantaloon chain of stores, too, is expected to make a big splash in e-retail, say analysts.
What could help the three Indian groups in e-retail is their presence in telecom services. The millions of mobile phone subscribers they have (Reliance Jio's service is yet to be launched) are potential e-shoppers on their portals as well. The country has over 900 million mobile phone subscribers currently and estimates suggest that 40 to 50 per cent of all online shopping in the country is done through mobile phones.

Apart from these, there are international majors such as America's Walmart, which has already begun its cash and carry (wholesale) e-commerce in India. Walmart is likely to get into mainstream e-retail in the country once the government allows foreign investment in the sector, or it may enter it through the marketplace route as Amazon and eBay have done.

Shopping on the go

The Indian e-retail (excluding travel-related transactions) market is pegged at around $3 billion at present, and is expected to grow to around $22 billion (about Rs 1,34,420 crore) in five years, according to a CLSA report. This is a sliver of the $500-600 billion retail market in India. So the upside is huge. India's e-retail is expanding at a compounded annual growth rate of about 34 per cent, according to a report by Digital Commerce. The tipping point is about two years away, when the real growth story and e-retail wars will unfold in India, point out industry stakeholders. Even today, the conversion from offline to online retail is happening at a fast clip. After bookstores, electronic stores have begun to face the heat. Mobile handset makers Motorola and Xiaomi have chosen to launch products for the mass market only online. Food stores all of a sudden find themselves short of delivery boys because they have all been poached by e-retailers as couriers.

Going by the recent deals, funds do not appear to be a constraint for the e-retailers. Private equity funds are more than ready to loosen their purse strings, even though profits are nowhere in sight, because they see in it the future of retail. E-retail is more efficient than offline retail, but, because it's a new sector, not many have been able to find a foolproof mantra for success. Cutthroat discounts have made profits hard to come by. Globally too, the scenario is challenging. Even Amazon reported a loss of $126 million in the quarter ended June 30. Only Alibaba, which is in the market to raise funds through an initial public offer, is profitable. Its net income almost tripled to 23 billion yuan in the year-ended March 31, 2014, compared with 8.4 billion yuan a year ago. While Flipkart's promoters, Sachin Bansal and Binny Bansal, have maintained that profitability is a long-term target, Amazon India's head, Amit Agarwal, says: "We have a very long term outlook in India and are not looking at immediate profitability." Even Bahl of Snapdeal, which has raised around $350 million since 2010, in a recent interview said profitability was not something he was looking at currently.

While the big retailers, Indian as well as foreign, chalk out their plans, Indian e-retail start-ups are going all out readying for the coming battle: from raising funds to investing in hiring the best talent from Silicon Valley and premier B schools, scouting for real estate to multiply their warehouses and fulfillment centres for a solid back-end and foolproof one-day delivery in as many cities as possible. Most of them are even preparing for mergers and acquisitions and have hired specialists in this field. While they are planning acquisitions of other e-retailers and expect technology players to grow, there's the possibility of some of the big players getting swallowed in the process, according to an industry expert who does not want to be named.

As of now, the industry leaders are gung-ho. It is their time to celebrate, perhaps. Sachin Bansal, co-founder and chief executive of Flipkart, said last week the next big goal was to take the company's valuation to $100 billion. "India is set to have many hundred-billion-dollar companies and Flipkart could be one of them. We are ready to do what it takes," is how Sachin described the aspiration of Flipkart, an online bookstore that he had co-founded along with Binny (the two Bansals are not related) seven years ago. The company has now diversified into multiple categories including fashion, accessories, electronics, lifestyle and the latest being adult well-being. Automobile is perhaps the only area that it won't enter.

Funds no bar

Flipkart has raised $1.76 billion in the seven years since its launch in 2007 and is currently valued at $7 billion, way below Amazon's $148 billion. In its first announcement on any financial matter so far, Amazon, which set up shop in India in June 2013, made public its $2-billion investment last week. It's the largest investment so far by any e-commerce company in India. "We see a huge potential in the Indian economy and for the growth of e-retail in India. With this additional investment of $2 billion, our team can continue to think big, innovate, and raise the bar for customers in India," Bezos said in a statement. At current scale and growth rates, India is on track to be Amazon's fastest country ever to reach a billion dollar in gross sales, he added. The company has not given any target date for touching the $1 billion gross sales target in India, a benchmark that Flipkart achieved earlier this year.

India is one of the last potential e-retail markets Amazon is testing out. Amazon did not divulge its total investment in India. But information available with the Registrar of Companies suggests that Amazon invested around Rs 1,500 crore in India till December 2013.

Snapdeal, which was a marketplace player from the early days, likes to compare itself with Alibaba. Sachin Bansal of Flipkart, which turned a marketplace player from being an inventory-led company initially, also referred to Alibaba recently when questioned about the Bansals' diluting stake in the company as it raises more and more funds:, "Alibaba's Jack Ma or Apple's Steve Jobs too had single-digit stakes in their companies". Besides the leaning towards the Alibaba model, the current lot of e-retailers is also shying away from listing the companies on stock exchange. But only when the real war unfolds in e-retail once the big business houses come in will we know the potential of the current newsmakers.

Ref: An Article In Business Standard

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