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
