Ecommerce industry in India- Evolution continues

The ecommerce industry has moved from infancy to adolescence. There has been instances of reckless expansion with no or very distant bottom-line.  However, there are a few players who have started to differentiate themselves and started to look a bit more sorted. This is in some measures due to the full-fledged entry of Amazon, the big daddy of global ecommerce.

Let’ look at the industry scenario.

Ugly truth

According to estimates from NextBigWhat, a website focused on entrepreneurship, 136 e-commerce firms shut shop between November 2012 and April 2013. According to other data from Allegro Capital, an investment banking boutique in Bangalore, 80 per cent of all Indian ecommerce companies are on their last legs, having failed to raise fresh funds.

Between 2010 and 2013, 52 e-commerce firms raised some $700 million in funding, but just 18 of them attracted a follow-up round. In the past year to 18 months, there has been a substantial clear-out in India's e-commerce space, as investors have been wary of investing in this space, either backing large-scale players such as Flipkart or putting smaller amounts into high-margin niche start-ups.

·         Accoding to Allegro Capital, around 80% of Indian companies are on their last legs

·         Almost no Indian e-Commerce firm has turned profit and investors are asking tough questions.

·         With VCs getting picky and FDI not allowed in inventory-led Indian ecommerce industry, more firms could go belly up.

The industry does have potential

India’s E-Commerce market was about $2.5 billion in 2009, it went up to $6.3 billion in 2011 and to $16 billion in 2013 and is expected to grow to $56 billion by 2023 that would be 6.5% of the total retail market.

Indian ecommerce industry has started to bulk-up

Set up by two ex-Amazon employees in 2007, Flipkart has raised between $540-$560 million, according to industry estimates which valued the company at about $1.6 billion at the end of 2013.

Snapdeal pivoted from its early focus to also become perhaps India's largest marketplace with some 20,000 sellers on its platform. "We have five million products on our site and we're adding a new product every 30 seconds."

"From being six steps behind in the race, we went to being four steps ahead." He points out that from an overcrowded market of some 800-1,000 companies in 2011, only a handful survived

New products

Amazon

"We offer the most comprehensive suite of options for sellers to grow their business online and make profits in India," boasts Agarwal of Amazon. He points to solutions such as Fulfilment by Amazon (FBA) service, a pay-as-yougo fulfilment service, as enticements for sellers, wherein Amazon takes care of packing, shipping and delivery of sellers' products.

"We strive to do the heavy-lifting on their behalf while they focus on their core business functions," adds Agarwal. Today over 75 per cent of units shipped are FBA. Over 200,000 products are available for next-day delivery on Amazon. Over 60 per cent of existing demands are already eligible for next-day shipping.

 Amazon isn't holding back in its pursuit of both sellers and buyers. Another initiative it is aggressively rolling out is Amazon Easy Ship, an assisted shipping service that makes it easy for sellers to ship products across India. With Easy Ship, after order confirmation, sellers pick and pack the shipment, confirm to Amazon that they are ready to ship and Amazon collects the shipment and ensures that the product is delivered to the customer.

Flipkart

For example, Flipkart has rolled out a range of furniture and wants to expand its presence in white goods.

Snapdeal

Snapdeal too is constantly ramping up several categories — including some unexpected ones such as car tyres where it is seeing strong sales.

Different strategy for arch rivals

Flipkart	Snapdeal
Founded in: September 2007	Founded in: Feb 2010
Initial business: Books	Initial business: Local Merchants’ Marketplace
Current Business: E-commerce marketplace	Current Business: Full-fledged marketplace
Founders: Sachin Bansal and Binny Bansal	Founders: Kunal Bahl abd Rohit Bansal
First office and rent: 800 Sq ft cubby hole in east Bangalore for a monthly rent of Rs. 800	First office and rent: 300 Sq ft basement of a house in New Delhi at Rs. 14,000 per month
First business transaction: John Wood’s ‘Leaving Microsoft to change the world’ for Rs 200	First business transaction: Made by Rohit’s wife Parul for restaurant called Salsa in Gurgaon. It was for rupees 400
Headcount: 10,000	Headcount: 1300+
Revenue: USD 1 Billion	Revenue: USD 1 Billion
Investors: Accel Partners, Tiger Global, Naspers, ICONIQ Capital, Sofina, Vulcan Capital, Dragoneer Investment Group, Morgan Stanley Investment Management	Investors: eBay, Intel, Capital, Bessemer Venture Partners, Nexus Venture Partners, Silicon Valley Bank, Recruit Corp, Kalaari Capital and IndoUS Venture Partners
Acquisitions: WeRead, Letsbuy, Mime360 and Digital Catalogue of Chakpak	Acquisitions: Doozton, Grabbon, Esportsbuy and Shopo

Flipkart is the more valuable of the two — it was valued at $1.6 billion in its last round of funding — compared with $400 million for Snapdeal (as in February). Both Flipkart and Snapdeal are bulking up with an eye on the future.

Inorganic and organic growth- whatever it takes

The arrival of Amazon will most likely expedite the consolidation in the market, which will see the emergence of three or four large Indian players. However, there will be a long tail of high-margin specialty players in categories such as apparel, accessories and jewellery.

Flipkart's chief executive Bansal says that firm was open to inorganic growth. It has already acquired, Myntra, a provider of fashion and apparel online.

To try to have the scale to compete with Amazon, Snapdeal too is keen on inorganic growth. Most recently it acquired Doozton, an online product discovery firm, to expand its presence in apparel and fashion. Previously, it acquired Grabbon, Esportsbuy and Shopo to expand into areas such as sports equipment and Indian handicraft and strengthen its presence as a full-fledged e-commerce market place.

"We are accelerating before takeoff," says Bahl of Snapdeal. "E-commerce is going to be a $100-billion industry in the next 10 or 15 years and we need to stay nimble and scrappy and pick our battles." Even as both companies add muscle to their businesses inorganically, the real scale may come the hard way — from adding new categories and products to their baskets.

 Source:

http://www.livemint.com/Companies/zWdTfe2wRUKyn2XVJMGnWL/The-next-Infosys--The-frontrunnerFlipkart.html

http://articles.economictimes.indiatimes.com/2014-05-04/news/49609451_1_amazon-india-binny-bansal-sachin-bansal/2