# US-based Amazon
commits $2 billion in India’s e-commerce space
# SoftBank invests
$627 million in Snapdeal, $210 millin in Ola cabs
# Flipkart gets $1.7
billion in funding, taking valuation to $7 billion
# Reliance Group
exits Yatra.com with 12-fold increase in original investment
# Footfalls during
festive season drop in shops in favour of e-commerce
# Physical retail
segment demands level field, regulations vis-a-vis e-retail.
E-COMMERCE SALES
SHAKE UP PHYSICAL FORMAT IN RETAIL SPACE
It’s still a small component of
India’s Rs.38 trillion ($600 billion) overall retail trade industry. Yet, the
e-commerce format with sales of Rs. 1 trillion ($16 billion) managed to create
a buzz in 2014 like never before – not just with mega promotions but also with
mergers, acquisitions and some crazy valuations.
Earlier in December, the
Anil Ambani-led Reliance Group sold its 16-percent stake in Yatra.com, a
leading consolidator of travel products, for an eye-popping 12-fold jump in
initial investment made in 2006, to value the portal at $500 million.
This was followed by a
$700 million fund-raiser by Flipkart, that came over and above the $1 billion
the company had raised in July – that had taken its valuation to a whopping $6
billion overnight. Flipkart also decided to merge Myntra, another leading
e-retail firm, into it.
Similarly, one saw
Japan’s SoftBank make a commitment in October to invest $627 million in SnapDeal,
a major player again in the Indian e-commerce space, and pick a $210-million
stake in Ola that offers car rentals in 19 Indian cities through its mobile
platform, web site and call centres.
Not to be outdone, the
US-based Amazon said it will invest $2 billion in India’s e-retail space.
Data
on Internet penetration in India backs the scales of operation.
There are currently some
250 million Internet users in the country. As per various estimates, the
e-commerce industry, now valued at $16 billion, is growing at 30-40 percent
each year and will top $100 billion in the next five years.
To serve them, there are
some one million online retailers — small and large — which sell their products
through various e-commerce portals, according to a report by the commerce
ministry-promoted India Brand Equity Foundation (IBEF).
The year, however, did not pass without some hiccups.
Flipkart had to face
much embarrassment when its “Big Billion Day” Oct 6, meant to attract online
shoppers with steep discounts, crazy deals and lucky draws on a range of
products, boomeranged as its website crashed and social media was abuzz with
allegations of cheating against the company.
Flipkart apologized to
the people for the inconvenience. But it also announced that it had got a
billion hits and sold products worth $100 million (Rs.600 crore) that day
including some 500,000 mobile phone handsets, an equal number of clothes and
some 25,000 TV sets within minutes of starting sales at 8a.m.
This set the regular retailers thinking and fuming as well.
The Confederation of All
India Traders, an umbrella body for regular retail trade industry, cried foul
and urged the commerce ministry to regulate the e-retail business, look into
their trade practices, which they alleged were not exactly as per rules, and
create a level-playing field.
But some leading
industry chambers cautioned against over-regulation and the matter died down.
Going forward, experts
expect several developments in the e-retail space.
Besides logging a 40-45
percent annual growth, they feel huge investments will flow into logistics to
overcome the challenges of last-mile reach. They also expect large retail chains
of Reliance Industries and the Aditya Vikram Birla Group, among others, to go
online.
“The coming year will be
more dynamic. A lot of niche e-commerce players will emerge. We expect to see a
good number of traditional businesses also leveraging this channel in both the
B2B and B-2-C space.
Experts also predict
some initial public offerings in the near term not just because existing
investors will seek to realise value but also since the e-retail industry will
need funds for infrastructure, logistics and warehousing — estimated at $500
million now and 1.9 trillion by 2017.
“We will see more consolidations. Public
issues will also happen. The industry is keenly awaiting the GST (goods and
service tax) to get cleared. It will help in seamless movement of goods among
states. It will give the e-commerce industry wider operations and a major
push.”
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