It’s time for a roundup of India e-commerce news. There’s lots happening including profit challenges, shrinking VC money, intense competition, startup closures and much more. Morgan Stanley marks down its investment in Flipkart by 15.5%, its second markdown in six months. CEO Binny Bansal expects Flipkart to retain its position as largest e-commerce company in India. Reality bites as valuations drop for Indian e-commerce companies according to a report in ZDNet. Attrition of top executives continues to hurt e-commerce companies and the latest is the resignation of Snapdeal’s chief product officer Anand Chandrasekaran after just one year with the company.
Jabong is dropping several poor-performing brands as part of its effort to increase profitability. Amazon and Flipkart are duking it out in the e-commerce marketplace over Amazon’s exclusive launch of the newest Moto G smartphone. The All India Online Vendors Association (AIOVA) thinks Paytm’s latest cashback promotion is breaking government guidelines. New e-commerce platform, Tata CLiQ launches May 27th. Electronics are no longer eligible for refunds from Amazon India after a quiet policy update. Buyers will need to get refunds directly from sellers. Competing state and regional taxes may hurt consumers and e-commerce companies according to a recent Forbes India article.
Morgan Stanley marks down Flipkart’s valuation again
The spate of markdowns in valuation of Flipkart does not seem to be ceasing. On Friday, Morgan Stanley marked down the valuation of e-commerce retailer’s shares by 15.5 percent. The markdown — the second time Morgan Stanley has done so — effectively brings down Flipkart’s valuation to USD 9.39 billion from the highs of USD 15.2 billion in June 2015.
Morgan Stanley Institutional Fund has valued its shares in Flipkart at USD 87.9 per share in March from USD 103.97 a share in December 2015. The fund had valued the e-tailer’s shares at USD 142.24 per share in June 2015. This is fourth markdown for Flipkart over the past six months.
According to filings with the US Securities and Exchange Commission, Fidelity Rutland Square Trust II — the mutual fund managed by Fidelity Investments — had lowered the value of Flipkart shares it owns by almost 40 percent to USD 82 apiece as of February 29, 2016, from USD 135.8 in August 2015. Similarly, Valic marked down the value of its investment in Flipkart by 29 percent to USD 98.19 a share from USD 139 apiece. Via moneycontrol.com
Flipkart will remain the largest player in online retail, no challenger in sight for top slot: CEO Binny Bansal
What do you make of the government’s guidelines on FDI in ecommerce?
Binny Bansal: It is good to have a clear ecommerce policy. I don’t see the policy having a huge impact. We have been compliant till now. Whenever new regulations come in, it takes a little while for everyone to become compliant. For us, we have been lucky that we were already in line with the regulations.
Were you expecting something different from the government?
Not from ecommerce policy but from general things such as reforms in GST, reforms in banking payments. But things should move faster with elections.
What are GMV targets?
The last time the range was $10-12 billion.
Binny Bansal: We have stopped giving the range. The first thing we have done is we talk about real targets —they’re about Net Promoter Scores (a proxy for customer loyalty), customers we have, number of times they buy from us, how satisfied they are. The way I look at the business is that GMV is an output of all these. So the focus is now on input targets. NPS is the most important metric for the company across all teams. Via economictimes.indiatimes.com
Moment of reckoning for Indian ecommerce as valuations plummet
It’s almost as if the world woke up and realised that the kings of Indian ecommerce were wearing no clothes.
Yesterday, Indian restaurant search site Zomato, which is in a major battle with Yelp for world dominance, was given a major haircut by HSBC Securities and Capital Markets when the investment firm valued it at around $500 million — or just half of the valuation at which it raised its last round of funding in September last year. The firm pointed to an over-dependence on online advertisements and hemorrhaging international operations for the markedly lower figure. (The company has raised $225 million since it was funded in 2008.)
This isn’t good news for Zomato — and it won’t take much solace in the fact that it is following in the footsteps of Indian ecommerce giant Flipkart who has also experienced the ignominy of a markdown in its net worth recently.
First it was Morgan Stanley and T. Rowe Price, both of whom own hundreds of millions of dollars out of what was once a $15 billion market cap, who respectively decided that Flipkart was worth only $11 billion and $12.75 billion in their investor declarations in late February. Via zdnet.com
Another one bites the dust in ecommerce space! Now Anand Chandrasekaran quits Snapdeal
Anand Chandrasekaran has resigned as the chief product officer at Snapdeal, a year after joining the ecommerce major.
Rohit Bansal, cofounder of the company, tweeted on Tuesday: “@anandc proud of the super work by you and the product team. Hard to believe that this was just 1 yr. Farewell, keep rocking!” To which Chandrasekaran replied: “@rohitkbansal thanks for the support. We did in 1 what would take 3 years anywhere.”
The company declined to provide details on who will be heading the position on his behalf. Chandrasekaran’s next move has not been disclosed. Via economictimes.indiatimes.com
Jabong sheds brands with low-margins, to focus on premium lifestyle products to trim its losses
Online fashion portal Jabong is shedding several low-margin brands, including three-fourth of its private labels, in a bid to cut losses and position itself as a platform for premium lifestyle products.
The company, unit of German ecommerce incubator Rocket Internet, will instead focus on top 200-300 brands, said a top executive of the company.
“We had spread ourselves too thin and now we are shrinking our portfolio,” said Sanjeev Mohanty, who joined Jabong as director from Italian fashion brand Benetton six months ago. “We are sharpening our positioning and opting out of lower price point brands and labels,” he said. Via economictimes.indiatimes.com
How Flipkart tried to gatecrash Amazon’s Moto G4 launch party
Amazon and Flipkart, the biggest e-commerce companies in India, are at war, not only in the real world where they try to gain the largest market share, but on Twitter too.
Motorola became immensely popular in India with its Moto G line of phones which were initially available exclusively on Flipkart. The brand has now switched sides and on Tuesday, launched its latest, Moto G4 and G4Plus, exclusively on Amazon.
On Wednesday, Flipkart tried to counter the loss of sale and traffic to Amazon’s wesbite by taking out full-page print ads, offering deep discounts on the Motorola models it has on its website, and discounting other phones such as the iPhone 5S as well. #MotoOnFlipkart, which Flipkart used in its print ad, started trending, detailing offers on the site, and Twitter ‘influencers,’ people paid to market certain products and offers, started urging folks on the social networking site to check out the ‘great deals on Flipkart.’ Via livemint.com
Vendors Dispute Paytm’s Cashback Promotion
Is Paytm breaking the rules with its cashback promotion? Some vendors in India believe so. As The Economic Times reports, All India Online Vendors Association (AIOVA) — which represents about 500 sellers in the country’s eCommerce space — has raised the possibility that the Alibaba-backed Paytm is violating FDI (foreign direct investment) guidelines by giving cashback over and above the seller-funded discount.
In response to a request for clarification on that issue made on Twitter by AIOVA, India’s Department of Industrial Policy and Promotion (DIPP) responded on the social media platform: “Giving discount or not is prerogative of the seller owning inventory. FDI permitted in marketplace, not in inventory-based model.” While 100 percent foreign investment in online marketplaces is permitted in India, notes ET, those same platforms are not allowed by DIPP to influence retail prices or offer their own discounts.
In defending Paytm’s cashback promotion, its vice president, Sudhanshu Gupta, told the outlet: “Everywhere in the world, including India, all financial services and payment companies incentivize consumers to use their products. Banks promote usage of their credit and debit cards by giving extra reward points and cashback … Paytm cashback promotions are similar in nature since they are driving usage of Paytm wallet.” Via pymnts.com
Tata group to launch e-commerce venture CLiQ on 27 May
Tata Unistore, a Tata Industries incubated business venture, on Tuesday announced the launch of its e-commerce platform, Tata CLiQ.
It will open to consumers on 27 May across its website, mobile site and mobile apps (Android and iOS), the company said in a statement. At launch, Tata CLiQ will offer consumers apparel, electronics and footwear products. Over the next few months, it plans to expand by adding more categories, brands and features.
“Clique and Click came together to form the perfect name for our platform, which curates authentic and exclusive products for customers with impeccable taste. A name that says shopping online is now so easy and trustworthy, that all it takes is a click. The ‘Q’ in the logo represents a magnifying glass—a visual representation of the brand’s focus on curating only the best brands and products,” said Ashutosh Pandey, chief executive officer (CEO), Tata CLiQ. Via livemint.com
Amazon India will no longer offer refunds on electronics
Amazon India has silently upgraded its return policy for electronic items. As per the new guidelines , electronics are no longer eligible for refunds. However, customers can still get defective items replaced. It is important to note that this is applicable only for products that are fulfilled by Amazon. For items that are seller-fulfilled, it is up to the seller to issue refunds for items that can’t be repaired or replaced.
“Mobile phones, tablets, laptops, desktops, monitors, cameras and camera lenses that are fulfilled by Amazon are not eligible for refund and have a replacement only policy. In case you have received a defective or a damaged mobile phone, tablet, laptop, desktop, monitor, camera or camera lens that is fulfilled by Amazon, you will be eligible for a free replacement by the seller as per the product replacement policies provided on Amazon.in,” according to the company.
Amazon India did not clarify what will happen if the seller cannot provide replacements for electronic items fulfilled by Amazon. Via timesofindia.indiatimes.com
Taxing times for ecommerce sector
The ecommerce sector appears to be the cynosure of tax and regulatory authorities. Even as the sector comes to term with the recent policy circular emphasising FDI norms, it is simultaneously battling crippling delays and demands on shipments being delivered across the length and breadth of the country. Here is a look at why this is a unique phenomenon that this sector needs to face and conquer in India.
The “USP” of the sector is delivery within quick and committed timelines at reasonable prices leveraging economies of scale. In line with this, deliveries to online shoppers are typically made from regional warehouses in key states with central sales tax being paid to the state from where the goods are despatched. This appears to have left the destination states into which the goods are delivered harbouring a sense of loss of revenue on goods consumed within their state. What started as sporadic demands being raised on “cash-on-delivery sales”, has, in recent times, progressed into a full-blown levy of entry tax legislations, being introduced, specifically targeting delivery of goods by online portals. These new-found taxes seek to apply themselves on inbound ecommerce shipments meant for delivery to end consumers residing in the state.
Per se, such entry taxes in discriminating against shipments of a particular nature / industry shall go against the basic principle of equality, which is a canon of taxation. Importantly, the framework of the Indian constitution seeks to promote and protect free flow of trade across states and frowns upon any tax that disincentivises such movement. Despite this, the bandwagon of states that are choosing to tax ecommerce deliveries continues to be on the rise. Via forbesindia.com
That’s a wrap
That’s a wrap for this week’s Cashback Industry News. If you’d like more global news highlights in your inbox every weekday morning, subscribe at the top of this page. Enjoy your weekend and we’ll be back with more news you can use on Monday.