The Indian e-commerce market is a lot like the old wild West. There’s lots of prospecting, the occasional fortune made, lots of gamblers, dried-up grubstakes (VC money) and plenty of failures. Welcome to e-commerce in 2016 in India and we’ve got all the news you can use to keep you current.
If there’s any one company that illustrates the highs and lows of e-commerce in India, it’s Rocket Internet and DealStreetAsia tells a compelling story of the company’s growth and fall from grace. Infosys co-founder Kris Gopalakrishnan says e-commerce in India is poised for growth with the economy growing 10% and mobile penetration high.
Flipkart launches PhonePe, its new payment app to compete with Paytm. Digital wallet firm MobiKwik expects to reach $2 billion in sales and new growth in offline transactions. Snapdeal hopes to grow prepaid transactions by offering free next-day delivery in a market used to payment on delivery. In addition, the company announced much-needed new investment of $21 million from Luxembourg’s Clouse SA.
Morgan Stanley downgraded its investment in Flipkart for the third consecutive time in six months, pegging its value at $9 billion. Foodpanda said it raised a total of $22.4 million in new investment in the past year. Online fashion rental start-up Flyrobe raised new investment of $5.3 million. Online truck service aggregator TruckSumo closed operations while saying it will shift to a B2B model. It’s interesting and fast-moving times in Indian e-commerce.
The rise and fall of Rocket Internet in India
Over the next few years, it would become one of the most influential Internet companies in the world. And then, almost as rapidly as it had risen to prominence, the company would fall. But we are getting ahead of ourselves.
Rocket is a Germany-based Internet conglomerate that copies business models proven in the US or China and adapts them to high-potential markets outside those two countries.
The idea is simple: copy the original, hire young, hungry consultants and finance professionals as so-called founders to run the company, deploy massive amounts of capital to grow fast and overtake incumbents in two years or so, and sell at an attractive price.
Copy, adapt, hire (founders), overtake, sell. Repeat. Via dealstreetasia.com
India best market for e-commerce growth: Infosys co-founder Kris Gopalakrishnan
With five of the top global IT services firms being Indian, India was the best market for e-commerce growth as the industry was heading in the right direction, said Infosys co-founder Kris Gopalakrishnan on Sunday.
“With GDP hitting 7.5 per cent and possibly 10 per cent in sometime, India is the best market for e-commerce growth. The increased mobile penetration will also help the industry grow,” said Gopalakrishnan at an event here. The five Indian IT services firms are Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies and Tech Mahindra.
Also noting that India was a high-growth market for e-commerce business, thanks to its 1.2 billion people as consumers, the software major’s former chief executive said with increasing per capita income ($2,000), their aspirations too increased. Via firstpost.com
Flipkart and Paytm become instant rivals, setting stage for ecommerce battle
Just yesterday, the ecommerce landscape witnessed two announcements that could have far-reaching implications for consumers in India, in addition to pitting two of India’s new economy companies against each other.
According to Mint, Indian online retailer Flipkart, which is feeling the heat from an aggressive and well-endowed Amazon in India, will release a UPI-based app in partnership with Yes Bank called “PhonePe” that will allow its shoppers to connect their registered accounts to their banks via their smartphones, thus allowing them a seamless experience all the way through to the virtual checkout counter. PhonePe is a clever pun, since “Pe” means “on” in Hindi while is pronounced “pay”.
Security for transactions comes courtesy of National Payments Corporation of India’s encrypted libraries. Now, shoppers will be able to use their own PIN rather than the customary one-time password process that most transactions currently need in order to thwart online fraud but is generally viewed as a monumental headache.
There was also a simultaneous revelation by Mint on Monday from unnamed sources that online payments service Paytm will be raising $300-350 million from investors including MediaTek, Temasek Holdings, and Goldman Sachs Group that will vault this leader in the payments space from $2 billion to around $5 billion in valuation. (Last year, Chinese giant Alibaba and its financial services affiliate Zhejiang Ant invested more than $500 million for a 40 percent stake in Paytm’s holding company.) Via zdnet.com
We are pretty much neck-to-neck with Paytm: MobiKwik’s Mrinal Sinha
Digital wallet firm MobiKwik is betting big on the offline space and expects the biggest chunk of its business coming from this segment in the next 18-24 months. The Gurgaon-based company aims to increase the number of users almost five-fold within two years and says it is set to cross $2 billion in transactions this year.
The company last week raised $40 million from South African payments firm Net1, taking the total it has secured so far in funding to $120 million from marquee investors such as Sequoia Capital, American Express, Cisco Investments and MediaTek. In an interview, chief operating officer Mrinal Sinha talks about MobiKwik’s priorities, the annual profit scheme that was scrapped in less than a week, competition with Paytm and other issues. Via techcircle.vccircle.com
Snapdeal nudges buyers to pay before delivery with new service
E-commerce marketplace Snapdeal has introduced a new service that promises free next-day delivery and other benefits to buyers who pay at the time of purchase, in a tactic aimed at goading users to move away from the cash-on-delivery model that helped popularize e-tailing in India.
Snapdeal Gold doesn’t need any registration, offers free shipping and promises a 14-day return period compared with the usual one week. But all these facilities are only for those users who pay via credit or debit cards, Internet banking, equated monthly installments or digital wallets, Snapdeal said in a statement.
Next-day delivery will be provided wherever it is available, the company said; the facility is available in 104 cities across India.
Snapdeal, backed by Japan’s SoftBank Group Corp, hasn’t explicitly said that it will exclude people paying in cash from the new service in the future as well. Still, the move is significant considering that cash on delivery has helped all e-commerce companies grow rapidly over the past few years in a country with relatively lower penetration of cards or net banking compared with the developed economies. Via techcircle.vccircle.com
Snapdeal secures $21 MN from Luxembourg fund house
The Economic Times reported on Friday that the fund raised was part of Snapdeal’s Series J round initiated in February. At that time, the e-commerce marketplace had secured $200 million (Rs 1,362 crore) in a fresh round of funding from Canada-based Ontario Teachers’ Pension Plan as well as from Singapore-headquartered investment firm Brother Fortune Apparel and others.
That round had sent Snapdeal’s parent Jasper Infotech’s valuation soaring at $6.5-7 billion. Earlier, the e-commerce company had raised $500 million (Rs 3,250 crore) at a valuation of $5 billion in August 2015. iPhone manufacturer Foxconn, Chinese e-commerce giant Alibaba and existing investor SoftBank had led that round while some of its existing investors Temasek, BlackRock, Myriad and PremjiInvest also participated in the round.
It was reported earlier this month that Snapdeal is looking to sell a stake in payments enabler FreeCharge at a valuation of $1.2 billion (Rs 8,000 crore). Potential investors include Foxconn which could pick 26% in the payments firm. Via techcircle.vccircle.com
India: Flipkart valuation downgraded by Morgan Stanley third time in 6 months
Morgan Stanley Institutional Fund Trust, one of the mutual fund investors in Flipkart, has marked down its estimate of the company’s valuation for the third consecutive time in the past six months. Morgan Stanley values its Flipkart holdings at $84.3 a share as of 30 June, some 4% lower from the preceding quarter, according to a filing with the US Securities and Exchange Commission.
Morgan Stanley valued Flipkart shares at $142.2 a share as of June 2015, filing show. Flipkart had last raised a financing round in the middle of last year when it bagged a valuation of $15 billion.
Morgan Stanley’s markdown implies that it estimates Flipkart is now valued at around $9 billion. Via dealstreetasia.com
Foodpanda’s India unit raises $22.4m in one year
Rocket Internet-backed food ordering firm Foodpanda’s India unit has raised over Rs.150 crore ($22.3 million) in the past year in eight different tranches from Berlin-based parent Jade Gmbh and Co., according to documents available with the registrar of companies. The money has come in between July 2015 and June 2016.
Foodpanda is also looking to raise fresh funds, said Saurabh Kochhar, chief executive of the company, on Tuesday, adding it has roped in investment banker O3 Capital for the same. He said that the fresh capital will be used in enhancing technology, infrastructure, delivery and for marketing activities.
The global online food delivery company had in May announced it had raised $100 million of fresh funds from investors led by hedge fund Goldman Sachs Investment Partners. The amount raised is expected to have come from the same fund. The firm, however, declined to clarify about the same. Via dealstreetasia.com
India: Online fashion rental start-up Flyrobe raises $5.3m
Online fashion rental start-up Flyrobe by Omapal Technologies Pvt. Ltd has raised $5.3 million in a Series A funding round led by IDG Ventures, with participation from existing investor Sequoia Capital. Tokyo-based GREE Ventures also participated in this round, the company said.
Flyrobe, founded by Shreya Mishra, Pranay Surana and Tushar Saxena in 2015, had earlier raised $1.7 million from Sequoia Capital. Other investors in the firm include Snapdeal founders Kunal Bahl and Rohit Bansal, Paytm founder Vijay Shekhar Sharma, Freecharge founders Kunal Shah and Sandeep Tandon, and Zishaan Hayath, founder of Toppr.
“With this round of funding, we will continue to scale Flyrobe and grow four-to-five times by March 2017, triple our designer roster to 150 and launch in five more cities,” said Shreya Mishra, co-founder and chief executive at Flyrobe. Via dealstreetasia.com
Exclusive: Online truck aggregator TruckSumo shuts shop
The website is still live but users are not able to place orders and the company’s customer care number is also not operational.
That the truck aggregator platform was under stress came to the fore in June when it had suspended its operations and stopped taking fresh orders.
TruckSumo’s co-founder Arun Rao, however, told Techcircle.in that the company has moved from B2C to B2B model. He, however, did not elaborate on the new business and refused to answer whether the B2C platform had indeed been shut down. Via techcircle.vccircle.com
Indian e-commerce living in interesting times
E-commerce in India is never boring as evident in this week’s roundup of news and new developments. The biggest change is the tightening of venture capital & Investment funds for both startups and existing companies struggling to reach profitability. The battle for market share in online sales will continue to be fought between Flipkart, Amazon and Snapdeal. Meanwhile, Alibaba is scouting the market for the best way to enter through startup, acquisition, mergers or a combination of these strategies.
Competition in online, offline and mobile financial payment apps will continue with PhonePe, Paytm and MobiKwik. As with most startups, profitability, despite the size and potential of the Indian market, profits remain a distant dream. The region remains attractive in every segment for its size, increasing economic growth, modernization and willingness to embrace new technology faster and faster.
That’s it for news this week. Enjoy your weekend and we’ll be back on Monday with an update on US retail.