Cashback News – May 2: India e-commerce update

Cashback News – May 2: India e-commerce update

- in E-Commerce, Slider

India e-commerce 2016 updateWe’re back – faster, smarter and still just as friendly, after a few days of website backend updates. Thanks for your patience and we hope you enjoy getting your news faster after these improvements. Today, we take a look at Indian e-commerce and how some of the early success stories are surviving and how some of the newcomers are challenging. It’s a huge market but not yet profitable one. So, here’s what’s happening.

Boston Consulting Group (BCG) released a report estimating India’s online retail market at $50 billion in 2015. Some say growth to date has been driven by deep discounting and is not sustainable. India’s e-commerce business is expected to grow 6-times to US $101.9 billion by 2020, according to another report by CII-Deloitte. New Indian government regulations forced Flipkart, Amazon and Snapdeal to temporarily suspend sales discounts while they figure out how to respond to new regulations. Smaller online sellers have sent a petition to the Prime Minister asking for protection of their rights against bigger competitors.

All India Online Vendors Association (AIOVA) also demanded to be consulted by the government on future changes in regulations. Amazon India‘s market share grew from 14% to 24% putting it into second place behind Flipkart (down to 37% from 43%) and dropping Snapdeal to third place (down from 19% to 15%). T Rowe Price marked down its shares of Flipkart by 15%, following Morgan Stanley‘s earlier move. Walmart India reorganized its management team and placed India in its emerging markets group.

While Jabong’s parent company Global Fashion Group raised secured $339 million in new funding, its valuation dropped by 68%. After just six months of operation, Flipkart is aiming to be India’s largest furniture company by the end of the year. Goldman Sachs’ Principal Strategic Investments (PSI) group is looking to invest in early-stage Indian startups, mainly those focused on big-data analytics and machine learning.

The $50 billion Indian e-commerce prize much-debated question doing the rounds these days is this—when will the e-commerce bubble burst? For many entrepreneurs who have shut shop or sold out, it may have happened already. But for those going strong, there is still scope for scaling greater heights.

In February, the Boston Consulting Group (BCG) released a report titled Decoding Digital @ Retail, published in collaboration with the Retailers Association of India. The report estimated the size of the online retail opportunity (goods only) to be $50 billion. What followed was a lively debate among the likes of Sachin Bansal of Flipkart, Kishore Biyani of Future Group and the inimitable investor, Rakesh Jhunjhunwala.

While everyone agreed with the underlying trends and opportunities, half the panel thought that the estimate was seriously under-reported and the other half refused to believe a number so high. That tells us that the estimate will probably be spot on! The discomfort of the naysayers flows from the belief that a lot of the growth achieved so far has been driven by heavy discounting, mostly funded by investors looking to build scale. So, the critical question is whether this is true and what will happen if and when the plug is pulled. We tried to get to the heart of this matter, supported by data. Via

E-Commerce: A game changer for India

E-Commerce a game changer in IndiaIndia’s e-commerce business is expected to grow 6X to US $ 101.9 billion by 2020, according to a CII-Deloitte report. Powered by new age technology, convenience, higher adoption rates and large reach, B2C e-tail is expected to race ahead from its US $ 40 billion market size in 2015, excluding online travel and classifieds.

The report, E-Commerce in India – A Game Changer for the Economy — which highlights the journey of transformation in the way business is done in India powered by e-commerce — also showcases how digitalization offers the power to create innovative, sustainable, consistent and seamless shopping experience across all channels.

The report suggests that B2B e-commerce landscape is powering ahead with the availability of affordable smartphones, 220 million users as of November 2015 (beating US and second only to China), and mobile internet spends rising from 54% to 64% between 2014 and 2015, as 3G and 4G networks roll out with affordable broadband.

Consequently, this sector is attracting VC/ PE investments with over US $ 20 billion deployed in 2015. And while B2B e-commerce struggles with low profitability as consistent with global trends, the GMV (Gross Merchandise Value) of B2C e-commerce in India crossed US $ 16 billion in 2015. Via

E-commerce firms put sales on hold’s largest online marketplaces Flipkart, Amazon India and Snapdeal have temporarily suspended their sales so as to comply with new e-commerce regulations that ban marketplaces from influencing product prices, five people familiar with the matter said.

While the three companies continue to fund discounts purportedly given by third-party sellers on their sites, they have cancelled planned sale events and accompanying advertisements to avoid potential punishment from regulators, said the five people, all of whom spoke on condition of anonymity.

Flipkart has cancelled its plan of doing an app-only sale during the first week of May, the people said. Snapdeal and Amazon, too, have suspended their plan of holding a one-day sale event, where products across categories were supposed to be offered at massive discounts, they said.

The three companies are in the process of devising new ways to fund discounts and advertise sales, the people said. The three companies want to be ready with the new discounting mechanisms and ad messages in time for the festive season which kicks off in August and goes on through Diwali, which falls in October. Via

Why talk to only Flipkart, Amazon, Snapdeal? We need help too, online vendors to PMO on online marketplaces have written to the Prime Minister’s Office (PMO) demanding regulations to safeguard their rights and help resolve their issues with ecommerce giants that claim all the credit for the online shopping boom in recent years, largely on the back of deep discounting.

“We are not being called for discussion by your (government) agencies. But you are calling Bansals and Bahls of the world,” said the petition by All India Online Vendors Association (AIOVA), referring to Sachin Bansal and Binny Bansal of Flipkart and Kunal Bahl of Snapdeal.

The PMO has forwarded the petition to the ecommerce section of the department of electronics and information technology (DeitY) under the communications and IT ministry. The petition and the action taken by the PMO have been put on the grievance redressal portal of the department of administrative reforms and public grievances. Via

Amazon pips Snapdeal to become India’s 2nd largest online marketplace after Flipkart was India’s second-largest online marketplace by shipments last month, industry estimates show, as it dislodged Snapdeal to become the only major player to increase share from a year ago.

Market leader Flipkart’s share of shipments fell to 37% in March from 43% in the same month in 2015, and Snapdeal’s fell to 14-15% from 19%, show estimates by an investor tracking the logistics market and the chief executive officer of a logistics company that handles shipments for online retailers. Amazon India’s unit market share surged to an estimated 21-24% from 14%. Although the data are snapshots of shipments a year apart, they definitely point to a drop in the volume market share for the India-based companies. Other industry experts and analysts corroborated the numbers. Via

T Rowe Price marks down its Flipkart stake by 15% mutual fund managed by T Rowe Price has marked down its shares of India’s most valued internet company Flipkart by 15%, the second investment firm after Morgan Stanley to resort to such a move. T Rowe Price had first invested in the Bengaluru-based in December 2014, when the e-tailer announced a $700 million round of funding which also participation from sovereign wealth fund Qatar Investment Authority and Hong Kong-based hedge fund Steadview Capital.

T Rowe Price’s markdown of its Flipkart shares is part of a global trend, as the mutual fund has slashed value of world’s most valued startups like ride hailing start up Uber Technologies and home rental website AirBnB. T Rowe marked the value of its Flipkart shares at $120.69 per unit, according to its filings made for March quarter, as compared to the value of $142.26 assigned to them at the end of December 2015.

The markdown would peg Flipkart’s valuation close to $13 billion, as compared to the $15.2 billion when it last raised capital in July 2015. The markdown by T Rowe Price is not as drastic as Morgan Stanley, which said in a regulatory filing in February that it had valued its Flipkart’s shares at $103.97 a piece down from $142.24 a piece, pegging Flipkart’s valuation at $11 billion. Via

Walmart revamps; India CEO will now report to emerging markets head retail giant Walmart Stores Inc today realigned its business structure by removing India unit from Asia region and moving it to emerging markets portfolio.

The firm also appointed Enrique Ostal as Executive Vice President and Chief Executive Officer Walmart Latin America, India and Africa, effective from February 1. “This is in addition to his role as President and Chief Executive Officer Walmart Mexico, Central America and LATAM (Latin America),” the company said in a statement.

Walmart International President and CEO David Cheesewright said:” Enrique’s experience is perfectly suited for aligning our emerging markets with our core business strengths while serving our customers uniquely and in the most efficient ways.” Via

Jabong parent raises $339M; valuation plunges Fashion Group, the parent of loss-making Indian fashion portal Jabong, has raised fresh funding from its existing investors but at a sharply lower valuation.

The company secured €300 million ($339 million or Rs 2,250 crore) from Germany’s Rocket Internet SE and Swedish investment firm Kinnevik. The transaction values the company €1 billion, Rocket Internet said in a statement. This is a drop of almost 68% from its previous funding round in July when it was valued at €3.1 billion.

Kinnevik will invest up to €200 million while Rocket Internet will underwrite the remaining. Rocket Internet said it expects to invest up to €85 million including the conversion of an existing investment at the terms of the financing. Separately, Kinnevik said GFG will get pre-funding of €50 million as shareholder loan during the first quarter. Via

Flipkart eyes becoming India’s largest furniture retailer by year-end Flipkart has set its sights on becoming India’s largest furniture retailer by the end of this year with an ambitious target to register a 15-fold growth in the high-value category, which also promises to deliver healthy profits. The nine-year-old company has so far relied primarily on categories such as electronics, mobiles and apparel to fuel its rapid growth.

This year, the need to temper growth with profits has led the Bengaluru-based company to seek out newer product categories like home furnishing and automobiles that deliver both large transaction size and margins. Launched just six months ago, furniture is now one of the top categories for Flipkart as it squares up to stiff competition from specialised portals such as Urban Ladder and Pepperfry. Also in the fray is Kishore Biyani’s Hometown, which recently acquired Rocket Internet-owned Fabfurnish to build an ‘omnichannel strategy’,which involves selling both online and offline. Via

Goldman Sachs’ game plan for venture investments in India banking giant Goldman Sachs’ Principal Strategic Investments (PSI) group is looking to invest in early-stage Indian startups, mainly those focused on big-data analytics and machine learning, as it seeks to ramp up its venture funding activity in the country.

The group, which invests from Goldman Sachs’ balance sheet, is in initial talks with a few companies in India as well as Asia-Pacific for investments, PSI managing director Alokik Advani said at a conference. He declined to name the startups the group is in discussions with. “We don’t have a magic target. We are very opportunistic in how we think about this. When we go out and meet a whole series of startups, the numbers could be anything. It depends on what we’re able to find,” said Advani.

Advani laid down a three-fold approach that the group intends to take towards its investments in the country. The group will invest in companies where it can take a minority stake and where the technologies can be used at Goldman Sachs. It also intends to participate in local mentorship programmes to promote startups. Finally, the PSI will look to commercialize its technology by offering it to third parties. Via

Indian e-commerce bustles, profits not so much

Profitability is the next big hurdle for e-commerce companies in India. Discounting has helped build the market quickly but the profitability hurdle is proving more challenging. We expect to see some interesting mergers, acquisitions and partnerships throughout 2016 and will be right there to bring you coverage. If you’d like to get regular weekday morning news highlights in your inbox, just sign up above. Coming up this week, we’ll also look at US e-commerce, new developments in logistics and mobile commerce.



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