rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » E-commerce start-ups face battle with Tatas, Reliance in fray

E-commerce start-ups face battle with Tatas, Reliance in fray

August 07, 2014 10:59 IST

E-commerce start-ups face battle with Tatas, Reliance in fray

     Next

Next
Nivedita Mookerji in New Delhi

Tata Sons, Reliance Industries and Aditya Birla already have well-established retail brands and are capable of pumping in large sums of money into the promising sector. 

E-commerce is the flavour of the month. First, homegrown Flipkart raised $1 billion from private equity funds, which valued the e-retailer at over $7 billion. 

The very next day, Jeff Bezos, the founder and CEO of Amazon, announced an additional investment of $2 billion in India.

This sparked off speculation that another prominent Indian e-retailer, Snapdeal, could be planning something similar.

Though Snapdeal co-founder & CEO Kunal Bahl has maintained he does not believe in the herd mentality, news reports suggest that his company may attract funds from Ratan Tata, the former chairman of Tata Sons.

Please click NEXT to read more…


Photographs: Courtesy, Flipkart
Tags:

     Next

E-commerce start-ups face battle with Tatas, Reliance in fray

Prev     Next
Prev

Next
Nivedita Mookerji

Talk to experts and they will tell you the battle has hardly begun. "There's no war yet in e-retail," says Arvind Singhal, chairman of Technopak Advisors, a leading consultancy in the retail sector.

According to him, the stakes in the sector will increase manifold when big industrial houses such as the Tata, Mukesh Ambani and Aditya Birla groups join the bandwagon.

He also expects global powerhouses like China's Alibaba and Japan's Rakuten to enter the Indian e-retail market. 

The big Indian groups could get going soon. Tata Sons, Reliance Industries and Aditya Birla already have well-established retail brands and are capable of pumping in large sums of money into the promising sector.

The Tata group, the $138-billion car-to-salt conglomerate, wants to invest $35 billion in the next three years for expansion in sectors such as retail and defence.

Please click NEXT to read more…


Image: Ratan Tata bullish on e-retail sector.
Photographs: Courtesy, Flipkart

Prev     Next

E-commerce start-ups face battle with Tatas, Reliance in fray

Prev     Next
Prev

Next

E-retail is expected to be a significant recipient of this investment, and the group is busy finalising the details.

Reliance Industries, with revenues at around $66 billion, already has a profit-making retail business; it has ambitious plans to expand it and make e-retail integral to its businesses.

In fact, the Mukesh Ambani-run company has announced that it will enter e-retail by the end of the year.

The $40-billion Aditya Birla group, which runs the More and Pantaloon chain of stores, too, is expected to make a big splash in e-retail, say analysts. 

What could help the three Indian groups in e-retail is their presence in telecom services.

The millions of mobile phone subscribers they have (Reliance Jio's service is yet to be launched) are potential e-shoppers on their portals as well.

Please click NEXT to read more…


Image: Mukesh Ambani plans e-retail by the end of the year.
Photographs: Reuters

Prev     Next

E-commerce start-ups face battle with Tatas, Reliance in fray

Prev     Next
Prev

Next

The country has over 900 million mobile phone subscribers currently and estimates suggest that 40 to 50 per cent of all online shopping in the country is done through mobile phones. 

Apart from these, there are international majors such as America's Walmart, which has already begun its cash and carry (wholesale) e-commerce in India.

Walmart is likely to get into mainstream e-retail in the country once the government allows foreign investment in the sector, or it may enter it through the marketplace route as Amazon and eBay have done. 

Please click NEXT to read more…


Image: Walmart store
Photographs: Reuters

Prev     Next

E-commerce start-ups face battle with Tatas, Reliance in fray

Prev     Next
Prev

Next

Shopping on the go 

The Indian e-retail (excluding travel-related transactions) market is pegged at around $3 billion at present, and is expected to grow to around $22 billion (about Rs 1,34,420 crore) in five years, according to a CLSA report.

This is a sliver of the $500-600 billion retail market in India. So the upside is huge. India's e-retail is expanding at a compounded annual growth rate of about 34 per cent, according to a report by Digital Commerce.

The tipping point is about two years away, when the real growth story and e-retail wars will unfold in India, point out industry stakeholders.

Even today, the conversion from offline to online retail is happening at a fast clip. After bookstores, electronic stores have begun to face the heat.

Please click NEXT to read more…


Photographs: Courtesy, Flipkart

Prev     Next

E-commerce start-ups face battle with Tatas, Reliance in fray

Prev     Next
Prev

Next

Mobile handset makers Motorola and Xiaomi have chosen to launch products for the mass market only online. Food stores all of a sudden find themselves short of delivery boys because they have all been poached by e-retailers as couriers. 

Going by the recent deals, funds do not appear to be a constraint for the e-retailers. Private equity funds are more than ready to loosen their purse strings, even though profits are nowhere in sight, because they see in it the future of retail.

E-retail is more efficient than offline retail, but, because it's a new sector, not many have been able to find a foolproof mantra for success. Cutthroat discounts have made profits hard to come by.

Globally too, the scenario is challenging. Even Amazon reported a loss of $126 million in the quarter ended June 30. Only Alibaba, which is in the market to raise funds through an initial public offer, is profitable.

Please click NEXT to read more…


Photographs: Courtesy, Xiaomi

Prev     Next

E-commerce start-ups face battle with Tatas, Reliance in fray

Prev     Next
Prev

Next

Its net income almost tripled to 23 billion yuan in the year-ended March 31, 2014, compared with 8.4 billion yuan a year ago.

While Flipkart's promoters, Sachin Bansal and Binny Bansal, have maintained that profitability is a long-term target, Amazon India's head, Amit Agarwal, says: "We have a very long term outlook in India and are not looking at immediate profitability."

Even Bahl of Snapdeal, which has raised around $350 million since 2010, in a recent interview said profitability was not something he was looking at currently. 

While the big retailers, Indian as well as foreign, chalk out their plans, Indian e-retail start-ups are going all out readying for the coming battle: from raising funds to investing in hiring the best talent from Silicon Valley and premier B schools, scouting for real estate to multiply their warehouses and fulfillment centres for a solid back-end and foolproof one-day delivery in as many cities as possible.

Please click NEXT to read more…


Photographs: Reuters

Prev     Next

E-commerce start-ups face battle with Tatas, Reliance in fray

Prev     Next
Prev

Next

Most of them are even preparing for mergers and acquisitions and have hired specialists in this field.

While they are planning acquisitions of other e-retailers and expect technology players to grow, there's the possibility of some of the big players getting swallowed in the process, according to an industry expert who does not want to be named. 

As of now, the industry leaders are gung-ho. It is their time to celebrate, perhaps. Sachin Bansal, co-founder and chief executive of Flipkart, said last week the next big goal was to take the company's valuation to $100 billion.

"India is set to have many hundred-billion-dollar companies and Flipkart could be one of them. We are ready to do what it takes," is how Sachin described the aspiration of Flipkart, an online bookstore that he had co-founded along with Binny (the two Bansals are not related) seven years ago.

The company has now diversified into multiple categories including fashion, accessories, electronics, lifestyle and the latest being adult well-being. Automobile is perhaps the only area that it won't enter. 

Please click NEXT to read more…


Image: Sachin Bansal.


Prev     Next

E-commerce start-ups face battle with Tatas, Reliance in fray

Prev     Next
Prev

Next

Funds no bar 

Flipkart has raised $1.76 billion in the seven years since its launch in 2007 and is currently valued at $7 billion, way below Amazon's $148 billion.

In its first announcement on any financial matter so far, Amazon, which set up shop in India in June 2013, made public its $2-billion investment last week. It's the largest investment so far by any e-commerce company in India.

"We see a huge potential in the Indian economy and for the growth of e-retail in India. With this additional investment of $2 billion, our team can continue to think big, innovate, and raise the bar for customers in India," Bezos said in a statement.

At current scale and growth rates, India is on track to be Amazon's fastest country ever to reach a billion dollar in gross sales, he added.

Please click NEXT to read more…


Image: A worker collects items to pack into boxes at Amazon's logistics centre in Graben near Augsburg.
Photographs: Michaela Rehle/Reuters

Prev     Next

E-commerce start-ups face battle with Tatas, Reliance in fray

Prev     More
Prev

More

The company has not given any target date for touching the $1 billion gross sales target in India, a benchmark that Flipkart achieved earlier this year. 

India is one of the last potential e-retail markets Amazon is testing out. Amazon did not divulge its total investment in India. But information available with the Registrar of Companies suggests that Amazon invested around Rs 1,500 crore (Rs 15 billion) in India till December 2013. 

Snapdeal, which was a marketplace player from the early days, likes to compare itself with Alibaba.

Sachin Bansal of Flipkart, which turned a marketplace player from being an inventory-led company initially, also referred to Alibaba recently when questioned about the Bansals' diluting stake in the company as it raises more and more funds: "Alibaba's Jack Ma or Apple's Steve Jobs too had single-digit stakes in their companies".

Besides the leaning towards the Alibaba model, the current lot of e-retailers is also shying away from listing the companies on stock exchange.

But only when the real war unfolds in e-retail once the big business houses come in will we know the potential of the current newsmakers.

 


Photographs: Reuters

Prev     More
Source: