In 2015, the Indian government loosened theFDI policyfor single-brand etailers with foreign funding. The amendment to the policy now allows single brands backed by foreign investors to sell their products online. This has allowed many to expand their online retail approach.
Zivame, the online lingerie retailer,reached out tothe government to turn its retail venture into one that focuses solely on a single brand. This it plans to do to benefit from the policy introduced in 2015, as mentioned above. The retailer’s parent company, Actoserba Active Wholesale, applied to the Department of Industrial Policy and Promotions (DIPP) for:
Expansion of existing facilities
Conversion of wholesale retail activities
According tothe DIPP website, Actoserba Active Wholesale is doing this“to undertake single brand retail trading of Zivame branded products, including (through) ecommerce.”
Others single brand sellers in ecommerce
Benetton, the Italian fashion brand, has also applied to change to the single brand model and start its own ecommerce. The company’s chief executive in India, Sundeep Chugh said that the company is looking to create an omnichannel experience for customers in India this way.
Desperate times call for desperate measures. Snapdeal that’s running out of time and money just got a temporary breather.
The home-grown company’s co-founders Kunal Bahl and Rohit Bansal along with early-stage investor Nexus Venture poured Rs. 113 crore (approximately $17 million) into Jasper Infotech, Snapdeal’s parent company.
According to the Registrar of Companies (RoC) filing, the major chunk of the funds (Rs 96.2 crore) was invested by Nexus and Bahl & Bansal invested Rs 8.45 crore each.
As per few reports, this latest Rs. 113 crore funding would be utilized to meet the marketplace’s day-to-day operational expenses. On the other hand, an insider revealed that the money would be poured into Unicommerce.
Other details of the surprise emergency funding:
The investment was sanctioned in Extraordinary General Meeting of Snapdeal that was held on 10th March
In exchange of the investment, the co-founders were allotted 1,300 Series J preference shares and Nexus was given 14, 810 preference shares
What about Flipkart-Snapdeal merger?
The last update on this front was that the term-sheet has been signed and the due diligenceto determine Snapdeal’s worth is underway. But it is taking longer than expected, which has left the Indian etailer with little cash reserves.
Cash-crunch compelled Jasper to infuse Rs. 22 crore in its payments arm Freecharge, which is on-sale. Now the co-founders and Nexus had to do the same for Jasper.
The plus side of this is that Bahl, Bansal and the investors would roll in money once Snapdealand Freecharge get acquired by Flipkart and Paytm, respectively. Because with each investment, their personal stake in the soon-to-be-sold company is increasing.
The Indian ecommerce leader just wrapped up its 10thanniversary sale ‘Big 10’. In less than 2 weeks, Flipkart has rolled out its summer sale.
Flipkart’s ‘Summer Shopping Days’ will run till 31st May. The etailer is offering discounts of up to 80% on electronics and auto accessories. Lucrative offers on top brands such as Apple, Adidas, Lenovo, Samsung, Motorola, Micromax, Nikon, Fastrack, and Voltas are up for grabs. The trusted EMI, product exchange and buybacks schemes would also make an appearance, which would help Flipkart to attract first-time buyers.
Flipkart witnessed five-fold increase in its order volume during the Big 10 sale. Let’s see how much would the Summer Shopping sale contributes to its FY 2017-18 Q1 revenue.
Ecommerce seems to be a hit with everyone even the Indian government. Back inJuly, last year, the country’s ecommerce ministry launched an e-marketplace to bring more transparency and streamline the procurement of goods and services by the government.
This year, the government amended the General Financial Rules (GFR) making it compulsory for central and state agencies to purchase all office requirements through the Government e-marketplace (GeM). InApril this year, the Union Cabinet ordered the wind up of the procurement department under the government and replaced it with GeM.
Now, since the scope of the portal has increased the government is looking for a private company to build and manage the platform. The broadened scope of the platform makes this opportunity more exciting for companies. So much so that evenFlipkartandAmazonare eyeing it.
Why is GeM a big deal to etailers?
Handling GeM will require managing the biggest buyer in the country, i.e. the government. The portal caters to ministry and department procurement needs. It offers items like laptops, air conditioners, furniture and daily use items like stationary. These items can be purchased by states and the central government bodies. On the service level, GeM covers taxi services, transportation, pest control, laundry and florist services to make the procurement process more efficient.
More than 21,000 products and 17 services will be available on GeM which is currently run in-house. From August 2016 to April end this year, the portal received purchases worth Rs. 454 crore in total.
In a year, the procurement needs of state governments and the central government amount to Rs.5-7 lakh crore, approximately.
“The value of the contract will depend on the transactions. There would be a revenue-sharing model with the MSP (managed service provider) in which the private company’s share has been capped at 0.5% of the total transaction value payable quarterly,”saidan official.
A sourcesaid,“It will be a mega opportunity if all the government departments start to procure through it. The size of the project could anywhere be between Rs 900-1,000 crore.”
How will companies join the government?
According to reports, many sources confirmed that Flipkart and Amazon have shown interest in a managed service provider (MSP) contact with the GeM. The government recently sent out a request for proposal (RFP) regarding the same. The final submission deadline is June 1st. Executives from these ecommerce companies were present at the pre-bid meetings organised by the government. A top tech firm executive stated that this project is a hit with ecommerce firms like Amazon and Flipkart showing visible interest.
The executiveadded,“Flipkart is a logistics provider, they know the game. Amazon is also hovering.”
The person also mentioned that these companies will need to join forces with tech vendors since they cannot provide their own platforms to the government.
Flipkart is likely to team up with Microsoft for technology since the RFP promotes IT and ecommerce company collaborations for collective bidding. According to sources, Amazon received permission from US-headquarters to go ahead and the franchise is looking to present its cloud services if it is selected. But, Flipkart and Amazon are not the only ones aiming for the MSP designation at GeM. Tata Consultancy Services, Accenture and Wipro are also in for the coveted five-year contract that is extendable up to two more years.
The official mentioned abovesaid,“Formation of consortium is up to the private companies. The government will only talk to the lead partner.”
How will payment work on GeM?
Within 10 days payments are required to be made by all government agencies for goods and services acquired from vendors. GeM is expected to prioritise payments which are a major concern among vendors. The portal is planning to make them happen much faster.
The special purpose vehicle for GeM will cover MSP payments within a month from the date of transaction. Vendors will be asked to pay for registration on the platform to ensure revenue is sourced for the portal.
Partner and retail sector leader at KPMG India, Mohit Bahlsaid,“Whichever company gets the contract will add the country’s largest buyer to its customer base.”
The successful bidder could also receive advantages other than revenue. If ecommerce front runners manage to strike a deal to manage GeM, they will be a mammoth sized lead over their competitors.
The Indian ecommerce industry currently resembles an aggressive ongoing war with multiple battlegrounds. There are many mini-wars being fought to winthe ultimate war. One battleground isprivate labels, another one islarge appliancesand the third one is digital payments.
Let’s take a close look at the third battleground.
Amazon Pay in the market for third-party clients
AfterinfusingRs. 67 crore into its payments arm Amazon Pay, the ecommerce giant has started work on expanding its business. Amazon’se-wallet recently initiatedpayments on online services Housejoy, Faasos and Box8. The etailer’s aim is to makeAmazonPay an alternate source of revenue by tying-up with third-party companies.
By limiting its service to parent company would restrict Amazon Pay’s growth. Therefore, it is flying solo and penetrating into the e-payments industry.
Without disclosing any specific company names that it is partnering with, Amazon’s spokespersonsaid,
“We are always testing ways to improve experience for our customers and these experiments are part of that.”
The popularity of e-wallets touched a new high in the post-demonetisedIndia. Online marketplaces that were looking to break away from cash-on-delivery rejoiced when online buyers started embracing digital payment methods.
So what is it about e-wallets that ecommerce companies particularly find irresistible?
According to the industry watchers, having their own payments arm gives an extra edge to ecommerce companies. This is why the top players are investing heavily into this department.
A digital wallet and payment entity enable etailers to:
Test the water in an emerging ecommerce market (Example: Alibaba)
Gain insights into consumer buying behaviour and spending patterns
Gauge the size and volume of ecommerce business
Offer features to ease payment transactions to its customer base
Encourage prepaid orders and reduce the volume of COD orders
Offer special previews, cashback, deals and discounts
Provide sense of security to customers who are wary of online payments
The above reasons along with few others are driving the growth of this ecommerce vertical. But how much would this help Amazon, Paytm and Flipkart to win the Indian ecommerce race is yet to be discovered.
Ahead of its Big 10 anniversary sale, Flipkart announced its plan to reduce dependence on smartphone sales by focusing on private brands. The ecommerce biggie is in the middle of developing exclusive products across various product categories, which would go live before the 2017 edition of annual Big Billion sale.
“Instead of increasing spending only on marketing and discounts, we have decided to invest more in technology and brands. These will help us build moats and improve the bottom line.”
The allure of private brands has captured many ecommerce companies’ attention. Be it ecommerce giant Amazon or niche fashion etailer Koovs, all are investing heavily in developing their own line of products. And rightly so, because it allows etailers to earn fat margins, operate on their own terms, modify product offerings and maintain control over quality, quantity & delivery.
Won’t turn into private labels etailer, says Myntra
In spite of the many benefits of own-labels, fashion etailer Myntra wants to strike the right balance between private and national brands. The company understands that established brands have a higher customer pull and diverse product portfolio is essential in today’s competitive business environment.
“We want to cap the contribution of private labels to a third of our overall business. We want to keep our identity as a multi-brand retailer and not turn into a private label business”, said Narayanan.
As of now, the company’s private brands such as HRX, Roadster, Anouk, and Dressberry account for 23-24% of revenue. By the end of this year, Myntra plans to increase contribution of these brands to 30%.
More full-price sale events on the horizon
In order to reduce dependence on discounts, Myntra experimented with full-price sale. As customers equate sale with discounts, the etailer failed to touch its revenue target of Rs. 100 crore. But this hasn’t dissuaded Myntra from hosting similar events in the future, albeit with few changes.
“One of the things we learnt from the full-price sale was that you need to have a lot more high fashion and exclusive merchandise. That’s what customers are looking for when you ask them to pay full-price. Another thing is, the sale should be longer. Because a full-price purchase won’t be an impulse purchase, customers like to browse and delay the decision. They want to come back later and see if they feel like buying it.”
Would no-discount sale events affect Myntra’s customer satisfaction meter negatively? Or would the wide range of private and established brands keep the buyers happy?
Onlinefurniturewas touted to be the next big thing in the Indian ecommerce industry. But the contribution of this category to the overall ecommerce sales hasn’t been impressive in the last two years. While mobile phones and fashion category continue to grow from strength to strength,furniture sales seem to be sluggish.
In 2015, mobiles phones’ contribution to Indian ecommerce industry’s sales was 42%, fashion 20%, and furniture less than 1%
In 2016, mobile phones’ contribution increased to 48%, fashion to 22% and furniture only 1-1.5%
Low cost products and offline stores to the rescue
Industry experts believe that the inherent nature of the category doesn’t leave too much scope to increase the volume of sales. Online furniture as an ecommerce vertical is quite similar to big appliances, such as refrigerator and air-conditioners, as people buy furniture very rarely and only when needed.
“Furniture consumption cannot be enhanced significantly. There is only a limited space in your house for furniture.”
But that doesn’t mean that theindustry playerswould stop trying and experimenting with new business strategies.
The market leaders andrivalsPepperfry and Urban Ladder are looking to invest in offline outlets and introducing an affordable range of products to capture buyers’ attention. In April this year, Urban Ladderdecidedto convert sellers into contract manufacturers and focus on single brand soon after receiving freshfunds.
In one of his interviews this year, Urban Ladder’s co-founder Rajiv Srivatsa spoke about fighting distractions and looking at things from customers’ eyes.
“As an organisation, we truly believe in the value of ‘customer obsession’. It is one of our core values and defines most of what we do. What is the right thing for the customer? It’s easy to get distracted and try and do a lot of things, but then you will end up biting more than you can chew,”sharedSrivatsa.
Because the online furniture industry is so unstructured at the moment, etailers don’t mind trying out innovative methods or retracting their steps to fill the gaps. In the process if few mistakes happen, e-furniture players don’t get dissuaded by it.
Ecommerce biggies’ connect with furniture
Besides the niche players like Pepperfry, FabFurnish, Urban Ladder, Furlenco and LivSpace, Indian ecommerce biggies too are interested in selling big ticket items like furniture. Amazon India issettingup new warehouses and hiring people, especially for large product categories. Flipkart alsoaimsto be a top furniture etailer.
Some believe that the online furniture industry needs consolidation to be able to sustain in this competitive market. Would the entry of ecommerce top ranks help to boost the sluggish sales? Is merger & acquisition between rival furniture etailers on the cards likeFlipkart-Snapdeal?