Thursday 30 April 2015

Government not considering proposals to review FDI e-commerce policy

Government not considering proposals to review FDI e-commerce policy
"At present, there is no proposal under consideration of the government to review the FDI policy on business to consumer e-commerce," commerce and industry minister Nirmala Sitharaman said.
NEW DELHI: The government has said there is no proposal under consideration to review the foreign direct investment policy on the e-commerce sector. 

"At present, there is no proposal under consideration of the government to review the FDI policy on business to consumer (B2C) e-commerce," commerce and industry minister Nirmala Sitharaman said in a written reply to the Rajya Sabha. 

Global retail giants like Amazon wants India to relax the foreign investment norms in e-commerce space. 

India's Foreign Direct Investment (FDI) policy restricts e-commerce companies from offering services directly to retail consumers. At present, 100% FDI is allowed in business -to-business (B2B) e-commerce but not in retail trading. 

In a separate reply, the minister said the government has not taken any decision with regard to implementation of FDI policy in the multi-brand retail trading. 

Currently, as per the policy, 51% FDI is allowed in the multi-brand retail sector. 

In another reply, Sitharaman said an action plan has been developed for improvement of regulatory environment and increasing ease of doing business in the states. 

"States have been requested to complete action by June 30," she said. 

The government has said it wants to improve India's position to top-50 in terms of ease of doing business from 142nd currently, as per the latest World Bank report in this regard.

Flipkart buys engagement startup

BENGALURU: Flipkart has acquired Delhi-based mobile engagement and marketing automation company Appiterate.

This is the e-commerce major's second acquisition this year after it bought mobile ad network AdIQuity for an undisclosed amount. Both acquisitions show Flipkart's increasing focus on mobile commerce.

Appiterate, co-founded by Tanuj Mendiratta, Anuj Bhargva, Mayank Kumar and Varun Sharma, has helped leading e-commerce companies leverage the power of mobile apps and big data for targeted marketing though push notifications and in-app messages.

The platform has been delivering more than 100 million personalized notifications each month.

Monday 27 April 2015

Snapdeal's annual sales likely to touch Rs 6,100 crore

E-commerce company Snapdeal, one of the top rivals to Flipkart, is likely to achieve annual sales, described in the online world as gross merchandise value (GMV), of Rs 6,100 crore ($1 billion) within the next two-to-three months, sources said.

Earlier this month, Flipkart had announced it would touch the sales run rate of $1 billion much ahead of the target date. Both Flipkart and Snapdeal have been aiming for $1 billion GMV by 2015.

GMV is the worth of sales transactions on a website. E-commerce players calculate the annual GMV based on the monthly run rate.

Kunal Bahl, chief executive officer and co-founder of Snapdeal, declined to comment on the GMV target. However, sources indicated the company would reach the target way ahead of its 2015 schedule and might list in the US stock market within two years. Recently, Koovs, a fashion portal, became the first non-travel e-commerce website to list on AIM of London Stock Exchange.  “Going for public listing right now takes away some flexibility that we need as a growing company in an emerging market. We will take some time before we do that,” Snapdeal’s Bahl told Business Standard. The company, a leading marketplace player as opposed to inventory-led format, was recently in the news for raising its fourth round of funds,'estimated at Rs 830 crore from investors led by eBay,

Snapdeal, launched in 2010, is expecting over 50 per cent of its sales through mobile by the end of this year and is looking at spending more aggressively in technology. At present, 35 per cent of its transactions happens through mobile.

“Rohit Bansal (COO and co-founder) and I continue to be the largest individual majority share-holders in the company after the latest funding,” said Bahl, while countering speculation on buyout attempt by eBay.  Bahl, however, refused to share any information on eBay’s stake, which the market pegs at around 20 per cent in Snapdeal. However, some industry sources argued that eBay’s stake in Snapdeal was below 20 per cent because of US regulations. “If they (eBay) is anyway close to 20 per cent, Snapdeal’s finances have to be consolidated in eBay’s balance sheet according to US norms.“

Commenting on the next round of funding, Bahl said the company was well funded for now. The firm will spend the funds in technological innovations for sellers and expand its base of engineers. "We are hiring over 100 engineers from across the country. We will look at customer acquisition and expanding our seller base and make it increasingly simple for sellers to work with Snapdeal," said Bahl, who claimed the company had grown over 500 per cent from last year.

Meanwhile, fashion has become about 60 per cent of the Snapdeal sales unit from almost zero about 15 months ago, said Bahl. The largest category on the website-fashion - is growing by about 40 per cent month-on-month.
The company is not planning any private label, unlike competition. "We will never compete with our sellers. We don't think a private label is a bad idea, but we are not retailers but a platform for small businesses in India," said Bahl.
Furniture is another key category expected to expand on Snapdeal. Recently, Godrej Interio launched its new products exclusively on Snapdeal.

E-commerce dominates PE deals in India’s technology sector

E-commerce has become the most attractive space for private equity (PE) investment in India, leading to deals worth a record $11.5 billion in the entire technology sector last year, says a report by Grant Thornton and Indian Private Equity and Venture Capital Association (IVCA) released on Friday.
There were also about 400 mergers and acquisitions in the technology sector, and e-commerce accounted for 75% of the total value of such deals, up from 30% in 2012, says the report.
“A large part of the total deal value consists of big ticket e-commerce PE investments along with large cross-border acquisitions by leading IT majors,” the report said.
The trend continues in 2015.
“While all sub-segments within e-commerce have garnered investor interest in terms of number of deals, e-tailers such as Flipkart andSnapdeal, with their multiple products and brands, have driven big-ticket investments constituting 68% of the total deal value in 2014,” the report said.
“India, from being merely a technology adapter or importer, is now becoming creator for technology enabled disruptive solutions. There is a clear desire and confidence that Indians can create unique solutions for the local market and also compete actively in the global market,” said Harish H.V., partner, Grant Thornton India Llp. “What started as an inflow of investments into e-commerce shopping portals like Snapdeal, Flipkart in 2014, transformed into a full-fledged focused strategy with aggregators likeOla, Quikr, Foodpanda, which secured multi-million dollar investments at billion-dollar valuations,” he said.
Eighty percent of PE investments were under $10 million deals.
“With a stabilizing capital market, stable government and hopes of new reforms, we expect heightened interest from global investors in the Indian economy in the coming year,” said Arvind Mathur, president, IVCA.
Top PE deals in 2014 included Morgan Stanley Investment Management, GIC, Accel Partners, DST Global Solutions Ltd, Iconiq Capital and Sofina Capital investing $1 billion in Flipkart Online Services Pvt. Ltd.
Baillie Gifford and Co., Greenoaks Capital, Steadview Capital,T. Rowe Price Associates, and Qatar Investment Authority and existing investors infused another $700 million in Flipkart.
Softbank Corp. invested $627 million in Snapdeal, and Capital Square Partners, CX Partners and others acquired 100% of Aditya Birla Minacs Worldwide for $260 million.

The curious case of India's e-commerce

 E-commerce has lately become a keenly watched sector in India, especially with a handful of home-grown successful ventures being valued at billions of dollars. While domestic players Flipkart and Snapdeal rule the market, the sector has also caught the fancy of global giants like the US’ Amazon and China’s Alibaba — all are competing hard for a bigger share of the cake.
The country’s e-commerce market was worth $2.3 billion in October last year and retail consultancy Technopak has estimated its value will increase more than 10 times to $32 billion by 2020. More, since the online market at present accounts for less than five per cent of India’s retail business, there still is a huge untapped space in e-commerce. The $15-billion valuation that Flipkart is eyeing in its next round of funding seems to reflect this potential, and aspirations of the existing and start-up e-commerce ventures.
Flipkart co-founders Sachin Bansal and Binny Bansal (not related to each other) today are role models for India’s aspiring entrepreneurs — mostly millennials — hoping to make it big in e-commerce.
But it was not the Bansals or the now-successful e-retail companies that ushered in India’s e-commerce boom. Way back in 2000, a handful of shopping sites like Rediff Shopping, Yahoo! Shopping, Indiatimes Shopping, Sify Shopping and HomeShop18 were doing roughly the same thing.
In fact, India’s e-commerce potential as we know it today was first spotted by the $18-billion (revenue) US firm eBay, which entered the country in 2004 — three years before Flipkart’s low-key start as an online bookseller — by acquiring local auction platform for about $55 million. It was eBay that brought the concept of online marketplace, where sellers and buyers engage directly.
However, neither eBay nor the hit shopping sites of the 2000s could get a first-mover advantage, despite their healthy parents, technology, favourable business model and brand equity — they were ahead of their time, say some experts. At the time eBay entered India, less than 10 million people in the country had access to the internet, and most of them were wary of shopping online, for want of clarity and trust.
All those shopping sites, as well as eBay, continue to operate in India but do not figure among top e-commerce players. All of these companies had lost the plot by the time e-commerce (as we know it today) took a shape here.
In an interview last year, eBay India Managing Director Latif Nathani had conceded his company not in the “valuation game” despite having the largest number of sellers on its marketplace. According to its filings with the registrar of companies (RoC), eBay India’s revenue stood at Rs 81 crore in 2012-13, about 60 per cent higher than the previous year.
By comparison, Flipkart was reported to have grown about 476 per cent in value of goods sold during the period. According to market estimates, eBay India sold goods worth Rs 1,000 crore in 2013, not much less than Flipkart’s Rs 1,180 crore that year. But their growth rates varied vastly.
Details of other shopping sites — Rediff Shopping, Yahoo! Shopping, Indiatimes Shopping, Sify Shopping and HomeShop18 were not available, as their parent companies did not give break-ups of their shopping portal business.
Things seem to have changed dramatically in the past few years — definitely a lot since eBay’s entry. Today, India has more than 94 million broadband users, and an internet-connected population of close to 300 million. Of them, about 39 million shop online, according to an April research report by consulting firm AT Kearney.
Milan Sheth, partner & technology sector leader (advisory services), EY, says there are several reasons why traditional e-commerce firms might have lost out. “These sites were positioned more as content providers or at best platforms for digital advertising. They never marketed themselves as e-tailers aggressively. Their product range was limited, because they did not collaborate with a wide range of suppliers and brands. Also, payment options were limited.”
PricewaterhouseCooper’s India technology sector leader, Sandeep Ladda, believes one of the key reasons for the failure of shopping sites from the pre-boom era was that they were “more focused on sellers than consumers”. Other challenges were limited ability to carry out product quality check and very limited product catalogue.
“There was no control on serviceability and product fulfilment cycle, and the focus was only on getting the user to transact. The actual inventory owners were responsible for shipping but did not have interactions with the user. With the user being directly involved with the website alone, there were increased communication gaps and information leakages. From a business perspective, most of these players were more of technology or internet media companies, with limited exposure to retail, and lacked defined organisational structures to operate intricate retail processes in-house,” adds Ladda.
According to EY’s Sheth, those like Rediff, Indiatimes and Sify did not evolve their business models with the internet-mobile revolution. “They did not make any investments in understanding the consumer behaviour and adapting their offerings to suit them. Their failure to build an ecosystem around online shopping in terms of suppliers, payment options, logistics, and to understand and target customers effectively, led these companies to losing out to new-age, dynamic, focused e-commerce companies like Flipkart.”
Another reason for the huge success of e-commerce companies in India is introduction of the ‘cash on delivery’ option, which helped e-commerce companies gain consumer trust.
When contacted by Business Standard, Rediff, Sify, Yahoo! and Indiatimes said they did not wish to comment.
HomeShop18 founder & CEO Sundeep Malhotra says “mobile and web are complementary and supporting channels to television” for HomeShop18. “The television business is profitable, and we are recording strong sequential growth of nearly 100 per cent on our mobile platform. The reach of TV in India continues to be 8-10 times that of internet. So, TV Home Shopping will ensure mass reach and high volume sales, while the web business will continue to attract the more discerning digital consumer,” adds Malhotra.
Ladda says, in the past decade or so, there have been several changes in consumer behaviour with respect to buying, especially in Tier-II and –III cities. “The convenience of sitting at home and comparing prices, features and products has brought new dynamics to the shopping experience.”
The increase in disposable income levels has led to bigger online order sizes, and changes in lifestyle. Shoppers prefer online channels to physical ones, for saving time and wider variety, says Ladda.
At the same time, growth has been driven further by a rapid proliferation of technology — increasing adoption of devices like smartphones and tablets, and access to the internet through broadband and 3G data connections. Another fillip is likely when 4G telephony becomes a reality. These enablers were not there when the original shopping sites had started their operations back in the 2000s.
The big difference now is that the competition is too intense and almost all players are capable of spending big. While the first-movers could not reap the benefits of early start, it might still not be too late, given that all of them are still operating.

India's Paytm forays into e-commerce; to compete with Flipkart, Snapdeal

Mobile payment services firm Paytm announced its foray into the eCommerce space, putting itself, which is backed by Alibaba, in direct competition with giants like Amazon, Flipkart and Snapdeal.
Paytm, in which world's one of the largest e-tailers Alibaba had picked up stake, expects its eCommerce entry to help revenue run rate to more than double to $4 billion (Rs 25,417 crore) by year-end from $1.5 billion now.
Revenue run rate is a term used in online retailing to indicate total sales value of merchandise sold through the marketplace over a certain time-frame.
India's Paytm forays into e-commerce; to compete with Flipkart, Snapdeal
Paytm, an Indian online payments platform backed by China's Alibaba, is pushing deeper into India's booming e-commerce industry.
"We were testing the product and already have 33,000 sellers on board. The sellers can come on board without paying a fee... The payment for products will be through the Paytm platform, which ensures that it is safe and secure for the end-consumer," Paytm founder and CEO Vijay Shekhar Sharma told reporters here.
Asked how the company expects to compete with the giants like Snapdeal and Flipkart, Sharma said the security of the platform, coupled with the variety of choices would help Paytm.
"We have 33,000 sellers and we expect this to touch one lakh by year-end. They can list their products in simple steps and customers can also communicate with the seller through chat that is built into the platform," he said.
In February, Alibaba acquired 25 per cent stake in One97 Communications, the parent of mobile commerce firm Paytm. Sharma and SAIF Partners hold about 27 per cent stake each in Paytm.
India, with its expanding Internet users and smartphone penetration, is one of the largest online retail markets in the world and is seeing growing interest from investors globally.
According to the consultancy firm PwC, the e-commerce sector in India is expected to grow by 34 per cent to $22 billion in 2015 compared with last year.
Sharma said about 66 million people are already using its wallet services and it expects the number to cross 100 million "much before the year ends."
Using Paytm's wallet, users can pay across merchant partners like Uber, Bookmyshow, IRCTC and eBay among others. The company has also launched a new app for consumers, using which they can transfer money to other Paytm wallet users.

Friday 24 April 2015

Banks bugged by 'Kunal calling Kunal' syndrome in e-commerce M&A

When Snapdeal acquired Freecharge, investment banks lost an opportunity to participate in India’s largest e-commerce transaction with an estimated valuation of $400 million (Rs 2,480 crore). Banks did not get a chance as Kunal Bahl, CEO and co-founder Snapdeal, called Kunal Shah, founder and CEO Freecharge, to discuss the deal and managed to seal it in record three weeks.

“I knew Kunal Bahl for eight years. We did not feel it necessary to involve investment bankers as we have been doing business together for some time,” says Kunal Shah in a matter of fact way. Also, Shah did not feel the need as his investors such as venture capital fund Sequoia were quite supportive. “They made this a breeze when there was alignment between the two founders,” he says.

In the rapidly evolving e-commerce industry, the M&As are based on existing investors or entrepreneurs identifying synergy with other similar companies and then driving the transaction based on business rationale or a common vision of evolution of the business. “Companies are evolving or pivoting so fast that before a third party adviser can get a true understanding of the strategic needs of a business – entrepreneurs or anchor investors are able to identify and act upon the strategic rationale that drives mergers,” says Gaurav Mehta, head of investment banking at global investment bank UBS in India.

M&A transactions in the e-commerce space has witnessed rapid growth since last year. The year so far has seen 34 transactions, up from 46 acquisitions in 2014 as per the data provided by Tracxn that specialises in tracking the start-up ecosystem. Kaku Nakhate, country head, Bank of America Merrill Lynch (BofA-ML) in a media interaction admitted to have changed her mind seeing the momentum in the e-commerce segment. The firm is believed to be building capabilities to cater to the demand specific to the industry.

While the global bulge bracket are missing from the M&A space in e-commerce, home grown investment bank Avendus has turned more agile, advising TaxiforSure in their acquisition by Ola early this year for about $200 million (Rs 1,240 crore).

However, these global banks seem to be more hooked to the industry when Indian e-commerce industry is looking for fund raising in private or public space. Citi helped mobile commerce firm Paytm raise $575 million from Ant Financial Services, a part of Chinese e-commerce giant Alibaba. Earlier Deutsche Bank advised Qatar Investment Authority (QIA) for picking up $150 million stake in Flipkart when the most valued India e-commerce company raised $700 million from investors in December.
“We believe that we can bring our strong domain knowledge and global network of corporate and institutional investors to add value in capital raising and other strategic activities for our clients in the e-commerce space in India,” says Madhur Deora, managing director, investment banking, Citi India. The banks have been quite active when it comes to public fund raising by these ventures. It led the IPOs of Info Edge in 2006 and Just Dial in 2013, also MakeMyTrip's follow-on offer in 2014.

M-commerce in India: The next level

The e-commerce wave gripped Indian market so swiftly that in no time there was a shift from brick to click. From our morning's breakfast to that favourite evening dress; e-commerce made everything just a click away. 

With some strong players and hoards of startups banking on online commerce, where does the future lie? The scorching summer appears to be heating up the m-commerce landscape in India with several reports forecasting bright prospects. 

As per the report by the Internet & Mobile Association of India (IAMAI) and IMRB International 2015, the mobile internet users in India is expected to reach 213 million by June this year on the back of growing smartphone penetration. It said that there were 173 million mobile internet users in India in December, 2014.

While number mobile Internet users in rural India are likely to grow to 53 million by June 2015, urban India will continue to account for the larger percentage with 160 million users.

This popularity of mobile phones in India is driving the country’s biggest e-commerce company to shut down its web portal within a year.
Flipkart recently announced that it will be transitioning over to its mobile app completely because of consumers' adoption and preference. The e-tailer clearly sees mobile as the dominant platform in the future as they are also shutting down all their e-commerce operations for Myntra as early as May 1. 

"A year ago, 6 per cent of our traffic was coming from mobiles. In less than 18 months, that traffic is 10-fold. As the rate of transactions mirrored that of traffic increase on the app, Flipkart's move to app-only platform makes sense," Michael Adnani, vice-president, retail and head of brand alliances, Flipkart said. 

The emerging shift is largely driven by falling handset prices and rise in smartphone penetration. A report by Morgan Stanley reveals that internet users will rise to 330 million in 2016 financial year, driven by falling handset costs, higher smartphone penetration, faster bandwidth and higher internet content or online services.

This shows the significance of what a mobile phone is doing for the consumers. Couple of years ago, being an owner of a smartphone was a style statement but today they have become far more affordable. The report said over the last two years, smartphone prices in India have come down from $200 to meagre $50. 

Now club this with the affordable rates of Internet pack that telecom service providers offer to woo customers. A 3G, 2GB pack which used to cost Rs 750 or 38 paisa ARMB in January 2013, today costs Rs 450 or 23-paisa ARMB for a 2GB pack 

The report further said, "Data growth will be driven by operator strategy of lower average revenue per mega byte (ARMB) for higher MB pack and operators having a strong data ecosystem, including strengthening spectrum portfolio."
This clearly shows how m-commerce, slowly yet powerfully, driving the e-tailers towards itself. However, they must not forget that for some consumers, a laptop or desktop offers a fuller and extended web experience which even the largest tablet or phone cannot match. This experience becomes an integral part of a transactional decision. This is an experience only a larger screen with a decent keyboard and touch/pointing device can deliver. 

Indian e-tailers are yet to stand the test of time for the mobile-only format, but the question remains; how many apps would a shopper want to have on their phone?