Monday 30 November 2015

‘Funding squeeze to continue at startups, overcrowded sectors will see consolidation’

Avnish Bajaj, MD, Matrix Partners, says the startup ecosystem will see another round of consolidation. Larger rounds of funding will be few, besides being sharply focused.

The Indian startup ecosystem is in for a course correction and funding will be hard to come by, says entrepreneur-turned-investor Avnish Bajaj, Managing Director of Matrix Partners. In an interview with Sanjay Vijayakumar, Bajaj talks about the current run of layoffs in the industry and the road ahead. Edited excerpts:

There is a lot of concern in the startup ecosystem due the recent restructuring and layoffs. What is your take on this?
This correction started in May and June this year. People have started to take notice now and are saying winter is coming. In my view it was freezing already, and the winter came in May and June.
So, the environment has started correcting. There will be a lot of consolidation in overcrowded and overfunded sectors, which is a good thing. The amount of capital coming in will get rationalised with the size of the opportunity, which is very important. Companies will go in for layoffs, while investors will focus on business models. How long it will last is hard to tell -- maybe 6-12 months.

What would be the implications of the course correction?
Larger rounds are going to be extremely few and very focused. And they will be in the best companies. Even in Series A and B rounds, it will be very hard to raise money. A lot of people will ultimately have to fund themselves.

Is there a way out?
If any of the large companies like Ola or Quickr raise their next round at a higher valuation, the environment will change. So the minute the company grows into their valuation, you can see a healthy funding environment coming back. It will come back sooner then people expect. But when, I do not know. This time there are a lot of long-term strategic investors in the market. They haven’t been there before.
We also need to keep in mind that this kind of an ecosystem and the start up investment activity is by definition chaotic. It cannot be expected to be a deterministic and straight line-process. If it was so deterministic everybody would have been a big investor and you would have seen entrepreneurs make a lot of money.

With regard to the current layoffs, including one of your portfolio companies TinyOwl, do you believe start ups need to put in better process?
Let us not make TinyOwl a specific example. A lot of companies are going through the consolidation phase, including some of the larger ones. Unfortunately, the TinyOwl situation got a little out of hand. And that happens. In other companies we have people doing dharnas and all of that. So, let’s not go company specific.
Yes, the start ups do need to build better human resource processes. They are young and that is where investors come in. We also need to guide them. On the other hand, our labour laws -- the philosophy of how you deal with labour -- are ridiculous. They are not labour, they are skilled professionals. And they can get a job in a minute, because the market is booming. So for a union guy to come in or for a politician to get involved is unhealthy.

But these layoffs have come before the festive season. Could the companies have waited and done it in a more organised way?
I think we need to grow up as a country. If we expect a Silicon Valley kind of innovation, we need to work at a similar pace. In that pace, every day, every week is important. Whether it is Diwali or not. In India, we have a festival every other week. Where do you draw the line? If somebody leaves some of the biggest companies in India, they treat them very badly. Nobody speaks about it.

What is the problem with the food tech startups?
Customer acquisition and unit economics are major problems. The others are that it is harder to build network efforts in these businesses, unlike a taxi business where once you aggregate supplies, the network effect comes in. Also, the whole food ordering business is undifferentiated, so margins are low.

Start-ups refocus on mobile web as app-only strategy loses fizz

Apps, as e-commerce companies told anyone who cared to listen, were the future. Many put their money where their mouths were, altogether withdrawing from the mobile web.
Now, as apps lose their novelty, and as smartphone users uninstall apps to clear up memory (uninstall rates are as high as 90% in some cases), these companies are revisiting their mobile web strategies.
The winner? Google, which retains its dominance of online ad spending.
Earlier this month, Flipkart restarted its mobile website. Myntra also plans to relaunch its mobile website, said two people familiar with the matter. Myntra’s move has been prompted by the drop in sales after it went app-only on 15 May, the two added, speaking on condition of anonymity.
Flipkart said in November that it would introduce web-based apps that will potentially make it easier and more convenient for people to shop on mobile phone browsers. A few days later, rival Snapdeal (promoted by Jasper Infotech Pvt. Ltd) said it too would launch a mobile web app to offer faster and app-like experience to web users.
Start-ups across the board, especially those that had moved unevenly towards the app, are scrambling to improve their mobile web offerings.
As per Deepak Gaur, managing director at venture capital firm SAIF Partners, “Earlier this year, companies had reduced resources and efforts towards mobile web, and the app-only strategy was taking centre-stage. But increasingly, we are seeing re-prioritization of mobile web and companies (in SAIF’s portfolio and others) are giving equal attention to mobile web again.”
Nobody is saying apps aren’t important. But it has become crucial for start-ups to have functional and well-designed mobile websites or web apps.
Few predicted this shift, which wasn’t even on the radar of many start-ups a few months ago. “The mobile web never died, and for those who moved to app-only…it was a faulty decision in the first place. For service providers like us, it is never an either/or choice,” said Anand Chandrasekaran, chief product officer,
According to Chandrasekaran, mobile web is a big contributor not just for Snapdeal but for the industry. “It is a bigger commitment to download an app,” he said.
Snapdeal gets about 70-75% of its traffic from the mobile web.
According to Chandrasekaran, various browser makers are realizing the benefits of offering integrated services—improving the quality of mobile websites.
“Slowly you are seeing a lot of innovation happen on the web; for instance, there are app-like features now available on the web,” he added.
Online grocery firm PepperTap, run by Nuvo Logistics Pvt. Ltd, which is currently available only on app and desktop, will be launching its mobile website soon, said Navneet Singh, chief executive and co-founder of the company. He did not disclose a specific timeline but said it’s important for PepperTap to have presence across all platforms.
India is expected to have close to 400 million mobile Internet users by June 2016, according to a report released in November by the Internet and Mobile Association of India and market research firm IMRB International.
A majority of these users will access the Internet only through their smartphones.
With the growing popularity of mobile apps, which many say offer a superior customer experience than conventional websi-tes, start-ups shifted their pro-duct and business strategies towards the app at the expense of desktop and mobile websites.
During the funding boom of 2014-15, many investors regarded the number of app downloads as one of the indicators of a start-up’s performance.
Entrepreneurs and marketing heads rushed to maximize app downloads.
Soon, however, it was evident that they didn’t necessarily result in high growth.
Consequently, the focus moved to usage and customer engagement. In this scenario, many start-ups and their investors have accepted that their expectations of an app-only world haven’t materialized.
There are several reasons for this. Many first-time Internet users, especially in smaller cities and towns, prefer using their mobile web browsers to shop and surf the Internet rather than download a multitude of apps on their low-cost smartphones that have limited storage.
Customers also tend to get rid of most of the apps they download because of the inconvenience of frequent app updates and the limited storage space on phones, studies have shown.
Now, many start-ups are moving to building mobile web apps, which can potentially offer the convenience and superior experience of so-called native apps, but without their limitations.
A few business-to-business (B2B) start-ups are also increasing their focus on the web.
Tracxn, which provides funding and other data on start-ups to investors, shut its mobile app four months ago and launched a mobile web app.
“As long as you can offer an app-like experience, mobile web is better for customers and companies,” said Abhishek Goyal, co-founder of Tracxn. “Customers don’t have to keep downloading updates and they save on space. For companies, it’s cheaper to build a mobile app compared to a native app.”
The shift back to mobile web will also affect advertising and marketing spending.
Many analysts predicted that Google, the largest beneficiary of digital ad spending, will be hit badly if shoppers moved towards apps and abandoned websites, desktop or mobile.
Google generates a majority of its revenues through search. With the rise of apps, its search business was getting hit. Though Google owns Android, which powers a majority of the smartphones in India, analysts predicted the company would lose to rivals such as Facebook Inc. and ad-tech companies in an app-only world.
As mobile web makes a comeback, Google is better positioned to retain its dominance of digital ad spending.
“Affordable smartphones have led to a huge surge in adoption of the Internet in India, but if you look at user behaviour on mobile phones, you will realize people are also watching videos, searching and using the rest of the web. For businesses to win on mobile, they need to take a strategic view on how mobile fits into the consumers’ lives—how it interplays with other devices they may own and how they move seamlessly between the web and apps. While there is a big focus by online companies to push app downloads, they are also learning to build a more holistic mobile strategy, one that ensures they are present—with relevant content—wherever the users are,” said Nitin Bawankule, industry director, Google India.
In October,Google announced plans to make mobile web browsing much faster and convenient. The initiative, Accelerated Mobile Pages Project, is expected to go live early 2016, according to a 25 November report by tech news portal TechCrunch.
“Mobile web continues to be a way for consumers to engage with content. When it comes to monetization, it will continue on both,” said Dippak Khurana, chief executive officer at mobile ad-tech firm Vserv Digital Services Pvt. Ltd.
Still, there are people who believe that apps will eventually call the shots.
“In the mobile Internet world, it is an app war. And in an app war, you can’t win by betting on a mobile website,” said Vijay Shekhar Sharma, chief executive at One97 Communications Ltd that runs Paytm.
Hyperlocal services provider Grofers India Pvt. Ltd too plans to focus exclusively on its app.
“Eventually, the market will go app-only and apps that have a frequent-use case will always find space in customers’ phones,” said Albinder Dhindsa, co-founder at Grofers.
The company currently sees users on its platform shopping about eight times a month.

Can Flipkart, Snapdeal make money via ad revenues like Alibaba?

Online marketplace Snapdeal has launched a new platform called ‘Snapdeal Ads’ to enable its 2,00,000 sellers get their products discovered and thereby sales through targeted advertising tools. 

The tool developed in-house will allow the seller community to reach customers through product advertisements, enabling faster discovery across web, mobile web and apps, the company said in a statement. 

"The advertising tools will help our over-two lakh strong seller community simplify their business journey and boost overall revenue as more users discover their products," Anand Chandrasekaran, chief product officer, Snapdeal said.

Snapdeal will unveil the programme in phases. In the 1st phase, which was launched yesterday, sellers would be able to buy native advertisement formats for product commercials. This will help the sellers to increase the visibility of their products on the platform on its website, mobile site and app. In the second phase, which is expected to take between three to six months, ads of other formats such as banner ads will be made available to the sellers.

Along with support and visibility to sellers, the advertisement tool will lead to an additional revenue for the company. Currently, ad- revenues are largely driven and earned by Google and Facebook with almost everyone using their platforms for advertisements.

The initiative is reportedly being led by Asif Ali, founder of Silicon Valley based advertising platform Reduce Data, which Snapdeal acqui-hired in September this year. The company assists brands and advertisers to optimize their advertising campaigns through leveraging artificial intelligence, real-time data and other tools. 

Snapdeal's announcement comes more than six months after rival Flipkart acquired a mobile advertising firm, Adquity Technologies, to develop similar advertisement solutions for its platform, and to make ads one of their core-revenue streams in near future.

Evidently both firms are looking to generate an additional revenue route via advertisement revenues, walking on the path mapped by China's Alibaba Group. 

According to estimates by iResearch, advertising accounts for more than half of Alibaba’s revenue. 

Alibaba Group not only dominates China’s e-commerce, but also runs one of the biggest online advertising businesses in the country. Alibaba’s Taobao marketplace is equipped with a search engine that allows shoppers to look for products by entering keywords. Many merchants selling their products on Taobao participate in auctions of search keywords — much like how businesses spend money on Google's search-linked ads.

The mechanism is quite similar to Google’s AdWords, the engine that Google uses to place keyword-targeted ads alongside main search results.

It would be interesting to see how ad-revenues will help sellers and eventually the e-commerce majors to generate actual profits as against the GMV the company's boost about which is based on the maximum retail price (MRP) of products sold on the website and does not factor in discounts, or even cancellation or return of products.

Also Read: Can the e-commerce model ever turn profitable?
Meanwhile, Snapdeal has launched a series of sellers specific initiatives this year. In September, the company launched a SD Advisor program, which essentially provided its sellers with a personal adviser to assist them in business management. These personal advisers provide sellers with market insights, but also help them establish their brand and grow their e-commerce business on Snapdeal. Earlier this month, the company also unveiled Snaptrends – an online future-defining, fashion trends forecasting service for its sellers.

Friday 27 November 2015

Product comparison app launched for marketplaces, to bring out their best
Silicon Valley start-up, ShopInSync is making a beeline for the Indian ecommerce ecosystem. Through its app it aims to offer online customers in the country a shopping experience that will let them make a more informed decision when purchasing products from Flipkart, Snapdeal, Amazon and similar online companies of that ilk, by combining multiple features.
“The product solves important consumer pain points and makes purchasing easier,” said Vijay Ragavan, an angel investor in ShopInSync and Chief Technology Officer at Jabber Labs.

How it works?

  • ShopInSync’s app will allow buyers to compare products based on price listings, ratings and recommendations
  • Customers can then communicate information using the integrated chat option to finalise a purchase decision
  • Finally buyers will be redirected to the site of the online marketplace they wish to purchase their product from
It is hoped this will provide a more human-like consulting process than simply being presented with static screen shots. If the customers friend or family has not installed the ShopInSync app, they can still collaborate through WhatsApp, twitter, email or SMS by forwarding the product link.
“We designed ShopInSync to serve the unique needs of the Indian shopper. While comprehensiveness and finding the best value are among the top factors, a majority of purchase decisions are made in consultation with family and friends. With ShopInSync, we aspire to bridge both these worlds and bring a seamless, comprehensive and connected shopping experience,” said Raj Ramaswamy, co-founder, ShopInSync.

Will the ecommerce marketplaces play ball?

ShopInSync aims to make money from the app by charging affiliate brands to advertise their products in its featured section. ShopInSync is first launching a version on the Google Playstore and after a few weeks will release it for iOS customers. ShopinSync is currently scouring the country to create synergy with more online marketplaces and also hopes it will be accepted into their databases in return for pushing a healthy number of sale prospects their way.
“We are driving traffic to them. The decision is made on ShopInSync, so once users move on to an Amazon or Flipkart, they are there to make an assured final purchase,” explained Ramaswamy.
By tying up with more online marketplaces, ShopInSync will increase its product range, which will in turn have a knock on effect for all you online sellers out there, by generating more sales leads.  Judging by ShopInSync’s product comparison offering, only the cream of the crop will rise to the top.

Flipkart boosting supply chain with reported investment in MapmyIndia
Ecommerce leader, Flipkart is always on the lookout to find new ways to improve competitive advantage, especially when it comes to on-demand delivery. Who would have imagined Flipkart knocking on the doors of Mumbai’s dabbawala’s to procure their services? Flipkart executives even delivered goods during the Big Billion Days Sale, in order to gain vital insights and personally test drive the delivery process.
The latest news doing the rounds is that Flipkart is reportedly planning to invest in online GPS portal, MapmyIndia in order to improve the effectiveness of its delivery service. Although the news has not been confirmed, Flipkart lately voiced big plans to invest heavily to improve its supply chain in regards to warehouse logistics and delivery team in order to tap tier 2 and tier 3 cities. MapmyIndia owns intellectual property rights to digital map data in India and recently cab service Ola cabs partnered with it to gain access to the vital treasure trove of knowledge.

Benefits of MapmyIndia for Flipkart:

  • Provide articulate geographical maps and precise pin code information
  • Navigate the best route
  • Reduce time taken to complete orders
  • Deliver multiple products at the same time
  • Build in-house supply chain solutions
“Logistics network is the biggest differentiator. A logistics network presents strong competitive advantages, which is why it will be the biggest investment area for the company,” said Binny Bansal, COO and Co-founder, Flipkart, recently.

Online sale of large appliances goes up; set on steady growth path

Can ‘Assisted ecommerce’ solve the problems of insufficient reach?
Online selling is now stretching itself to reach those who don’t shop online. The fairly new concept of assisted ecommerce is doing the rounds in the online sales sphere. Enterprising start-ups are looking at how best they can increase  the potential  of online commerce.
Those who are promoting assisted ecommerce are trying to engage buyers who don’t normally shop online and expand the reach of ecommerce platforms, with the assistance of kirana stores. The intention is to bank on the comfort level most shoppers have with their local store keepers, whilst offering a wider range to the customer.

Kirana stores to double as online shoppers

The fact remains that most offline shoppers prefer to go to their friendly neighbourhood kirana seller.
Krishna Lakamsani, founder CEO of iPay, an assisted ecommerce company simplifies it with the following words, “More than feeling the products while buying, Indian customers want to buy from someone they trust and to whom they can go back and ask in case of any problem.”
Assisted ecommerce is all about leveraging that trust factor. The kirana shops will purchase goods online for their customers. iPay helps to connect the local stores with the product distributors thereby minimising the geographic distance. The retailers are given a commission of anywhere between 2 to 14 percent, based on the product.

Aiding ecommerce to reach out to offline buyers

“E-commerce is only for the top pyramid. Only 50 million people in India buy online. Even in an advanced country like the US it is hardly 20 percent,” says Kiran Gali, founder CEO of NumberMall, another assisted ecommerce company.
Assisted ecommerce is trying to help ecommerce companies serve rural and remote areas. This will help online sellers in widening their customer base. Online transactions will not be limited to only those who use the internet. This is also a good deal for local offline sellers, as they stand to gain a small profit in the entire transaction. Hopefully the assisted feature (which is currently limited to a few companies like iPay and NumberMall) will grow to include greater number of buyers over time.

Online Lingerie Store frequented by men; account for nearly 25% of the market
In April this year, Richa Kar, Founder & CEO of online lingerie leader Zivame had shared with IndiaOnlineSeller, “Male customers form a growing segment in our business.”
7 months down the line it still holds true as a large chunk of online lingerie buyers are men, according to this ETRetail report.

Men frequent online lingerie store for gifts

Unlike physical lingerie stores where men would enter only if accompanied by a woman, the online space allows them to shop for their wives, girlfriends without any hesitation.
Besides birthdays and anniversaries, other occasions when male population rely on online lingerie stores to buy gifts are Valentine’s day and around wedding season. They account for nearly 25% of the market. And this number goes up during holiday and wedding season.
Clovia’s founder Neha Kant who revealed 25% of their shoppers are menadded, “The figure touches almost 40% during the November to February period -the wedding season in many parts of the country, and hence also the wedding anniversary season. Many of these orders ask for gift wrapping.”
Kar also said the same thing, “It picks up during Valentine’s Day. Anniversaries and birthdays are other occasions when men pick up lingerie.”
Discreet online shopping experience has made this possible
While speaking to IOS, Zivame’s founder had said, “With the category present online now, they get to save the embarrassment, select in a private ambience, seek consultation if necessary and spend more time choosing what they want.”
This is exactly why men who always wanted to buy lingerie for their loved ones are happy with the growth of online lingerie stores. Features such as wide variety, size guides, blogs, style tutorials, and free consultation on such portals makes it easy for them to make an informed purchase.
The online lingerie market is still a niche segment but is growing steadily. One such indicator is the growth of market leader Zivame. The company not onlyraised Rs. 250 crore funds from a host of investors, but also caught Ratan Tata’s attention and successfully launched various TV ad campaigns.

Delhi-based online sellers to submit tax returns by November end
In a move to crackdown on tax evasion, The government of Delhi has requested all ecommerce companies operating in the capital to compulsory start filing quarterly returns and also release the names of sellers on their platforms. The first tax submission is due as early as the end of this month, which will come as a rude awakening to all and sundry.
A large advert appeared at the start of the week released by Delhi government’s department of trade and tax proclaiming, “Attention! All ecommerce web portals, It is compulsory to enroll with the department by filing form EC-1 online.”
The Delhi government took the step to clamp down on online sellers in the capital after a large number were found not to be paying any taxes. Last year,Karnataka government came down heavily on ecommerce giant Amazon which forced the marketplace to set up its warehouses elsewhere. Recently, tax authorities in states like Kerala and Uttar Pradesh have been locked in bitter court room battles with online marketplaces such as Flipkart who claim to only facilitate the transaction between buyer and seller.

Writing’s on the wall

Flipkart and Amazon recently opened their largest warehouses in Telangana, as it was believed that the tax laws were favourable for ecommerce, but the irony is that even Telangana state govermnent plans to get tough and implement tax rules for ecommerce marketplaces. So it now seems that the writing’s on the wall for etailers and online marketplaces as far tax issues are concerned.

[Infographic] Ecommerce markets: China, Japan, South Korea; how does India compare?
As we come close to the end of 2015, we have seen the ecommerce market in India maturing slightly this year as compared to the last. More festival sales has produced increased revenues for ecommerce marketplaces, such as Flipkart,Snapdeal and Amazon. Online marketplaces owning mobile wallets and offering countless cashback has brought new entrants into the ecommerce ecosystem, such as Alibaba backed Paytm. With little over a month left till we enter the new year, we expect it to be a formidable one, with established Indian blue chips such as Tata, Mahindra, Reliance, Aditya Birla and Godrej set to make an even bigger splash on the etailing stage.
These factors will surely present new opportunities for you Indian Online Sellers. A recent BRIC’s report told us how we compare to countries such as Brazil, Russia and China, but what about nations closer to home such as Japan and South Korea. Check out this Infographic to learn more: