admin
December 19, 2014
Arpita
Mukherjee, Business Today
New
Delhi , 19 December 2014
In
a bid to strengthen their presence in the e-commerce sector, large
players such as Amazon, Snapdeal and Flipkart are likely to look
at acquiring companies with niche, differential capabilities,
say industry analysts.
With the recent acquisition of gifting technology platform Wishpicker by Snapdeal and reports about its acquisition of online order management platform Unicommerce, experts feel e-commerce players are looking to benefit from the vertical capabilities that such companies have on offer.
"Snapdeal will be able to leverage Unicommerce’s platforms to achieve in-depth visibility into its vendor profiles in terms of both inventory and accounts as well as improve its customer services," says Sanchit Vir Gogia, Chief Analyst and CEO, Greyhound Research.
Snapdeal is flush with cash after recently receiving $627 million in funding from Softbank. The online retailer earlier this year also acquired social product discovery technology platform Doozton.com.
With Flipkart acquiring Myntra this year, and several other acquisitions that have been taking place over the past couple of years, this seems to be one of the trends emerging in the industry, says Devangshu Dutta, CEO of consulting firm Third Eyesight. "The key word is differential, because the generic ones have already happened to a certain extent," says Dutta.
Arvind Singhal, Chairman of Technopak Advisors, says that as investment dries up for the several niche smaller players who have been unable to show growth, these are likely to be snapped up by the bigger players. "We will see that happen more in the next few months," says Singhal. "Amazon, Flipkart, Snapdeal will start looking for specialty players, or very niche specialty players, either for the market, or for technology."
Analysts also note that while this kind of consolidation helps establish one or a few clear winners, it is not good for the industry as a whole.
According to Harminder Sahni, Managing Director of consultancy Wazir Advisors, for any industry to strive there needs to be a lot of players, creativity and lots of new ideas. And, primarily driven by investor interest, with these kinds of acquisitions, the industry is likely to go the modern retail way where there are only a few players such as Shoppers Stop and Future Group. "(Investors) are not interested in building a large ecosystem where a lot of players strive. They want to have a winner and they all want to be a part of that winner," says Sahni.
(Published in Business Today)
admin
December 18, 2014
Sagar Malviya & Snigdha Sengupta, The Economic Times
Mumbai, 18 December 2014
Despite
an online shopping frenzy in the country and large investors stepping
in to fund several online retailers, most e-commerce players are
yet to turn their click-and-buy model into big businesses as the
big ones steal the show.
While nearly half a dozen shopping portals such as Zovi, FashionandYou,
Yepme and Shopclues have doubled their sales since the last two
years, they are yet to reach the Rs 100 croresales mark, and pale
against the likes of Flipkart, Snapdeal and Jabong that clocked
anywhere between Rs 500 crore-Rs 2,800 crore in sales for 2013-14,
according to filings with the Registrar of Companies.
India, one of the fastest-growing ecommerce markets, is expected
to have 100 million online shoppers by 2016 when the industry
will grow to $15 billion, or about Rs 93,000 crore, up from 35
million consumers and $3-billion valuation this year, according
to a recent Google report. Yet, in a highly competitive marketplace,
where big discounts are the primary sales drivers for online retailers,
many small players are struggling to gain ground.
"For every successful online retailer, there are at least 10 others which have either shut shop or got acquired," said Devangshu Dutta, chief executive at retail consultancy Third Eyesight.
He said just selling at lower rates isn’t enough for small players at a time large players flushed with funds aggressively look to grab market share through deep discounting. "Smaller players should have some key differentiator so that customers can give business to them instead of competition," Dutta said.
In fact, with small players forced to match discounts offered by bigger rivals, most of these firms reported higher losses, some even posting half their overall sales as net loss. VAS Services, which runs Yepme portal, posted a net loss of Rs 45 crore on net sales of Rs 61 crore last fiscal, while the net loss of Shopclues at Rs 38 crore was higher than its net sales of .`30.5 crore. But investors are still upbeat about ecommerce players, due to the huge growth opportunity.
"Investors are still willing to pay fairly healthy valuations for some of the smaller players in the market," said an investor who has backed a private label e-tailer.
"Compared to other developed markets, e-commerce entry valuations in India are still relatively attractive," the person added.
Some small players did manage to improve their performance though. Robemall’s Zovi, which more than doubled its sales in FY14 to Rs 51 crore from Rs 21 crore in the previous year, reduced its net loss to Rs 19 crore from Rs 34 crore during this period. FashionandYou, a flash sales site of Delhi-based Goldsquare sales, also managed to reduce losses to Rs 20 crore in FY14 from Rs 77.9 crore in the previous year as it consolidated its business after acquiring fashion and beauty e-tailor Urbantouch a year ago.
"The focus throughout the year was to bring efficiency and cut down cost that included trimming down the employees from 1,000 to 300 people," said Aasheesh Mediratta, CEO of FashionandYou, which posted a 21% decline in sales at Rs 75 crore due to the reorganisation.
(Published in The Economic Times)
admin
December 16, 2014
Sagar Malviya, The Economic Times
Mumbai, 16 December 2014
eBay
India, one of the earliest online marketplaces in the country,
has slipped behind both Flipkart and Amazon on revenues from seller
commissions as its two rivals along with Snapdeal have been aggressively
pushing sales with big discounting events and high-decibel marketing.
eBay India posted revenues or income of Rs 107 crore calculated
on commission earned from sellers along with advertising revenues
for fiscal 2013-14, according to its annual filing to the Registrar
of Companies.
In comparison, Amazon Seller Services posted revenues of Rs 169
crore and Flipkart Internet that manages the portal reported income
of Rs 179 crore. A year earlier, eBay’s revenue was Rs 81 crore
while Flipkart trailed with Rs 15.4 crore.
These numbers are not sales from actual goods sold on their portals
but are transaction and listing fees from the sellers as well
as advertising revenue which is the actual revenue of e- commerce
sites. eBay declined to comment on its financials.
While eBay and Amazon don’t disclose income from merchandise
sales, Flipkart India, the website’s wholesale arm, said sales
more than doubled to Rs 2,846 crore in the year ended March 2014,
against Rs 1,180 crore in the previous year.
Experts feel that the aggressive strategy of Flipkart, Snapdeal and Amazon has affected most others including eBay.
"These three companies are playing a game for market dominance and their aggressive stance has taken options away from rivals," said Devangshu Dutta, CEO at retail consultancy Third Eyesight.
"These Indian players (Flipkart and Snapdeal) are funded well to continue that strategy while Amazon seems to have clearly seen a huge opportunity in India," he added.
In July, Amazon announced it would invest $2 billion (approx Rs 12,400 crore) in the company’s India operations that have exceeded gross merchandise sales of more than $1 billion within a year of the launch.
San Jose-based eBay bought local auction platform baazee.com for $55 million (about Rs. 344 crore) to enter India back in 2004, at a time when online retail was unheard of in most of the country.
The Indian e-commerce industry picked up in a big way in the last couple of years, triggered by deep discounting strategy from newer players even if that meant incurring heavy losses.
Soaring sales and rising losses bear witness to this. Combined losses of Bangalorebased Flipkart, Delhi-based Snapdeal and Amazon India was more than Rs 985 crore for the last fiscal. Flipkart and Snapdeal — which counts eBay, Azim Premji and Ratan Tata as investors — together sold goods worth more than $4 billion. eBay India has been mostly lying low and hasn’t been actively participating in recent mega sale events. Yet, the company has posted Rs 83 crore net loss during year to March 2014, a 15% increase from a year ago period.
Frequent change in its leadership team may have also affected eBay. Its current managing director Latif Nathani is its fourth India head in the past five years.
Parent company eBay Inc is trying to sort out issues in its home market by spinning off its PayPal unit into a separate business in an attempt to negate the slowing growth of traditional marketplace business.
Experts, however, aren’t discounting eBay India yet and feel
the Indian online retail market, which is estimated to grow over
four-fold to touch $14.5 billion (over Rs 88,000 crore) by 2018
can absorb a handful of large players including eBay.
(Published in The Economic Times)
admin
December 12, 2014
Vijaya
Rathore, The Economic Times
New
Delhi, 12 December 2014
Brioni, a luxury menswear brand from Italy, is currently looking for the "perfect" location in a south Delhi upscale mall to open a store, almost after a year it shut down its earlier store located inside a five-star hotel.
Store location is not the only change that Brioni has initiated in the country. It has found a new partner to sell its jackets, ties and shirts in India.
Another luxury brand, Etro, is holding talks with a number of retailers in India to make a comeback, after it split ways with Genesis Luxury and all the India stores were shut last year.
A host of popular brands, including Ferrari, Bang & Olufsen, Montblanc, Etro, Brioni and Bulgari are revisiting their India business plans by tweaking one of the most important factors – the local partner. Reasons differ. It could either be inefficiency of the existing partner to infuse new energy and money in the business, or the desire to take control of the operations by choosing someone docile.
Iconic jewellery brand Bulgari has formed a joint venture with a new "silent partner" with an aim to have better control over its operations in this market.
"Our ambition in India is much higher than before," Bulgari chief executive office Jean Christophe Babin told ET on his recent visit to India. The decision to make direct investments in this market, instead of simply relying on a franchise partner is like "pressing the reboot button". Bulgari had ended its seven-year relationship with Mumbai-based Dia Group’s Lifestyle Tradelinks India in 2011. Likewise, Ferrari has hooked up with Yadur Kapur, a dealer of luxury cars for the Delhi market and Navnit Motors in Mumbai, splitting with Delhibased Shreyans Group.
Kapur, who is working on a plan to open a new showroom, sales and service centre for Ferrari in Delhi, says, "The brand will now be represented in the right way in the country." One of his focus areas would also be to make sure that the company sent enough cars to India to match demand and that the buyers don’t have to wait too long.
Experts point out that the change in partnerships was partly due to the natural lifecycle of a relationship between the two parties, apart from other factors. "Many pacts were originally signed for a limited period, and when that time passes, people move on," says said Devangshu Dutta, chief executive at retail consultancy Third Eyesight.
Also, as brands become more serious about the market, they revisit everything in order to infuse a fresh lease of life into the business.
"When international brands realise the importance of India and sense that the existing partner may not have the capacity, interest or potential to address the same, they move on," adds Dutta.
Etro, for example, is one of the brands looking for a new partner to conduct business in India. "We have had a meeting with them," said a senior executive of one of the top luxury retailers in India who did not wish to be identified.
Some separations are bitter. Former cricketer and businessman Dilip Doshi and Montblanc are fighting a legal battle amid allegations of fraud and deceit. Doshi claims that Montblanc pulled out of a possible joint venture at the last minute and terminated its distribution and franchise agreements in March this year.
Earlier this year, Montblanc announced a 51:49 joint venture to setup single-brand retail stores with Titan Industries, a Tata Group company.
Similarly, Brioni and Badasaab Designs (retailer of Brioni in India) went to court against each other and the legal tussle went on for some time. "A mutual settlement has been reached between the two," said a person aware of the development. Brioni is understood to have finalised OSL Luxury, which sells Corneliani menswear in India, as its new partner. OSL executives, however, did not comment on the development.
New Partners, New Plans
To begin with, most brands are working on re-establishing a retail presence besides enhancing brand visibility and "consumer experience."
Denmark-based high-end entertainment systems maker Bang & Olufsen (B&O) for instance has just opened a single-brand store in Delhi, and so has Bulgari. Ferrari and Brioni are doing the same. "We also have access to outside investment to expand B&O’s business in India," said Gaganmeet Singh, director of BeoWorld.
For the Bulgari CEO, it was important to take control of India’s operations."Though we have a partner here, we are behind the driving wheel," Babin said.
It’s not the first time brands are shuffling their relationships. In 2009, Gucci parted ways with its old franchisee Vijay Murjani and moved to a franchise agreement with investment banker Ashok Wadhwa’s Luxury Goods Retail.
Versace, is now with Infinite Luxury, but was earlier retailed by Blues Clothing Company in India. In 2012, Giorgio Armani ended its joint venture with DLF Brands to get into a deal with Genesis Luxury, run by Sanjay Kapoor.
A recent Euromonitor report said that India was the fastest-growing emerging market for luxury goods. The country’s luxury market will grow 86 per cent in constant value terms between 2013 and 2018, while China, Malaysia and Indonesia are expected to grow 74 per cent, 62 per cent and 59 per cent, respectively, over the period. India’s luxury market was expected to reach $14.73 billion by 2015 from an estimated $8.21 billion last year, with about 30 per cent of the customers coming from smaller cities.
(Published in The Economic Times)
admin
December 12, 2014
Rashmi
Pratap, The Hindu Businessline
Mumbai,
12 December 2014
Vinay
Singh does not own a debit or credit card, nor does anyone in
his family, which has lived for four generations in Bihar’s
Gaya district. Yet, they regularly shop online from Homeshop18
and Naaptol. Even their holiday hotel bookings are done online,
again without internet banking or cards. Singh instead has a mobile
wallet from Paytm, which allows him to load cash on his mobile
phone through a nearby mobile retailer or ATM and use it for all
his online transactions.
In the recent case where a customer of Uber’s car-sharing service was allegedly raped by the driver, Paytm helped Delhi Police close in on the accused. As Uber riders can only pay through Paytm under RBI guidelines for credit card use, the police downloaded the Uber app and Paytm wallet, booked a cab and directed the driver to take them to Uber’s office in Gurgaon. This was a neat ploy to track down the office, whose physical address remained unknown until then.
This new world of mobile wallets is expected to become a $20.4-billion business by the end of the year, according to a joint study by the Internet and Mobile Association of India, Payments Council of India and IMRB.
Besides loading cash, users can also sync their credit or debit card with Paytm’s mobile wallet and avoid having to punch in confidential card details during an online transaction. Several companies including PayU, CCAvenue, among others offer mobile payment services, but Paytm is different as it has its own mobile marketplace, which brings it into the league of Snapdeal and Shopclues.
Card-free shopping
“When smartphones came, people wanted to shop online and operator wallet (payment through mobile operator) was not allowed. We saw that gap and created Paytm in 2011 to build an online payment option for the masses,” says Vijay Shekhar Sharma, founder and CEO of Paytm. Short for ‘pay through mobile’, Paytm is the consumer brand of mobile internet company One97 Communications, whose investors include SAIF Partners, Intel Capital and SAP Ventures, among others.
Paytm began by offering payment services for utility bills and mobile recharges. It has expanded through tie-ups with companies since January this year, after the RBI gave its nod for mobile wallets. Shoppers can store cash on mobile phones for payments to a whole lot of retailers from Myntra to Zovi and Fabfurnish to Yepme.
“If you are on an online shopping site, Paytm gets your card details pre-filled and you just have to add your CVV number. The card details are only with us and not with any of the merchants,” says Sharma.
Paytm also takes care of any reversal of transaction. And if any merchant fails to fulfil obligations, Paytm blocks the merchant and the payment. Over 22 million have used Paytm since January, making it one of the largest mobile commerce companies.
Customers love it
Online furniture retailer Fabfurnish has witnessed this growth first-hand. “Paytm offers buyers incentives like cash-back and additional discounts. It also makes payment much more convenient. Tying with them leads to greater sales for merchants like us,” says Reeju Dutta, CRM manager of Fabfurnish.
At Fabfurnish, the number of transactions through Paytm has increased 10 times in the last six months. “Paytm drives a certain number of sales and revenues. Even though the order value may not be too high, the number of transactions through Paytm is relatively higher, making it very important for us,” Dutta explains.
Ditto for Homeshop18. Vikrant Khanna, its COO – TV Business, says: “Within a month of our partnership, 10 per cent of our online paying customers adopted this wallet service. It also gave us access to over 10 million Paytm customers and saw referral traffic.”
Currently, 12 per cent of Homeshop18’s online paying customers uses Paytm. “We are looking at launching Paytm option on all our mobile platforms next year and expect to grow by 50 per cent every month after that,” Khanna adds.
Paytm users can load their mobile wallets with cash from banks, retailers and ATMs. “We are in talks with some large nationalised banks for tie-ups. And on the retail front, we want to see that any place where a phone can be charged can also load money into a Paytm wallet,” says Sharma. He expects one million such outlets in the next three years.
Already, 16 million Paytm wallets have been created since January and the company has seen a Rs. 3,500-crore annual run rate of transactions. “Consumers have accepted us wholeheartedly. Our wallet users are growing at more than 40 per cent every month, while transactions are growing at more than 20 per cent,” he adds.
Forget cash-on-delivery
This growth for Paytm is driven by online services such as food delivery, cinema ticket bookings, travel bookings and so on. “These services typically don’t accept cash on delivery, but users want to book with assurance. We are an answer for businesses that don’t accept cash during delivery. We are an alternative to cash-on-delivery,” says Sharma. India’s e-commerce boom was primarily driven by cash-on-delivery, but Sharma believes the next wave of services including taxis and medical appointments will grow with mobile e-commerce. “But unlike e-commerce, we don’t require logistics.”
According to a study by Accel India, the number of cash-on-delivery transactions in India will drop from 60 per cent in 2013 to 50 per cent by 2016. And the share of third-party wallets such as Paytm will rise 7 per cent. Third-party wallets, despite being a new phenomenon, have a strong value proposition and will become popular quickly, just like in China. They will become a significant alternative to cash-on-delivery, the study says.
Khanna says additional factors such as greater adoption of mobile payment technology, high penetration of mobile internet and a strong demographic dividend will see young India increasingly favouring quicker, safer and convenient payment options.
Gateway to the market
Encouraged by the growing number of merchants and customers opting for Paytm, the company set up its marketplace in February. This is basically a common platform where customers and merchants can discover each other. “We are like the checkout aisle where you can pick up things on the way out,” says Sharma, adding, “we were getting traffic as we were sorting payments. So we began offering an opportunity to merchants to have their catalogue discovered.”
Globally, too, payment gateways and marketplaces have been linked — eBay and Paypal, and Alibaba with Taobao, for instance. “All marketplaces in the world are successful as they control payment to the merchant. Otherwise, you are an inventory owner and can’t control the experience of the customer and you can’t create trust. This is our fundamental understanding,” Sharma adds.
Paytm currently features a staggering 3.5 million products and over 10,000 merchants in its marketplace. “We will be the fastest to reach a million merchants in the next two years,” says Sharma.
As a marketplace, Paytm does not hold inventory. In contrast, the e-tailer owns the products in inventory-led models. “We don’t store goods but offer logistics to merchants through our cloud service,” says Sharma. Instead of big courier companies, Paytm has tied up with multiple smaller players in every location, allowing it to deliver to 20,000 pin codes across the country.
Double business
With nearly $30 million invested so far, Paytm is currently raising more money. “No other e-commerce company is using our model. There are independent payment companies such as CCAvenue and Airtel Money, while the marketplace model has Shopclues and Snapdeal. But nobody has this combination of payment+marketplace,” says Sharma.
This model, however, is not an easy one. Flipkart would know. It launched the payment gateway PayZippy in July 2013 only to shut it down a year later for want of traffic. Flipkart then tied up with payment gateway ngpay.
Devangshu Dutta, chief executive at consultancy firm Third Eyesight, says a payment gateway-cum-marketplace eases two pain points for merchants — acquiring customers and handling the payment transactions. “And, in theory, that’s something which can be delivered by the same company. But in practice, the skill sets and mindsets required are different.”
In the payment space, any company’s aim is to drive down the transaction cost, while the marketplace seeks to acquire customers, drive sales volume, drive conversion (visitors into buyers) and increase transaction value as well, he explains.
“There is nothing to say that the same company cannot execute it. But given that the marketplace model is undergoing significant changes and seeing a lot of action and competition (Amazon and Snapdeal are investing billions of dollars), it does need phenomenal execution ability to compete in that space,” Dutta adds.
Considering its dream run so far, Paytm will be hoping to ride the two boats simultaneously and successfully.
(Published in The Hindu Businessline)
