Companies

FDI in e-commerce may help drive market growth

Priyanka Pani Mumbai | Updated on March 12, 2018 Published on September 20, 2012

E-commerce in India is still at a nascent stage and needs players that can invest in the eco-system. — M. Moorthy

To improve efficiency in supply-chain, logistics and back-end services





Even as retailers are busy carving out business plans with foreign investments soon to flood the Indian market, online players are equally excited about the reforms, with many saying that it would help the segment mature and grow faster than expected.

Though the Government has not given any clear guidelines on FDI in the online space, it is understood that foreign direct investment (FDI) is set to bring in strategic investors, said Abhishek Goyal, CEO, Fashionandyou.com.

Global ecommerce players such as Amazon and Walmart.com, Best buy, Zegna, Zappos and Staples could be the first ones to enter the Indian market. Amazon has already set up its backend logistics operations in the country. According to Technopak Advisors, currently the market is pegged at $10 billion and is estimated to reach $200 billion by 2020. The figure does not include fresh FDI.

Both online and offline players consider the Centre’s nod to allow up to 51 per cent FDI in multi-brand retail last week as one of the biggest reforms. Though organised retail in India is just a decade-old story compared to the West, the e-commerce segment has been facing several teething problems.

“With regard to e-commerce in India, the industry is still at a nascent stage and the market needs players that can invest in the eco-system and drive the growth of the industry itself,” said Karandeep Singh, CFO of Flipkart.com.

At present, online firms are either funded largely by private equity players who are yet to reap benefits from the segment, or through personal investments. With the easing of the FDI norms, players have a single corporate entity for which they can directly bid for funds, said Rachna Nath, Leader (Retail), Pricewaterhouse Coopers.

Besides, FDI could also improve efficiency in supply-chain, logistics and back-end services as they are very critical for any e-commerce business. The other relevant areas would be marketing and also expansion of businesses into smaller towns. At least 50 per cent of total FDI will be invested in ‘backend infrastructure’ within three years of the induction of FDI, says a recent CARE study.

“FDI will enable access to superior quality goods and services by the masses. Consumer is the only winner out of all these,” said Mukesh Bansal, Founder, Myntra.com.

The entry of global players will create a competitive landscape leading to consolidation thus wiping out smaller and non-serious players. Even in the US, about 50 per cent of the total e-retail market is held by the top three players, said Technopak Advisors.

Pani.priyanka@thehindu.co.in

Published on September 20, 2012
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