The last year has been tumultuous for the e-commerce sector, with leading players announcing a spate of big ticket funding deals. It all started with home-grown Flipkart’s $1-billion announcement, followed by global e-commerce giant Amazon’s $2-billion commitment to its Indian operations this year. A few months later, Snapdeal has proved there could be several leaders in one segment. The company bagged $627 million from Japan’s SoftBank, pushing its total funds raised this year to $1 billion.
E-commerce experts and industry-watchers say the sector, which is a little less than one per cent (at $3.2 billion) of the $700-billion retail industry, has attracted several global investors in a short span of time.
Stiff competition, sustainable models, focus on growth, rapid internet and smartphone penetration and the Government’s focus on startups have all combined to be a big draw for foreign investments.
Over the last year, a little over $5 billion in private equity and venture capital funding has flooded the growing internet start-up ecosystem, with analysts expecting the number to more than double in the next year.
Siddhartha Nigam, Partner, Mergers and Acquisitions, Grant Thornton India LLP, said: “Snapdeal’s investment is a monumental transaction that reaffirms the confidence of global investors in the Indian e-commerce space.”
Arvind Singhal, chairman of retail consultancy firm Technopak Advisory, added that it was not only monetary capital entering the system but also intellectual capital.
“At the front end, the Indian consumer looks very excited, but the challenge is still there at the back-end. Most of the money will be invested in creating world-class back-end technology comprising logistics, supply chain, payment solutions and customer acquisition,” he added. “The strategies have been charted out by leading players, and it is a matter of time to see who emerges as a leader,” he added.
Gaurav Gupta, Senior Director, Deloitte, said the recent funding proved that e-commerce was emerging as a strong alternative marketing channel in the country. He said that when this happens, early movers get benefited. He added that in the coming months, investors would also look at unique business models and players with differentiators. “There will be a potential shake-out in the segment, in the coming year.”