Info-tech

Who will be top dog after consolidation?

Sangeetha Chengappa Bengaluru | Updated on January 15, 2018 Published on April 05, 2017

Booming business Online shopping has become a way of life for over 50 million Indians, a number that is expected to scale to 175 million by 2020   -  Shutterstock.com

Flipkart will have to contend with Amazon’s deep pockets

The country’s e-commerce space could be bracing up for its first wave of consolidation, with Snapdeal struggling to raise funds and on the other hand Flipkart receiving a fresh lease of life with an infusion of funds worth over $1.5 billion.

BusinessLine spoke to investors, analysts, VCs and other e-commerce stakeholders to find out if a ‘winner-takes-all’ scenario will emerge in the next 12 months, like Amazon in the US and Alibaba in China.

While Amazon, with its $5-billion commitment to the India marketplace, looks like the strongest contender to the number 1 place, stakeholders say the battle for the highest sweepstakes is far from being won.

Differentiation

“More than one player can thrive, provided they differentiate. Currently all e-commerce players have similar products, pricing, user experience to offer, and have done their bit to innovate on the demand side of the business,” said angel and PE investor Sanjay Mehta. He cited the example of DMart, a retail chain of standalone stores in Western India promoted by Radhakishan Damani, whose recent IPO was oversubscribed and has thrived in a market ruled by biggies such as Reliance and Future Group.

Mehta said Damani focussed on building a profitable business before listing the company.

“Similarly, Flipkart with its renewed focus on cost-cutting and profitability can continue to be a dominant player if it focusses on innovating on the supply chain/logistics side of the business to efficiently manage supplier accounts reconciliation, reverse logistics, warehousing, quality checks, minimising returns, etc, rather than play the discounting/marketing splash game.”

While investors have shown confidence in the Indian e-commerce story by funding Flipkart, which is now under pressure to stay afloat, its runway is getting shorter and shorter.

Duopoly

Its survival against Amazon’s deep pockets and India focus will depend on how it manages its costs, feels Vidhya Shankar, Executive Director, Grant Thornton India. Asked about a clear winner emerging this year, he said: “If there is a good exit option for any of the Snapdeal investors, some will exit creating a knock-down effect, as others with minority stakes in Snapdeal will want to exit, creating a duopoly in the market with Amazon and Flipkart, rather than a monopoly, over the next 12-18 months.”

Flipkart’s most recent investors — Microsoft, Tencent and eBay — will strengthen its position as it prepares to take on Amazon and Alibaba, which is slated to enter the India market this Diwali.

Microsoft will contribute to Flipkart’s private data-centre build-out with core technology in Cloud, AI and analytics.

Microsoft’s Dynamics CRM software will enhance Flipkart’s efforts in driving personalisation; and in the long-term, both companies will co-create and innovate to win customers, observed Sanchit Vir Gogia, Chief Analyst, Greyhound Research.

With eBay’s plans to merge its Indian arm with Flipkart, 25 per cent of the former’s 70,000 Indian sellers who export to eBay geographies around the world, will help Flipkart take on a new turf.

eBay’s 4.5 million registered users, categories such as collectibles, coins and notes, refurbished electronics at lower prices, and warranties will plump up Flipkart’s product range, said a source. Pointing out that Amazon is definitely a winner in the Indian e-commerce marketplace, Sanjay Swamy, Managing Partner, Prime Venture Partners, said: “Just like Coke and Pepsi, Nike and Reebok, Avis and Hertz co-exist, Amazon and Flipkart can both co-exist successfully in the Indian marketplace, which is a nuanced market with a diverse customer base, very different from the US and China markets where Amazon and Alibaba dominate. Moreover, India has just 30 million active online shoppers, giving e-commerce huge headroom for growth.”

Flipkart’s success will depend on its ability to execute exclusive brand tie-ups in important categories, by pushing its fashion category with Myntra, which is way ahead of competition, and It they takes on the deals/discounts that Amazon offers, observed Swamy.

Online shopping has become a way of life for over 50 million Indians, a number that is expected to scale to 175 million by 2020, when e-tailing will drive 25 per cent of the total organised retail sales of $240 billion in India, reaching $60 billion in GMV, as per a Google and AT Kearney report.

Published on April 05, 2017
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