India's bustling e-commerce segment, estimated at about $600 million, appears to be poised for some serious business consolidation.
Jolted into action by the entry of global e-retail heavyweight Amazon last year, domestic biggies appear to be in the throes of upping their game, the most recent of which is the long-speculated move by the largest domestic player Flipkart to acquire a majority stake in fashion e-tailer site Myntra.com.
While both companies have declined to comment on this, Bangalore-based Myntra.com has said that a “strategic announcement” is due on Thursday. Those in direct knowledge of the matter confirmed that talks have been on between the two companies for the past four months. Both Bangalore-based companies found common ground in investors, namely Tiger Global Management and Accel Partners, which led talks of a merger at the beginning of the year.
The Amazon effect?Amazon's aggressive game thus far—reflected in the multi-channel advertisement campaign it has unleashed over the past few months—has indeed intensified competition in the sector. Domestic players are seen playing catch up by introducing services such as 24-hour delivery, improving focus on mobile, and adding sellers and categories.
Snapdeal, which is the fastest growing marketplace in the segment, too, has been aggressive in expansion; the New Delhi-based company announced on Wednesday that it has completed a fresh round of equity financing worth $100 million. It must be noted that global e-tailer eBay is a leading investor in the company, after it led an investment round in February this year, though speculations that eBay may acquire the company have been rubbished by founder-CEO Kunal Bahl.
Mr. Bahl indicated to The Hindu recently that he is more keen to go public than settle for a “merger-acquisition type route” as he believes the e-commerce market is still nascent here and hold plenty of potential. This is Snapdeal's fifth investment round. Both Amazon and Snapdeal declined to comment on the speculation around the merger/acquisition.
FDI in e-commerce?The e-commerce market in India, though nascent, is currently very fragmented. And, it has seen several smaller players disappearing from the scene over the past two years. The next big thing in this segment, experts believe, will be the government allowing FDI in e-commerce. Currently allowed only for those running a marketplace model, companies have been tweaking structures to work around this.
Analysts believe that with the change of guard at the Centre , lobbying is likely to intensify and that the new government is likely to be inclined to do so.
“Mr. Modi has expressed support for use of technology to benefit retailers. I think he will want to boost this sector, and will see FDI in retail as separate from FDI in e-commerce,” comments Sandeep Ladda, partner and India technology leader at Price Waterhouse Coopers. As for profitability, given most companies are still struggling to break even, he sees this coming around in the long-term.
