E Business in India and brief Analysis of prominent players in India

"The alarm clock hasn't even gone off yet," Jeff Bezos, founder and chief executive of global e-commerce behemoth, Amazon, says of the US e-commerce market, about 20 years after it came about in that country. By that yardstick, the market in India isn't even a speck, considering only 11 per cent of the country's population uses the internet. But there are definite signs soon, Indian e-commerce, pegged at $9.5 billion (Rs 47,349 crore) last year (including online travel bookings) according to a study by the Internet & Mobile Association of India and KPMG, would be a force that would take onphysical retail head on, possibly forcing the closure of many brick-and-mortar stores.

That the market stood at just $3.8 billion (Rs 19,249 crore) in 2009 and is projected to grow to $12.6 billion (Rs 62,967 crore), according to the study, by the end of this year shows the potential in this space.

In India, the category took off with a deluge of portals, including those focused on travel, media and jobs, at the turn of the century, building into a bubble that burst systematically in ensuing years. Now, just a handful of serious players are left in this sector.

THE CLICK MARKET

E-commerce in India has grown from Rs 19,249 cr in 2009 to Rs 47,349 cr in 2012 expected to grow to Rs 62,967  cr in 2013 Expected to contribute around 4% to GDP by 2020 Online travel, which grew 30% last financial year, makes up for 71 % of e-commerce in India E-tailing segment has increased 59% from last year; share in e-commerce rose to 16 per cent in 2012 from 10 per cent in 2011 Internet reaches 11% of India's population against 34% world average

While another round of shake-out is imminent, e-commerce, which includes online travel bookings, e-retail and financial transactions, is set to grow, as consumers in non-metros and smaller towns embrace this concept, many on their mobile phones. Recently, Mukesh Bansal, chief executive of Myntra, a site focused on fashion and lifestyle, said the company expected 20 per cent revenue from mobile phone transactions by 2013-end and 40 per cent in the next two years. Against a mere 137 million internet users in India, the number of mobile subscribers is 951 million. The study projects mobile commerce would account for a quarter of the e-commerce pie by 2015 and non-metros would be the biggest driver in digital consumption.

Bringing e-commerce to the centre stage is the government's drive to open the sector to foreign direct investment (FDI), after being inactive on the issue for long. Not just Amazon and eBay, even brick-and-mortar players such as Walmart have made it known e-commerce is the future and FDI must be allowed in this space. Walmart Asia president and chief executive Scott Price is learnt to have written to Finance Minister P Chidambaram, saying "several other sectors stand poised for exponential growth and are ripe for foreign investment; foremost among them is e-commerce". During his coming visit to the US, Prime Minister Manmohan Singh is expected to discuss it with US President Barack Obama. Domestic companies are seeing action, too. The Kishore Biyani-owned Future Group has just announced a big-bang e-commerce initiative. Others are also betting big on it, and quite timely, considering Amazon has entered India. Flipkart's recent fund-raising exercise nearly turned on its head the argument investors were moving away from Indian e-commerce. The company raised $200 million from existing investors. Experts said investors weren't throwing good money after some bad money; they felt investors still had faith in Indian e-commerce and that business models would soon turn viable. Sachin Bansal, chief executive and co-founder, Flipkart, said, "We hope to be one of the largest companies from India on the global map."

Snapdeal, too, sounds positive. Chief executive Kunal Bahl said nearly every year, the company raised funds from external investors. Even niche e-tailers such as Healthkart have successfully raised funds. Healthkart has raised about $22 million through three rounds of funding from Sequoia Capital, Kae Capital, Omidyar Network and Intel Capital. The redBus platform, recently acquired by South African media giant Naspers through its Indian subsidiary ibibo Group for about $120 million, is creating ripples in the industry. While profitability remains a dream for most companies, these are swiftly changing business models. Flipkart is shifting from being an inventory-led business to a marketplace player. Though the move may have had to do with complying with the Centre's FDI norms, chief executive Bansal reasoned, "The range of products and prices that one can offer a consumer through the marketplace is, by itself, an argument in its favour." Three months ago, Amazon, too, was launched in India through a marketplace model, though globally, it operates through a 60:40 mix, where majority of its business volume comes from inventory-led sales.

Myntra offers a mix of inventory and marketplace, though the inventory-led model is the dominant one. Snapdeal, closely modelled on the Chinese Taobao of Alibaba fame, has been a marketplace player for long. There are other changes, too. Most online retail companies offer free shipment, only if the value of transaction is at least Rs 500, against Rs 200 earlier. Myntra, which may well be among the first online retailers to turn profitable, follows a model through which unsold inventory is returned to the vendor. It's also trying to perfect its one-hour delivery pilot in some cities, modelled on eBay in the US. There are payment innovations, too, including cash on delivery.

During the peak of the debate on FDI, Arvind Singhal, founder and chairman of Technopak Advisors, had said the government was missing the point, fussing over conditions while permitting FDI in multi-brand retail. "E-commerce, not FDI in multi-brand, would be the major cause of disruption for traditional retail."

Submitted,

Praveen Kartha P

12DCP-082