Online jiggles brick and mortar retail space in India

With around Rs 1 trillion sales, online retail format has managed to jiggle the established brick and mortar retail in India.
Online jiggles brick and mortar space in India

With around Rs 1 trillion sales, online retail format has managed to jiggle the established brick and mortar retail in India. The Rs 38 trillion Indian retail industry witnessed an e-tailing buzz in 2014 with mega promotions, new ventures, mergers and acquisitions, says an IANS report.

Anil Ambani-led Reliance Group sold its 16-percent stake in Yatra.com that led to a 12-fold jump in initial investment made in 2006 by the company, to value the portal at $500 million.

Besides, a $700 million fund-raising by Flipkart was further followed by $1 billion funds in july, that led to a valuation of $6 billion overnight. Also, Flipkart decided to merge Myntra, another leading e-retail firm with it, in order to sustain and flourish in the online retail market.

Some international giants invested in Indian online retail space like Japan's SoftBank invested invest $627 million in SnapDeal, a major player again in the Indian e-commerce space, and pick a $210-million stake in Ola that offers car rentals in 19 Indian cities through its mobile platform, web site and call centres.

Progressing at the same pace Amazon said it will invest $2 billion in India's e-retail space.

Expressing his views on the dynamic online retail industry, Ashvin Vellody, partner for management consulting with KPMG in India, told IANS: "It was a roller coaster journey," said in reference to the year that was for the country's e-commerce space."

"I think we have seen a lot of twists and turns in the industry in 2014 and more will follow in 2015. The good thing that emerged from this was that the customer is winning. There is pressure from every side and the customer is benefiting from that," Vellody told IANS.

At present there are around 250 million Internet users in the country. As per various estimates, the e-commerce industry, now valued at $16 billion, is growing at 30-40 percent each year and will top $100 billion in the next five years, the IANS report said. 

Besides, to serve them, there are some one million online retailers -- small and large -- which sell their products through various e-commerce portals, according to a report by the commerce ministry-promoted India Brand Equity Foundation (IBEF).

However, the year did not not pass easily for these leading e-tailers.

Home-grown online major, Flipkart recently faced embarrassment when its Big Billion Day offer turned out to be a flop show, which further created a lot of problems for the etailer.

The company apologised to the people for the inconvenience, and announced that it received a billion hits and sold products worth $100 million (Rs.600 crore) that day including some 500,000 mobile phone handsets, an equal number of clothes and some 25,000 TV sets within minutes of starting sales at 8 a.m.

The Confederation of All India Traders, an umbrella body for regular retail trade industry, cried foul and urged the commerce ministry to regulate the e-retail business, look into their trade practices, which they alleged were not exactly as per rules, and create a level-playing field, as per the IANS report. 

But some leading industry chambers cautioned against over-regulation and the matter died down.

"There is the need to professionalise. A profitable model is also yet to evolve. Operationally everyone is challenged. The supply chain hasn't grown the way demand has. There's no business model yet," Saurabh Srivastava, director with PricewaterhouseCoopers (PwC), told IANS.

Going forward, experts expect several developments in the e-retail space. Besides, logging a 40-45 percent annual growth, they feel huge investments will flow into logistics to overcome the challenges of last-mile reach. They also expect large retail chains of Reliance Industries and the Aditya Vikram Birla Group, among others, to go online.

"The coming year will be more dynamic. A lot of niche e-commerce players will emerge. We expect to see a good number of traditional businesses also leveraging this channel in both the B2B and B-2-C space," Vellody said.

Experts also predict some initial public offerings in the near term not just because existing investors will seek to realise value but also since the e-retail industry will need funds for infrastructure, logistics and warehousing -- estimated at $500 million now and 1.9 trillion by 2017.

Commenting on the matter, secretary general of the e-Commerce Association of India, Nasir Jamal

said: 'The e-commerce industry is in a growth stage. A lot is expected in the coming days.'

"We will see more consolidations. Public issues will also happen. The industry is keenly awaiting the GST (goods and service tax) to get cleared. It will help in seamless movement of goods among states. It will give the e-commerce industry wider operations and a major push."

IANS further highlighted following facts on e-commerce industry in 2014:

1. US-based Amazon commits $2 billion in India's e-commerce space

2. SoftBank invests $627 million in Snapdeal, $210 millin in Ola cabs

3. Flipkart gets $1.7 billion in funding, taking valuation to $7 billion

4. Reliance Group exits Yatra.com with 12-fold increase in original investment

5. Footfalls during festive season drop in shops in favour of e-commerce

6. Physical retail segment demands level field, regulations vis-a-vis e-retail.

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