2015 Wrap up : The E-Trail

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E-Retai l see ms to be gr owi ng like Pinocchi o’s nose, the New Year should bring hope that the wooden toy turns into a real and cheerful boy.

India is the third largest internet user base in the world with 354 millions accessing it. Even though its penetration is low as compared to US and UK, it is growing really fast adding around 6 million newcomers every month. This inflection along with affordability of smart phones and easy availability of low cost gadgets seem to be a facilitating factor for burgeoning e-commerce companies. Further, this growth story is being fueled by robust investments and M&A activity in the sector.

India’s internet market (gross merchandise value) was about $12.6 billion in 2013 out of which US$2.3 billion was travel related which is almost 70% of total market. CAGR vis-à-vis a global growth rate stands at about 8–10%. Electronics and Apparel remain the biggest selling categories. It is estimated that India Commerce companies combined GMV by close of this year will be over $12billion compared with $45 billion last year.

Last report from Morgan Stanley on E-tail in India revealed that Flipkart, founded in Oct 2017 led the pack with 44% market share at $6.3 billion. Snapdeal, started in 2010 follows at No.2 slot with 32% share and Amazon India launched in June 2013 owns a 15% market share and had touched $1 billion sale last year. Its parent company was started in 1994.

If we have to go by valuation as a significant milestone, in the first quarter of this year, seven Indian e-commerce companies namely Flipkart, Snapdeal, InMobi, Quikr, Amazon India, OlaCabs, and Paytm achieved a billiondollar valuation. While all three top players in online retailing made significant losses in triple digits of Crores (INR) last year, they seem to be on an acquiring spree consolidating players and market. As per analysts, the $200 billion investments in e-commerce last year were driven by sky-high valuations. The valuation of Flipkart sharply increased from $1.9 billion at the start of 2014 to reach $11 billion by the end of the year. It raised $1.9 billion in three rounds of fund raising despite incurring losses of around $4 billion. Similarly, Snapdeal saw its valuation increase from $350 million to $3 billion after raising funds of $850 million. The valuation can play a major role for an e-commerce player irrespective of the profitability of the company.

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