Breaking news: Ratan Tata makes yet another investment in his personal capacity in a start-up, Paytm. This makes the total number of investments to 5. His other investments being Snapdeal (marketplace), Bluestone (jewellery), Urban Ladder (furniture), CarDekho (marketplace for cars). As per this trend, do we see a property portal on his radar next?
Whatever maybe the answer but, the larger question is – Are we in an e-commerce bubble?
2014 was the defining year for the e-commerce industry in India. More and more people are transacting online, be it buying, selling, comparing, hiring, leasing, paying, travelling – the list is endless. According to Gartner, the Indian ecommerce industry is expected to touch $6 billion this year, a 70% jump over 2014 revenues of $3.5 bn. And it is expected to grow upward of $50 bn (various sources) by 2020.
Valuations – What’s that?
Flipkart’s valuation went up from $1.5 bn to $15 bn in a span of 19 months. Flipkart and Snapdeal have collectively raised ~$3 bn from various investors in the last year. Majority of the firms are making losses and profits are nowhere in sight. The investors really don’t care much, as they don’t want to miss on the action. The recent listing of Alibaba in the US at a valuation of $230 bn is also having a rub-off effect. This validates that a company from emerging markets can provide a blockbuster exit to its backers as well. The investors understand that the entire game is on capturing the market share and hope the tides turn soon.
Having said that, we have to bear in mind the retail sector boom from 2002 – 07, investors were pumping in money at exorbitant valuations without paying any heed to the profitability. What we see now is needless to say. Fewer players remaining – but profitability still a challenge.
The way forward
Consolidation: Consolidation has already begun, with the big guys acquiring other players. Either it is for expanding their portfolio of products or purely for the technology muscle power or the age old “acquiring your future competitor”. We have already seen action on this front and it is likely to pick up with the larger players being flush with funds. Flipkart acquiring Myntra and Ola acquiring Taxi for Sure recently are some of the examples.
Innovation: Model-wise many things are broken in India and that’s a great opportunity for us. If a company can build a solution around it and which is user friendly then there is no looking back. Zipdial (recently acquired by Twitter) is a great example of innovation in terms of how a simple missed call be turned in to a great business opportunity.
Niche: People are always on the lookout for niche offerings which help them to satisfy a particular need. Zomato (restaurant guide) is a classic example which has managed to achieve a billion dollar valuation. Quikr is another example of this.
Titans of the industry: Industry titans like Ratan Tata, Azim Premji, Narayan Murthy and the likes taking personal interest in this space is a great validation of how this industry is shaping up. Needless to say it’s a great PR victory as well for the companies who have been able to receive their support.
To conclude, we are witnessing small bubbles here and there, but we are still a couple of years away from a full-fledged bubble. Whatever may be the outcome, one things is sure that we are living in exciting times.
Would be great to hear your thoughts and feedback on this post.
– Sajid Khetani
(Sajid is a consultant & advisor to SMEs & startups. You can follow him on @sajidkhetani)
This article was originally published here
Disclaimer: The views expressed in this blog are of my own and are on as is basis. They should not be considered as any kind of advice or recommendation.
