Home > Strategy > Letsbuy sell-off and Zansaar investment- Where are we heading to?

Letsbuy sell-off and Zansaar investment- Where are we heading to?

About two weeks ago, the start-up world woke up to the $25 million acquisition of letsbuy.com by flipkart. A week back we had the news of Zansaar securing a $6 million investment from Accel Partners and Tiger Global. The e-retail world in India is abuzz with lots of hectic activity, so much so, it is confusing the consumer on who is offering what?

The news of letsbuy being on the block was in the air since last few months. First time I heard it, I was told they are looking for a $80-85 valuation. But, when the deal was struck, it was pinned at $25 million. Why such a drastic difference in ‘asking’ and ‘getting’ dollar value? Of late, the has been a lot of start ups coming up in the e-commerce and the deals space. As sources put it, letsbuy.com was finding it hard to raise additional capital and hence the sale. The fact that both letsbuy.com and Flipkart had common investors made it easier for the deal to go through. With the acquisition, Flipkart, which has not been able to shed the ‘bookseller’ tag will have a wider range or products to sell.

The VCs have already burnt their fingers in funding the deals based start-ups. Both the demand and the buy sides of the deals space were over rated. Today, I wee most of the deals sites selling nothing more than dinner, spa and massage coupons. The next best bet for investors is the e-commerce space. But, have a look around and you will find many websites selling similar products- hardly we see any differentiation. Least to say, the space is already overcrowded. Recently there was the case of taggle.com which started as a deals site, pivoted once and became a e-commerce site and finally shut down due to what the promoters said was ‘hypercompetition’ in the e-commerce arena.

Whats the future?

As I see it, although the Indian e-commerce sector has a lot of potential, you cannot have a lot pf websites selling the same stuff. Its not  as in the case of physical outlets where proximity to the customer is an important factor. In online retail, each of the portal is at same distance- just a click away. Here is what I see happening in future:

1. After a few years, there will be a handful of mega-online-retailers (with/without offline stores). This will be achieved at the cost of either shut down or acquisition of other e-retailers. These are the likes of Flipkart, Letsbuy and e-bay. A lot will depend on the spectrum of choice offered and efficiency in handling customer dissatisfaction.

2. Along with these mega-online-retailers, there will be a few dozen ‘specialized’ retailers selling high end or niche products but with a much smaller catalog. Freecultr is one example of the high end players. Chumbak is an example of niche products player.

3. There will be another set of ‘specialized’ retailers selling only one category of products e.g. accessories for gadgets.

4. I am not very sure if one-category-sites e.g. bagskart.com– selling bags, lenskart.com– selling sun shades and glasses will be able to survive the mega-e-retailers. They will have to shut shop.

5. Group deals websites will become history as the e-retailers will incorporate simiral of not same discounts into the price (guided by the sales volumes).

The above five points are just the over view of the e-retail world dynamics in India today. There are much more details to these five points. I would like to detail each one of these pointers, whenever I get time. Till then, enjoy the rain of offers and offerings around you!

  1. Mukesh Jha
    March 9, 2012 at 7:02 pm

    @ Harsh: I agree to most of the points raised in your article. I feel that Indian e-retail is still in its nascent stage and consolidation of “platform providers” will still take at least 4-5 years of time. Truly more than scale, differentiation will be the key to remain profitable. Also as the volume of e-retail options are growing exponentially, “loyalty” of their clients will be the key to success. This will be possible only through better understanding of visiting traffic and higher level of customized offerings and not by mere discounts.

  2. March 20, 2012 at 12:41 pm

    @Harsh the coupon deal space was bound to leave only a few players like snapdeal or mydala hanging on due to huge funds with them. Over time, even they shall have to convert into a full time sellers of products and service rather than flash sales of coupons which are always repetitive. About your point that says- Niche category websites shall perish- its hard to see all major ecomemrce stores turning into amazons of India even junglee shall find it hard to consolidate and sell everything available online. For instance, we sell Art Prints & Posters over http://www.artemporio.com and see the value of being there for niche category products rather than selling everything. Yes! Scaling up shall be a challenge but then, even amazon cannot implement the kind of details and customization we can into our art store.

  3. March 20, 2012 at 5:41 pm

    I would like your views on micro part of your post concerning letsbuy and flipkart having common investors and their one firm taking over the other one in the need of finance. Had letsbuy generated more funds, existing investors share would have been diluted. And probably the investors didn’t want to pump in more money from their pocket. Assuming that flipkart had reasonable retained earnings, it made good business sense for the investors to take over letsbuy through flipkart and thus raising more funds for letsbuy without diluting their equity or pumping in more money. There some assumptions here but what you think about investors mindset?

    Secondly, if Groupon has remained and only deals site then why don’t you expect the same for other startups in that domain?

    Will look forward to your comments.

  1. May 21, 2012 at 4:40 pm

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

<span>%d</span> bloggers like this: