Archive

Posts Tagged ‘ecommerce’

Why Snapdeal merging with Flipkart or Amazon will not make sense? Or might.


 

one_punch_can_kill_logo

Last couple of days have been ripe with rumors of Snapdeal reaching out to Flipkart and Amazon for a merger/buyout. YEstreday Kunal Bahl poked fun at these rumors with a tweet on the name that the merged venture will have. Fun aside, lets see is this kind of acquisition/merger would actually make sense or not.

On the face of it, acquiring Snapdeal will not make any sense for Flipkart or Amazon. Take the case of Amazon’s attempt of acquiring Jabong in late 2014. Rocket Internet (at that time I was leading one of Rocket Internet’s ventures in South East Asia) was looking at a valuation of $1.2b whereas Amazon was in no mood to pay more than $700m. Within weeks of the talks falling through, Amazon launched Amazon Fashion to counter Jabong. Later Jabong bled to its on death and was acquired by Myntra (a Flipkart group company) for $70m. That’s peanuts.

Jabong acquisition actually made some sense as Amazon was not very strong in the Fashion category. Snapdeal on the otherhand is a smaller Amazon. Learning from the Jabong experience, I don’t think amazon would even consider bidding for Snapdeal.

Now for the same reason, it does not make sense to acquire Snapdeal. Why would either of them not wait for Snapdeal to bleed weak till it dies or can be bought at a much lower valuation (just for the brand) as in the case of Jabong-Myntra deal.

Now, can it make sense as well? Remember when Ola acquired Taxi for Sure a couple of years ago for $200m? That deal not only helped Ola become the undisputed champion of ride-hailing space in India, but also removed an irritating competitor who was forcing to burn much more cash than what Ola would have liked to. Is Snapdeal that kind of rival for Amazon and Flipkart? The answer is- Yes. Do they want to remove Snapdeal from the competition? The answer is- definitely Yes. But do they want to right now? The answer is- No. Paying $200m for Taxi for Sure was peanuts as compared to the benefits it brought. Snapdeal is a unicorn. I don’t think either Amazon or Flikpart’s investors would ever agree to shell that kind of money ever. Even buying a small stake in Snapdeal would be equal to a billion dollar funding round for the two larger rivals.

So, let the rumors be rumors. I am not sure if anything is going to happen on this beyond being just rumors.

2014- The year of e-commerce Startups!

December 30, 2014 Leave a comment

eretail

 

2014 will be remembered in the startup ecosystem of India which was  completely dominate by the e-commerce startups. Be it the success of mega funding  rounds of Flipkart and Snapdeal or the price wars raged by the e-retailers on each other. Or, the sweet-bitter memories of the one-day mega sales and shopping festivals. Or, the protests by the small shop owners who claimto have been mauled by the e-retail giants. Love it or hate it- the year was that of the e-commerce.

The Indian e-comm industry has yet to learn a lot of tricks of the trade, but one thing is for sure, it is here to stay and will only grow big.

The potential for growth can be judged from the fact that the total size of the Indian e-retail revenue for the year 2014 is less than half the revenue for the Singles Day sale of Alibaba in China. Market size of retail in India is estimated to be at $600 billion a year. Which makes the e-retail industry less than even 1% of the total retail market (organized and unorganized). There are many gaps in the current market that need to be addressed and will be addressed by new players. The coming years will see this percentage share grow to at-least 6-8% which gives a huge space for growth for the existing players as well as a fertile ground for new startups.

With new investments flowing into the Indian e-retail industry, I also see consolidation happening in the market. The 2013 and 2014 also saw some consolidation happening in the e-retail space with Flikart acquiring Let’sBuy & Myntra and Amazon trying to acquire Jabong. The consolidation will gain momentum in next two years to eliminate some of the redundancy in the market.

All said and done, the next couple of years are going to see a lot of action in the e-retail space. Get ready for a lot of click-click!