When Sachin Bansal and Mukesh Bansal, no relation to each other, shook hands over a Rs. 2,000-crore buyout deal this week, their smiles masked worry-lines. These young entrepreneurs are battling — on their home patch — arguably one of the world’s brightest minds in the business of Internet entrepreneurship: Jeff Bezos of Amazon.
And the good news is that the Davids in this battle are tech-savvy, just like the deep-pocketed Goliath they face.
When Amazon entered India last June, speculation was rife that local e-commerce players would quickly concede defeat, especially since the global leader started its Indian journey on an aggressive note.
In less than 11 months, the US giant has built up a portfolio of 5,000 sellers and 15 million products across 25 categories. Amit Agarwal, country manager of Amazon India, said its vision is "to build a place where customers can find, discover and buy virtually anything online."
It was the Amazon effect that led to Myntra’s Bansal joining hands with Flipkart’s Bansal. Reportedly, the smaller e-commerce players in India are finding it difficult to access capital.
According to a Reuters report, Investment bank Allegro Advisors said only 18 of the 52 e-commerce startups in India that raised $700 million venture capital in three years ending 2012, were able to raise follow-on investments last year.
At the same time, some players such as Flipkart, Myntra, Snapdeal and Jabong are holding out, and even growing. In 2013, Flipkart had a 4.9% market share, while Myntra had 4.1%, and Amazon and e-Bay had 1.6% and 1.2% respectively.
Now the bigger Indian players are making their moves, and have begun acquiring smaller firms, planning mergers, raising funds, and launching new product categories.
A day before the Flipkart-Myntra deal was announced, Snapdeal raised $100 million (Rs 584 crore) from a cluster of five investors that included Premji Invest, the equity firm of IT billionaire Azim Premji.
Flipkart’s CEO and co-founder Sachin Bansal said Amazon does not give him sleepless nights. "We are constantly looking for inspiration and ideas from the Chinese online retail giant Alibaba,” Bansal said. Alibaba is the biggest online retailer in China, and it has not let Amazon scale up in the country.
Incidentally, Sachin Bansal is a former employee of Amazon.
The growth of e-retail in India has galloped at around 50% over the last five years.
It may hit $22 billion by 2018 as smartphone penetration, which fuels online shopping, increases.
The numbers may sound impressive, but they are small before China, where online sales are expected to hit $180 billion this year.
If that is the number on the horizon, all players have enough elbow room in India, said Arvind Singhal, chairman of consultancy firm Technopak Advisors, adding that Amazon has not wiped out existing players in US, Europe or China.
That is when the battleground will shift — to one for market share.