2014 was the year where billion dollar investments were announced in the e-commerce sector in India. In fact, between the three major players – Flipkart, Amazon India and Snapdeal, the sector saw an investment of around $4.8 billion this year.
Flipkart raised a total $1.91 billion across three funding rounds in 2014, which was over 5 times the money it raised in 2013. Amazon stated plans of investing $2 billion in its Indian operations earlier this year while Snapdeal raised a total of $860.7 million across three rounds in 2014.
Vertical e-commerce players like Jabong, Urban Ladder and Pepperfry also raised significant investment during the year. Jabong raised a ‘multi-hundred million dollar’ investment in February while Pepperfry raised $15 million in May and Urban Ladder raised $21 million in July. Online fashion store Koovs also raised £22 million through an IPO on London’s AIM exchange.
These investments also led to massive advertising campaigns across various channels like print and television, especially during the festive season, impacting the business of several large & small offline retailers. Urban Ladder co-founder & COO Rajiv Srivatsa said that they were also able to attract talent from other industries and college campuses. This was a remarkable change from 2013, wherein companies struggled to raise money and several companies shut down due to lack of capital.
— Pankaj Chaudhary (@Pankurocks) October 6, 2014
E-commerce problems in 2014
However, things weren’t all good in the sector during the year: HomeShop18 cancelled its IPO, around seven months after filing for an IPO and around five months after Reliance Industries acquired Network18. The company had also surprisingly stopped selling books online, which is believed to be among the higher margin categories for e-commerce.
One of India’s earliest e-commerce ventures Indiaplaza also went offline, after failing to raise funds last year, since investors were spooked by India’s FDI policy in e-commerce, an issue which is yet to be solved by the government. The Enforcement directorate is also probing several e-commerce companies like Flipkart, Amazon and Urban Ladder among others for possible violations of the FDI guidelines.
E-commerce companies stopped delivering products to Kerala due to issues with the state’s sales tax department. Amazon India is also tussling with the Karnataka’s commercial tax department on whether the seller or Amazon should pay the sales tax for all the orders through its fulfillment service. Karnataka government had later stated plans of classifying online marketplaces as “commission agents”, thereby bringing them under its ambit.
Warranties on online product purchases
Retail brands who were unhappy about the allegedly disproportionate discounts offered by e-commerce platforms like Flipkart, Amazon India, Snapdeal, Myntra, and Jabong among others, also issued consumer advisories against e-commerce players this year.
— Runner (@Nithin) October 14, 2014
Few brands like Gionee explicitly said that warranties will not be honored if products are bought online, although most of other advisories comprised of ambiguous words. Some merely asked consumers to check warranty entitlements of their online purchases. For instance, Asus said they don’t have different warranty policies for online & offline purchases, six months after warning consumers against buying its devices from e-commerce websites like Snapdeal, eBay, Amazon and Flipkart among others.
Sudhin Mathur, Director (Smartphones), Lenovo India which had issued a similar advisory against Amazon & Snapdeal, said that “advisory was never to say don’t buy, but to alert consumers to check the authenticity of the product they are buying from these sites”.
Related reading on consumer protection issue:
– Here’s what Lenovo, Dell, HP, Toshiba, Asus, Nikon have said about e-commerce offers & warranties in India
– Here’s what Amazon, Ebay, Flipkart, Snapdeal and others said about honoring e-commerce warranties in India
– How Amazon India deals with Fake Products
– CCI says consumer brands’ authorised-sellers-only demand is “prudent business policy”
Interestingly, we also saw several brands signing exclusive deals to retail their products only through online channels, much to the displeasure of offline retailers.
Flipkart partnered with brands like Motorola, Xiaomi, Karbonn, Lenovo and Philips among others, Snapdeal signed deals with Micromax and Google (for Chromecast) among others, while Amazon tied up with Microsoft, Grasim and interestingly the e-commerce dissing Kishore Biyani’s Future Group.
Sudhin Mathur, Director (Smartphones), Lenovo India had told Medianama that E-commerce platforms allows them to launch its products across the country on Day 1, which is not possible with physical retail. He added that online platforms also allows them to reach out to a very targeted audience which is already net savvy and understand what they want to buy. Apart from this, brands also get marketing support from these e-commerce players in return for this exclusivity.
Fast food restaurant chain Burger King also strangely experimented with pre-bookings on eBay India and it seemed to have worked, since the pre-order queue was bigger than the regular queue at Burger King’s Delhi launch.
– Retailers asking e-commerce players to rein in discounts is hypocritical and anti-consumer
– Retail majors complain against e-tailer pricing as they foray into e-commerce
– On Hindustan Unilever’s e-commerce pilot
M-commerce is major driver for e-commerce players
With increased adoption of mobile Internet in the country, mobile platform now accounts for majority of transactions & traffic for almost all e-commerce players in 2014.
Amazon India said that nearly 50% of its traffic comes through mobiles and there has been a sharp increase in the amount of shopping through its apps while Flipkart said that over 50% of its transactions are now coming from mobile phones. Snapdeal had earlier claimed that 50% of its transactions are from mobile phones.
Flipkart-owned Myntra had said in July that around 35% of its business is driven by mobile commerce while Jabong had said in October that Mobile transactions accounted for 27% of its transactions in Q2 2014. Urban Ladder also said that 50% of its traffic and 35% of its transactions is through mobile.
Impact of e-commerce deliveries on logistic companies
Revenues of logistics companies also increased significantly on the back of e-commerce deliveries from Amazon, Snapdeal, Flipkart, Myntra and Homeshop18 among others.
Blue Dart Express managing director Anil Khanna had said in August that e-commerce logistics accounted for 22% of Blue Dart’s revenues in the month, up from 13% in January this year and they were hoping this grows to 30% by December this year. DHL which owns Blue Dart, had chosen India to pilot its e-commerce logistics business model for Asia-Pacific and had stated plans of investing €100 million over the next two years to build the infrastructure for this business.
Logistics company GATI’s e-commerce division also reported revenues of Rs 40.7 crore for the nine month period ended March 2014. The segment contributed to 19% of GATI’s overall business as March 2014, up from 13% in July 2013.
India Post signed a memorandum of understanding with Snapdeal & Shopclues in October for e-commerce deliveries. It had also revamped its offering to include Cash on Delivery services, especially given the fact that it is a key requirement for e-commerce in India. The department reported revenues of Rs 50 crore from these deliveries in the current financial year.