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Indian Internet companies set up Indiatech.org to lobby against global players

Homegrown ecommerce and Internet companies such as Flipkart, Ola, MakeMyTrip, Quikr, and Hike Messenger are grouping together and launching industry body – Indiatech.org – to lobby or battle against ‘deep pocketed’ global competitors for ‘fair market’ in the country, reports The Economic Times.

The lobby group is said to be led by Flipkart’s co-founder Sachin Bansal, and the publication said that as founding president and chairman he will appoint an ex-IAS officer as CEO for the group by next month.

The body will push government to make policies favoring domestic startups as the club of these Indian startup wants local companies to dominate in the country. The publication also reports that the companies have also invited investors such as SoftBank, Tiger Global Management, Steadview Capital, Accel India and Matrix Partners India to join the group. No that some of these investors are also backers of some of the going-to-be-member-companies of Indiatech.org. The group will also work on issues like job creation, skills training and other business scaling issues, according to ET.

The group believes that if India’s local firms do not succeed, the country is likely lose $10 billion of foreign direct investment and over $1 billion of tax revenues per year, as reported by the publication.

Why?

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Some of these companies are struggling to fight competition from global players.

Flipkart Vs Amazon: Softbank-backed Flipkart, which raised investment from SoftBank’s $100 billion Vision Fund last month, believed to be around $2.5 billion is having a tough fight against Amazon.

Amazon is bullish on India in a big way. Currently, Amazon’s total investment commitment in India stands at $5 billion: the $3 billion announced in June 2016, plus the $2 billion investment announced back in July 2014, which the company has already completed in phases over the past two years.  Since the announcement of the additional $3 billion investment in June 2016, the India unit’s payments arm Amazon Pay received funds worth Rs 67 crore in May 2017, and an additional Rs 130 crore in July 2017. Amazon India’s logistics arm Amazon Transportation Services (ATS) had received Rs 207 crore worth of funding, in June this year, which was the second tranche of funds infused into ATS in less than a year. Amazon invested a further Rs 341 crore into its Indian subsidiary Amazon Wholesale (India), which is the B2B arm of Amazon India in July 2017, following the Rs 115 crorepumped into the wholesale business in September 2016. Amazon’s investment in its India unit: Rs 1,350 crore in June 2016, Rs 2010 crore in November 2016, and Rs 1680 crore in July 2017.

Ola vs Uber: In taxi space, Ola is running behind by global major Uber. In May this year, Uber infused Rs 51.64 crore into its India operations.

Ola entered the market in early 2011, and had a market share of only 5-6% in the year 2012-13. The share increased to 61-62% in the year 2015-16 (till September 2015), taking the lead in September 2014. Ola’s growth in January 2015 was 75-76%, as compared to 0-1% in June 2012.

Uber, starting operations in Bangalore in August 2013, had a market share of less than 1-2% in 2013-14, which increased to 9-10% in the year 2014-15. Uber maintained the second position from March 2015 onwards.

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For the six month period up to September 2015, Ola’s market share increased marginally by 2% to 3%, while Uber’s share increased by about 20%-22%. From January to September 2015, Uber’s trip size registered growth of nearly 1200%, while Ola’s growth was about 63% during the same period. Ola’s market share started to decline after Uber’s entry, to 58-59% by September 2015. Meanwhile other global players like Grab taxi are too looking at India.

Hike vs Communication apps: Facebook-owned WhatsApp is dominating globally when it comes to P2P communication segment.

Need of Regulator

Competition or no competition, the new-age industry of ecommerce platforms or Internet firms needs a regulator for various purposes. For this, The All India Online Vendors Association (AIOVA) demanded the government in June this year, to institute a regulator for the e-commerce sector. Their demands included a grievance cell for online sellers similar to a consumer court, a competitive market that isn’t marred by monopoly or cartelisation of any kind, and a set of accounting and auditing standards. 

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