India’s Flipkart launched its first self-branded products, dubbed Flipkart Smart Buy, in December, focusing on phone chargers and data cables.+
The aim is to gain higher margins for the Amazon arch-rival, which in turn could help with profitability.
Internally codenamed Project Ice, Sachin is planning to make self-branded items in more than 40 categories, including electronics and home furnishings. A rollout is expected by April.
Some of the reasons behind this are the same reasons for why Apple is thinking about producing iPhones for India in India, the “Make in India” government initiative:
There are tax benefits and subsidies that sweeten the deal. As per the Make in India site, “in order to boost manufacturing of electronics, the government of India provides a capital subsidy of up to 25 percent for 10 years.”
“As of now, the new label does not have a mandate to make profits, it just has a mandate to set up a Make in India base,” two people aware of the developments told Tech in Asia.
According to the quarterly Indian E-tailing Leadership Index, Amazon still plays second fiddle to Flipkart, which has been ranked number one for the fourth straight quarter in 2016.
Another Indian government initiative, demonetization, has led to Paytm, who recently got the licens to become a payments bank, and other payment providers to rise in popularity:
While Paytm gained from the phasing out of high-value notes, ecommerce players suffered a setback as a cash crunch crippled cash-on-delivery payment, which accounts for a significant chunk of their business.
Flipkart wants to be IPO-ready by the next 12 to 24 months but is lacking a clear growth strategy amidst increasing competition on the Indian market. It is unclear how private labels, aimed at the higher end of the market, will help with that. Like so much at Flipkart lately, this looks like it is mainly about the margins, made for creating a sellable IPO story.
The fierce fight for India is certainly taking a toll on the numbers, unsurprisingly:
Fast-paced growth has come at a steep price for India’s top online retailers- Flipkart, Amazon India and Snapdeal. The combined losses for all three companies doubled to Rs Rs 11,754 crore in fiscal 2016, while combined revenues doubled to Rs 6,802 crore according to financial numbers filed for the three previous fiscal years.
In the previous two years both losses and revenues tripled, signalling slowing growth for an industry where there is a fierce battle underway for leadership.
No suprise then that while Flipkart, Snapdeal, Amazon and Alibaba are heating up the war for the e-commerce market in India, investors have started looking elsewhere, at the wholesale market in India to be specific:
Industry reports currently peg the Indian retail market at US$490 billion and project its growth at a compound annual growth rate of 6 percent to reach US$865 billion by 2023. Tens of millions of small retailers are part of that, and they face issues in sourcing and pricing, just as consumers do. […]
Investors see opportunity in this space amidst the hiatus in the broader ecommerce scene. Evidence comes in today’s announcement of follow-on funding in mobile commerce startup Wydr. The business-to-business (B2B) startup raised an undisclosed amount from its initial investors, Bessemer Venture Partners, Stellaris Venture Partners, and Jungle Venture Partners. Singapore-based Axis Capital also participated in this round. […]
Wydr is an app-based marketplace connecting retailers with manufacturers and wholesalers across categories like fashion, home, automotive, and electronics. It claims to have 1,000 merchants selling their products on the app, and that 200,000 retailers have downloaded the app. With the fresh round of funding, the startup aims to expand its seller base, introduce new categories, and upgrade its technology to deliver more value to users.
“Our app enables easier sourcing and better pricing for retailers while opening up new avenues of sales and better stock liquidation to the merchants,” Devesh Rai, the CEO of Wydr told ET, adding that he plans to expand the seller base from 3,000 to 15,000 in the next six months. The platform has also integrated a chat platform on the app to facilitate price negotiation between buyers and sellers.
Wydr is currently reporting $2.5 million in gross sales per month with a a repeat buyer rate of 45% and growth by 30% every month.
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