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November 30, 2013E-commerce in India
India is seeing a massive boom in online retail, with growth rate by top companies easily touching the three digit mark. Billions of dollars of sales are being reported now as the industry has started to mature and consolidate around big companies. While profitability is still elusive like Amazon, the massive growth has attracted investors of all hues. While online retail has already plateaued in terms of high growth, e-commerce continues to grow at exponential speed. The growth potential is also extremely high, given the massive size of retail market in India. E-commerce in India is seeing super strong growth and may be one of the best sectors to invest in India over the next decade. While there are no pure play e-commerce companies in India right now, I expect some of them like Flipkart and Snapdeal to list soon, as they require huge amounts of cash to grow their business. They have already raised hundreds of millions to expand their business from PE investors. However, they would have to list eventually given the interest that Internet ventures are attracting in global markets and the size of the investment that they will require.
Read on GWI why Traditional Indian Retailers face Existential Risks from Online Retail Players.
Myntra which is a specialist fashion apparel online retailer got a $50 million investment from the family fund of Wipro’s founder. Most of the investments in e-commerce have mainly come from foreign investors but now even the Indian billionaires are getting interested. Note Indian online retail will be driven by the following favorable factors:
i) Ease of online retail shopping compared to brick and mortar retail given India’s crowded and traffic filled cities
ii) Lower prices offered by online retail due to the high real estate costs for normal retailers
iii) Thin marketing and distribution networks in India’s vast hinterland which makes online retail the only option for a lot of products
iv) Fast growth amongst the Indian internet users, thanks to the smartphone revolution. India is said to have almost 200 million Internet users now (not big users but people who can download Youtube etc.)
I think that investing in the Indian e-commerce companies can be a good idea though none are listed now. JustDial which is a phone based search engine got a spectacular response in India’s dead IPO market and the stock is still trading at high valuations.