Ecommerce Business and Investments

 Delivery system gasps for breath on order deluge. Delays are leading to buyers cancelling orders

Salim Ahmed wanted to celebrate his first wedding anniversary by gifting an LED television to his wife. Given the euphoria surrounding e-retailing coupled with attractive offers by various e-marketplaces, he decided to take the e-commerce approach instead of making the purchase from a physical consumer electronics retail store.

After comparing rates across various e-marketplaces, he booked a 32 inch television from Snapdeal.com which was offering the best rate. “While it was mentioned on their website that the product shall be delivered within 4-5 days, it took around 10 days – well past my wedding anniversary – for the television to reach my residence thus leaving my wife furious,” he said.

That's not all. In another purchase, Ahmed bought a mobile handset for his sister from eBay wherein the delivery time-frame mentioned by the marketplace operator was within four days. The handset was purchased on October 13, 2014 but it hasn't reached him yet.

“I called eBay's customer care number a few days ago and the executive 'advised' me to wait till October 22, 2014. On Tuesday, I called up Blue Dart customer care, which is suppose to deliver the product, and the lady executive stated that it will take another 4-5 days, as the product I have ordered could not get linked up for delivery, due to heavy pressure which started from the onset of Dushera,” said Ahmed.

The Blue Dart customer care executive informed further that except Flipkart (which has its own delivery system), all other e-tailers were facing a similar problem. In fact, the customer care executive also said that many customers are now refusing to accept the delivery due to delays.

“A lot of customers bought products to coincide with the auspicious Diwali festival. However, due to delays now, many feel they have been let down by the e-marketplace operator,” said the executive.

Salim is among the scores of e-shoppers (who have either witnessed a delay in receiving products purchased from e-marketplaces or are still awaiting the products to reach their residence. In fact, dna has learnt that a significant number of consignments are either piled up (across various locations) at the logistics services provider's end.

The reasons cited was either the logistics firm wasn't able to handle the huge number of despatches / deliveries or the consignments have been sealed by sales tax authorities (in certain states) citing non-payment of value-added-tax (VAT).

In fact, courier delivery services company FedEx is currently facing trouble delivering around 6,000 odd products bought from various e-commerce websites in the city of Patna in Bihar. “The consignment has been sealed by the sales tax authorities who are demanding payment of VAT on the goods to be delivered. Efforts are being made to speed-up the process but we are still not sure how long it will take for this issue to be resolved,” said a FedEx executive.

Speaking to dna, Agra-based promoters of a handicrafts trading company Stonkraft, Nitin Gupta and Sachin Gupta, who use e-marketplaces like Amazon, Snapdeal, Flipkart, eBay etc to sell their products said, the market response during the festive season has been very good.

“What is really heartening is that despite a small company we have received orders worth almost 20 times the same period last year. The handicrafts are sourced from Uttar Pradesh that levies no VAT on the products. The irony however, is that our despatches are now stuck in certain locations especially Bihar for the last 15 days owing to VAT issue. Similar problems also exist in states like West Bengal, Gujarat, Maharashtra and Karnataka. We are making our customers aware about the issue and hope to get this resolved,” said the Stonkraft promoters.

While e-marketplace operators like Amazon India, Jabong, eBay India, did not revert to queries seeking responses on the subject. Snapdeal said there were possibilities of delays due to heavy traffic at the logistics service providers' end.

According to Aakash Moondhra, chief financial officer, Snapdeal.com, this Diwali season online markets and e-commerce sites have seen a huge increase in traffic. “We have seen a multi-fold growth in our orders. With the increase in order volumes the delivery maybe impacted due to unprecedented delivery demands on the logistics companies. We have not seen delay in our deliveries due to any taxation issues or confiscation though,” said Moondhra.

A Flipkart spokesperson said that sellers from across the country sell their products on its e-marketplace and that MSME's scale their business to a national level without having to step out of their workplace. “On our marketplace products are sold in compliance with various laws. We clearly mandate to our sellers that they sell products in accordance with applicable laws. The taxes are paid as per the commercial taxes rules i.e. at the point of sale,” the spokesperson said.

The e-commerce industry, Moondhra said, is growing rapidly and is expected to grow to a $50 to $70 billion industry in the next five years and it will employ millions of people. “The logistics industry will also continue to grow to match this. Goods and Service Tax (GST) implementation will play a critical role in determining how fast the industry grows,” he added.

Interestingly, the delayed despatch / delivery issue is not restricted to e-marketplace operators and is true for those selling products through tele-shopping networks and some consumer electronics retail stores as well.

Ankur Tanna, a resident of Thane, bought a magic mop from Star CJ Alive on Sunday morning and received text message by evening that the consignment has been shipped and that he should keep the money ready. “I was hoping to receive the product by Monday afternoon but that didn't happen. Calls to the landline number shared on the text message did not elicit a response,” he said.

On Tuesday, he called the toll-free number for a status and was told that the product will be delivered before 6 pm the same day. “I haven't heard from them nor have I received the product as yet. Thankfully, it's a cash-on-delivery transaction so I have the option to cancel the order if it doesn't reach me within this week,” he said.

Similarly, Dinesh Lad bought an electronic appliance from Tata Group's consumer electronics store Croma and was promised delivery on Sunday i.e. October 20, 2014. “We didn't step out of the house to avoid missing the delivery. However, we were told late evening that the delivery would happen the next day. We wanted the appliance for a specific occasion and hence cancelled the purchase and sought a refund,” said Lad.

(Some buyer names have been changed)

IAF personnel and their families have been asked to desist from using Chinese 'Xiaomi Redmi 1s' phones as these are believed to be transferring data to their servers in China and could be a security risk."F-secure, a leading security solution company, recently carried out a test of Xiaomi Redmi 1s, the company's budget smartphone, and found that the phone was forwarding carrier name, phone number, IMEI (the device identifier) plus numbers from address book and text messages back to Beijing," says an advisory issued by the IAF to its personnel.

The IAF note, issued some weeks back, has been prepared by the intelligence unit based on the inputs from Indian Computer Emergency Response Team (CERT-In), according to IAF sources. Emails were sent by PTI to the company for its response on this development but those remained unanswered. However, in a general statement two days back, the company had said it was fully committed to storing its users' data securely at all times.

The company said it is migrating some data on non-Chinese customers away from its servers in Beijing due to performance and privacy considerations. It said that earlier this year, its e-commerce engineering teams started migrating its global e-commerce platforms and user data for all international users from their Beijing data centers to Amazon AWS data centers in California (USA) and Singapore.

This migration process will be completed by the end of October and will benefit users in all of our international markets — Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, and Taiwan. Incidentally, the Taiwanese government is investigating whether Xiaomi Inc is a cyber security threat due to privacy issues.

The e-commerce industry is worth US $13 billion currently and is expected to touch US $90 billion by 2021, according to eTailing India Founder Ashish Jhalani. This 700% growth will change the way organisations allocate internet advertising budgets in India, eTailing India Jhalani said in a statement here on Thursday.

"E-commerce is a full-fledged industry today, from being ancillary part of the retail industry less than a few years ago. Much like Apple changed the music industry, e-commerce will not only impact retail, but also the advertising industry, Jhalani said. Shoppers in India are increasingly using smartphones to buy products; sites such as Flipkart, Snapdeal and Shopclues have reported that that up to 35% of their traffic comes from the mobile phone.

With the high penetration of phones in India and improving internet connectivity, e-commerce firms are expected to reach millions of new users in the coming years, he said. In line with the growth of e-commerce, one-third of the world's advertising revenue is also expected to go digital by 2018, Jhalani said. At a recent conference, Google India declared that Indian internet users will surpass the number in the US by the end of 2014 and around 500 million people will be online by 2018.

E-commerce is new go-to sector for executives

Senior executives from other sectors look to join e-commerce firms which promise higher salaries, payouts

Until recently, it was common for executives at established companies to view e-commerce firms with scepticism bordering on disdain. Now, as confidence in India’s e-commerce story grows, several senior executives from sectors such as telecom, consumer goods and retail are starting to show interest in joining top e-commerce firms which offer higher salaries and promise lucrative payouts when they sell their shares on stock markets.

After the telecom boom of the early 2000s, when it became the go-to sector for ambitious executives looking to help build large businesses and pull in handsome salaries, e-commerce companies led by Flipkart are starting to generate similar interest among executives. “There’s a lot of interest among executives in various sectors in shifting to e-commerce, like it was when telecoms started to boom,” said Avdesh Mittal, regional sector leader, digital media, at executive search firm Korn Ferry, which works with e-commerce companies. “However, the biggest difference is that unlike telecoms, there’s a massive wealth creation opportunity in e-commerce.

During the telecom boom, not many people really got rich; it was mostly the promoters who created wealth. In e-commerce, you will see many more executives becoming millionaires.” Over the past six months, Flipkart has hired several senior executives from other sectors.

Such lateral hires include finance controller Rajnish Baweja who joined this month; he was regional chief financial officer at Bharti Airtel International (Netherland) BV; vice-president, projects, Nagesh Rao, who helped build the retail business at Aditya Birla Retail; and vice-president, legal, Srivals Kumar, who has worked with Bharti Airtel Ltd and the GVK Group. Other large e-commerce companies attracting top talent include the Ibibo Group and the People Group, which owns Shaadi.com.

Ibibo named Rohan Patnaik, a former Hindustan Unilever Ltd executive, as the head of supply and operations at its bus ticketing unit redBus in June. The changing attitude toward e-commerce reflects the strong revival of investor appetite for India’s fledgling Internet firms and the seriousness with which these firms are being looked at by the corporate world.

The India entry of the world’s largest online retailer Amazon in June 2013, explosive sales growth reported by Flipkart and Snapdeal and their ability to attract hundreds of millions in funds are some of the factors that have boosted the credibility of e-commerce as a sustainable industry. Online retail is worth $3.1 billion, or 10% of the organized retail market, and is estimated to grow to $22 billion, or over 15% of the organized retail market, in five years, according to a November 2013 report by brokerage firm CLSA.

“There is a lot of interest in working for Flipkart because the potential is so large and over a long period—barely 1% of Indians shop online and that’s going to grow to 15-25%, so the growth is going to be massive over the next five to eight years—as we’ve witnessed happen with Alibaba in China,” said Mekin Maheshwari, chief people officer at Flipkart. “We offer executives the chance to shape the present and the future of this industry, put their own stamp on it, and that excites them. We are competitive when it comes to salaries, but there’s also the large wealth creation opportunity, alongside the growth of the company that few other companies offer.

When you think of the valuation that Flipkart can reach in the next few years, stock ownership becomes a very lucrative option,” Maheshwari said. “Apart from the skill sets of a given job, we look for people who’ve started businesses, built something from scratch and taken it to a large scale. We are also interested in people who have led a major transformation or turnaround—basically led drastic changes in a business. Having at least one of these two traits is key because at the rate at which we’re growing, it requires people to be able to adapt quickly.”

According to Nishchae Suri, head of people and change practice and partner, management consulting, KPMG, “What happens is that once people at senior levels take the jump and join an industry, it gives encouragement to others and increases the credibility of the industry and then their juniors follow. E-commerce is a fast-growing business and it’s likely to see this happen.”

Hiring by e-commerce companies has risen significantly at B-schools, too. For instance, at the Indian Institute of Management (IIM), Bangalore, companies such as Amazon, Flipkart and Jabong together hired 26 graduates this year, an increase of 50% from 2013, said Sapna Agarwal, head, career development services at IIM, Bangalore. “Traditionally, consulting, banking and financial services have been the large recruiters in B-school campuses.

Though only 6.7% of the batch was hired by e-commerce companies, it is the only sector that has showed a large increase in hiring over last year,” Agarwal said. However, some headhunters said it still takes some convincing for people to join some e-commerce firms, especially as there is wariness about the sustainability of businesses outside the top 4-5 companies.

“The failure of some sites in the past has led to caution among people outside the industry. The attitudes are changing, but slowly, and it still takes a very sweet deal for most people to move to e-commerce,” said Simran Singh, founder of Simran Singh and Associates, an executive search firm that works with brick-and-mortar retailers and e-commerce firms.

Online retailer Flipkart on Tuesday announced it received $1 billion (around Rs.6,000 crore) in fresh capital, one of the largest-ever fund-raise by an Internet firm globally and the largest ever by an Indian start-up. In an interview, co-founders Sachin Bansal and Binny Bansal (not related) talk about the significance of the fundraise, how the company plans to use the money and its long-term plans for an initial public offering (IPO). Edited excerpts:

What is the kind of growth you are seeing right now? 

Sachin: The growth that we are seeing is exponential. In general, as the revenue base of companies grows to a certain extent, the growth slows down as a percentage. But here it’s not happening. We are growing fast on a larger base.

Binny: Our growth is, in fact, much faster than we expected ourselves. So our supplies are always behind. We are constantly struggling with ramping up our supplies to meet the demand. That’s the situation we are in right now.

You raised nearly $800 million in one year before this latest round. Why did you go for another fund-raise and how will you use the money? 

Sachin: We didn’t really have to raise this money. But when the option to raise this money opened up, we raised it. From a private investment point of view, this is probably the third or fourth largest private investment raised by any Internet company in the world. The future of India’s Internet is very bright and I believe Flipkart is positioned at the right place at the right time to capture the growth that is coming.

Binny: We will use these funds to step up our investments in the technology and mobile space, and in creating a whole new commerce ecosystem for entrepreneurs, sellers and brands. A few months ago e-commerce firms were chasing investors for money. Now, it seems it’s the other way round.

What’s changed? 

Sachin: That’s how it should be. In the Indian start-up space, we have had some great ideas, great teams but not enough funds. That is changing very fast. If you look at the Silicon Valley, there is 5-6 times more investment in the private investment space as compared to India.

Binny: Also, the rate of growth of Internet has really picked in India. The Internet economy is going to be very big in India. Mobile Internet will drive it.

What are the IPO plans? 

Sachin: The world is actually different now than it was 10 years back. Today investors have enough appetite. For example, a lot of Facebook investors are still invested even after they went public. IPO is long-term. We are not thinking about IPO right now. When we feel we are ready as a company, when the market is ready for us, and when our business model has stabilized, then probably we will look at that. Because of the foreign direct investment (FDI) rules, e-commerce firms in India have had to adopt a complicated structure to try and comply with them.

Does that have anything to do with your thinking on the IPO? 

Sachin: From the structure point of view, we are absolutely legal. It goes back to the investors we are getting on board. From the legal point of view, I think that’s not a concern at all.

A day after Flipkart said it raised $1 billion in fresh capital, Amazon.com Inc.’s chief executive Jeff Bezos announced that the world’s largest online retailer would pump in as much as $2 billion into its India business as it aims to become the leader in one of the fastest-growing e-commerce markets and rev up sales growth outside of North America.

Amazon did not give a time frame for the investment, but a spokesperson said it would be a “continuous flow allowing us to aggressively invest in growing our business and enhancing customer and seller experience”. Flipkart has thus far raised $1.78 billion for its capital-intensive e-commerce business.

“After our first year in business, the response from customers and small- and medium-sized businesses in India has far surpassed our expectations,” Bezos said in a statement. “We see huge potential in the Indian economy and for the growth of e-commerce in India. At current scale and growth rates, India is on track to be our fastest country ever to a billion dollars in gross sales.

A big ‘thank you’ to our customers in India—we’ve never seen anything like this.” The large war chests of Flipkart and Amazon may trigger a price war and inflate already-high customer acquisition or marketing costs, analysts and investors said. They will also increase pressure on rivals Snapdeal, Jabong and Shopclues to raise cash and lead to more mergers among e-commerce companies. “This money will mostly go into funding operating losses… given the discounts at which they (e-commerce players) are selling, they need $150-$200 million per year,” said Sanjeev Aggarwal, managing director, Helion Ventures Pvt. Ltd. “Secondly a lot will go into acquiring companies in the vertical segment play…like grocery, furniture, baby category.”

The $2 billion investment by Amazon comes as the company is facing increasing pressure from investors to cut spending and focus on improving its wafer-thin margins after the US-based online retailer reported disappointing quarterly results for a large part of the past year. Last week, Amazon said it posted a loss of $126 million for the latest quarter, much wider than what most Wall Street analysts had estimated. Amazon’s investment shows the increasing importance of its Indian business and also highlights the company’s ambition to succeed in a fast-growing international market.

It is struggling to make significant inroads in China where Alibaba, which is set to list its shares in the US this year, dominates e-commerce sales. “All large e-commerce markets are taken so this is probably the only market which is yet to be fully penetrated. Of the total $500 billion retail we are only $3-4 billion in e-commerce so it is important for Amazon to not to lose in India—the only large market left with high growth potential,” Helion’s Aggarwal said. Amazon globally generated nearly $75 billion in sales last year, roughly 40% of which came from international markets, including Germany, Japan and UK. The company has stated a goal to generate half its sales from outside North America and it needs to scale up its India and China businesses to achieve it, analysts said.

Last year, sales growth in Amazon’s international markets dropped to 19% from 27% in the previous year. India’s e-commerce market, excluding travel, is worth $3.1 billion and expected to grow to $22 billion in five years, according to a November 2013 report by brokerage firm CLSA. By that time it is expected to be the world’s third-largest e-commerce market after the US and China. Mint reported on 26 June that Amazon had increased the capital it can invest in India to as much as Rs.1,500 crore in December from Rs.200 crore in 2012-2013, citing documents filed with the Registrar of Companies.

Amazon Seller Services Pvt. Ltd, the firm’s India business, launched its India marketplace in June 2013 and has quickly expanded its product selection to become the biggest rival to Flipkart and Snapdeal. It now offers 15 million products across 28 categories, including electronics and apparel, and also claims to have the largest product assortment in 11 of these categories, including books and toys.

The number of third-party sellers on Amazon’s site has risen to over 8,500 from a mere 100 a year ago. In comparison, Snapdeal has over 30,000 sellers, Shopclues more than 40,000, and India’s largest e-commerce firm Flipkart over 3,000 merchants on its platform. Flipkart said on Tuesday that it raised $1 billion in fresh capital from existing investors including Tiger Global, Naspers and Government of Singapore Investment Corp., marking the largest-ever fund raise by an Indian start-up and among the largest ever by any Internet start-up globally.

THE ‘E-COM’ KINGS!
E-commerce seems to have become the biggest retail story in India in the past few years. The e-commerce business in India is expected to be worth over $70 billion by 2020. And the ones who took the plunge early are reaping heavy rewards already. The men who lead these profitable ventures are the new kings of Indian retail.

Latif Nathani, MD, eBay India,
Praveen Sinha, co-founder & MD, Jabong,
Kunal Bahl, CEO, Snapdeal,
Amit Agarwal, vice president, Amazon India,
Sachin Bansal, CEO, Flipkart and
Ashutosh Lawania, co-founder, Myntra,

are the new gurus of Indian retail. A few years back, one would have never imagined that sales in these e-commerce ventures would boom like they have done lately.

Some of the facts and figures surrounding the sales and acquisition figures of these ventures is astounding. EBay recently pumped around $134 million into Jasper Infotech Pvt Ltd, which owns Snapdeal as their strategy to take on Amazon in India.

Rohit Bansal started Snapdeal in 2012 with just five sellers and today has over 50,000 sellers. At Amazon, they launched Junglee.com in 2012, which enabled retailers to advertise their products to millions of Indians free of cost. Their programmes-Sell on Amazon & Fulfillment by Amazon, were used by over two million sellers to sell to over 200 million customers.

Flipkart was launched with an investment of just Rs4 lakhs and later got four rounds of venture capital funding before it acquired Myntra for around $330 million. Today, Flipkart directly employs over 10,000 people selling to over millions of Indian customers and is all set to invest in technology.

Jabong’s is another success story to emulate their warehouse in Haryana stocks over 20 lakh products and has over 1,000 trendy international high street, Indian ethnic and designer brands with over a lakh styles.

Myntra has always been more focussed on fashion apparel. It tied up with the Fashion Design Council of India last season to become the online fashion partner for the India Fashion Week and also launched the Indian by Manish Arora collection in 2013. With over 600 fashion brands in their kitty and over 50 million online clients a month, their turnover has been record breaking.

And all these success stories have one thing in common - the brains behind the business. These new age retail heads are not just passionate about what they do, they have also got their business mantra in the right place. In the coming years, they are sure to rule the retail sector in a growing economy, where fashion and lifestyle are estimated to become multibillion dollar industries.