Amazon and EBay Inch Into India’s E-Commerce Market

Amazon and EBay Inch Into India’s E-Commerce Market

By Mahesh Sharma January 23, 2014

For U.S. e-commerce companies, some of the most tantalizing expansion opportunities lie in India. Hong Kong-based investment bank CLSA forecasts that the country’s e-commerce market, now at $3.1 billion, will grow to $22 billion in the next five years. The problem for the likes of Amazon.com (AMZN) and EBay (EBAY) has been the Indian government’s strict rules barring companies backed by foreign money from warehousing their inventory on Indian soil—or selling it directly to the nation’s billion-plus consumers.

After several years of disappointing economic growth, the government is looking for ways to boost foreign investment. India’s Department of Industrial Policy and Promotion published a report earlier in January weighing whether it should relax regulations for online retailing and has asked e-commerce companies to register their opinions by Jan. 30. U.S.-owned companies are pushing hard to change the rules, says Amit Agarwal, Amazon India’s vice president and country manager.

U.S. companies have found a way to do business while they await the Indian government’s decision. They’re allowed to deliver and store goods on behalf of Indian merchants and are building local delivery and storage businesses and investing in e-commerce startups.

Amazon established an Indian online marketplace in June where merchants can hawk their wares and pay the company fees to store and deliver their goods. More than 2,300 sellers have signed up, listing 440,000 products including books, electronics, diapers, and jewelry, says Agarwal. That’s more than Indian e-commerce pioneer Flipkart but far shy of market leader Snapdeal.com, which lists some 20,000 sellers and 4 million products. EBay led a $50 million round of funding for Snapdeal last year. “Ninety percent of the assortment we have is not comparable to any other e-commerce company in India,” says Snapdeal Chief Executive Officer Kunal Bahl. “That’s where we’ve driven growth.” Snapdeal says it expects to hit $1 billion in sales conducted on its website this year; Flipkart says it will do the same in 2015.

Amazon said on Jan. 20 that it plans to open a 150,000-square-foot warehouse in Bangalore, matching a facility it maintains in Mumbai, to speed deliveries. On Jan. 15, EBay India announced a nine-hour delivery guarantee for customers in Mumbai. EBay India executive Vidmay Naini said in a statement that the service will expand to other cities over the next few months.

To appeal to local merchants, foreign companies will have to keep improving delivery range and speed, says analyst Rajiv Prakash, the founder of NextIn Advisory Partners, which advises Indian startups. In November, Amazon teamed up with India’s postal service to deliver packages to remote locations, a project Snapdeal says it has tested but hasn’t adopted. A month later, Amazon launched a guaranteed next-day delivery service for certain products in six major Indian cities; Flipkart and Snapdeal both followed, though the latter’s guarantee applies only to the municipality of Delhi. (Flipkart said it would undercut prices on Amazon’s Indian marketplace by 10 percent.)

Even with fervent lobbying, there are no guarantees that foreign companies will be able to expand into direct sales. India’s industrial policy department said in its report that easing rules could help cut prices and make supply chains more efficient but expressed concern that India’s small and midsize businesses would be hard-pressed to compete with the buying power and technology of an Amazon or EBay. “The market is not yet ready for opening up e-retail space to foreign investors,” the report read.

The bottom line: U.S. e-commerce companies are delivering goods for Indian merchants as they lobby to sell directly to customers.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: