Saturday, Apr 25, 2015

Flipkart & Co: Domestic e-commerce shake-up to curb global giants like Amazon

ama415 Experts are of the view that the spate of M&As in the recent past might be triggered by investors with stakes in multiple companies with a common DNA.
New Delhi | Published on:May 5, 2014 11:03 am

Global e-commerce giant Amazon’s foray into India last June seems to have frayed many nerves, as well as set the tone for a few big-ticket mergers and acquisitions (M&As) in the sector. The latest to have caught people’s imagination is the widely-speculated acquisition of online fashion store Myntra by its cross-town peer Flipkart. Though there are speculations galore on the deal, the enormous interest it has generated is an indication that M&As will soon become the order of the day in the country’s e-commerce landscape.

The industry has witnessed at least 16 M&As in 2012 and 2013, suggests data provided by investment research firm Venture Intelligence. Experts are of the view that the spate of M&As in the recent past might be triggered by investors with stakes in multiple companies with a common DNA. Besides, businesses are keeping their ears glued to the ground and opting for strategic acquisitions to either augment their existing capabilities or add new skills.

Major consolidations in the last two years is a proof of this. Online fashion store Zovi acquired rival Inkfruit in February 2013. Both companies dabbled in the fashion space and the consolidation was aimed at forging a bigger entity to take on competitors. Flipkart, which registered $1-billion sales recently, had acquired

social book discovery tool WeRead and electronics e-tailer Letsbuy. Incidentally, the acquisitions happened when Flipkart was consolidating its position in the respective categories, books and electronics goods.

Similarly, speculations about Flipkart acquiring Myntra gained steam in the wake of the former starting to sell apparels on its platform in February 2013, a category where Myntra is already ensconced as a market leader. According to retail advisory firm Technopak, online fashion and lifestyle accounts for one-fourth of the Indian e-tail segment and is projected to grow to 30% in the next five years.

Snapdeal, another major online marketplace, recently acquired Doozton, an online product discovery platform focused on the fashion and lifestyle categories that helps consumers discover trending products and designs from online stores across India. Other major consolidations were Fashionandyou’s acquisition of cosmetics retailer Urban Touch and Yebhi’s acquisition of Stylishyou. Myntra acquired online fashion brand SherSingh and Fittiquete, a developer of virtual fitting room technology.

In the case of Flipkart and Myntra, the consolidation is said to have been proposed by common investors Accel Partners and Tiger Global. In Flipkart, Tiger and Accel together hold 40% of the stock while the corresponding figure for Myntra is even higher, at 53%. Both Zovi and Inkfruit had a common investor in Saif Partners, while Tiger Global and Accel Partners were again the common investors in Flipkart and Letsbuy. They were also the common investors in Myntra and Sher Singh.

The recent churning in the sector is possibly triggered by global majors like Amazon and eBay gaining a foothold in …continued »

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