Japan’s Rakuten may Roll its Cart to Indian Shores
Opens biz office in Bengaluru, poaching mid-level managers from Flipkart, Amazon
Rasul Bailay & Shambhavi Anand
New Delhi: Rakuten, an ecommerce company referred to as Japan’s Alibaba and also the owner of chat app Viber, may follow its Chinese peer and enter India’s booming online marketplace.
Japan’s largest ecommerce marketplace operator, which opened a development centre in Bengaluru in 2014, has established a business office in the city and started poaching midlevel managers from Flipkart and Amazon for setting up an online retail platform in India, people familiar with the development told ET.
Alibaba, which has invested in local ecommerce companies, plans a direct entry sometime this year. A Rakuten spokesperson declined to comment. “India is a vibrant growth market and a great source of talent and ideas for us at Rakuten. We are always interested in new global opportunities for growth but we don’t have any comments on developments in India at this time,” the Tokyo-based firm’s spokesperson said in an email. Ecommerce sales in India are expected to grow from $14 billion in 2015 to $55 billion in 2018, according to research firm eMarketer.
This involves selling both at a store and on online platforms. Apparel maker Madura owns brands like Van Huesen & Allen Solly, besides multi-brand outlet chain Planet Fashion and fashion etailer Trendin.
A representative for Aditya Birla Retail did not reply to email queries from ET for this story.
Creating strong revenue streams is particularly important for market leader Flipkart, as it seeks to raise fresh capital while defending its valuation of $15 billion. The company, which counts New York-based investment firm Tiger Global as its largest shareholder, is battling a host of well-funded rivals from Jeff Bezos’ Amazon to the SoftBankbacked Snapdeal.
“We want to be the best supply chain provider in India,” said Jha, a five-year veteran at Flipkart who earlier oversaw the mobile and electronics category.
“The importance of scale is there but importance of technology differentiator is higher,” he said.
India's online retail market is expected to be worth $36 billion in 2016-17, according to Goldman Sachs.
Online retailers alone are expected to provide a lucrative opportunity for logistics providers, according to a recent report by IIFL, which projects that order volumes for ecommerce shipments will have increased 13-fold between 2014 and 2020. “We believe overall volume of ecommerce orders will amount to 2,000 tonnes per day by calander year 2020,” it said. Ekart, which is owned by an entity called Instakart Services Private Limited, will offer clients a variety of supply chain solutions ranging from delivery of goods to offline stores and multi-brand outlets, besides shipping to consumers. The company expects the business-to-business (B2B) segment, which will also include movement of goods between wa- rehouses, to become sizable.
By next year, Ekart expects shipments from non-ecommerce businesses to contribute to half its revenue. Etailing delivery for third-party players is being done under an initiative called Fulfilled by Ekart (FBE), which according to Jha “is a holistic omni channel fulfilment service.”
Experts are of the view that that Ekart has already built more logistics capacity than any of its rivals in the online retail industry.
The division can ship five lakh orders a day and expanded its total warehouse space to 1.6-million sq ft at the end of 2015. It has 17 fulfilment centres across the country and plans to add about eight more by the end of 2016, and employs about 14,500 people. However the bulk of the business for EKart will have to come from smaller rivals and the large swathe of traditional offline retailers, as main rivals Amazon and Snapdeal have their own logistics networks.
“It’s not (only) a strategy but a necessity (to) drive fulfilment requirements of Flipkart in the future,” said Manish Saigal, MD at consulting firm Alvarez & Marsal. While a large share of current shipments by Ekart are done to metros and tier-I cities, future growth is expected to come from smaller cities and rural areas. As it builds infrastructure to deliver to these markets, winning third-party clients will help Ekart generate volumes to build a capital efficient business in these geographies.
Analysts are of the view that Flipkart is tapping into a wellestablished tradition of large conglomerates like TVS Group and Mahindra building specialised logistics units for their auto business.
Online retailers alone are expected to provide a lucrative opportunity for logistics providers