Ja­pan’s Rakuten may Roll its Cart to In­dian Shores

Opens biz of­fice in Bengaluru, poach­ing mid-level man­agers from Flip­kart, Ama­zon

The Economic Times - - Front Page -

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

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