Ekart Rides off with Off­line Clients in Bag

Af­ter win­ning or­ders from etail­ers, Flip­kart lo­gis­tics arm bags Birla co Madura Fash­ion & Life­style as a client

The Economic Times - - Front Page -

Mad­hav Chan­chani &

Aditi Shri­vas­tava

Bengaluru: Ekart, the lo­gis­tics arm of Flip­kart, has started win­ning clients among brick-and-mor­tar brands as it aims to be­come an in­de­pen­dent lo­gis­tics pow­er­house which can fi­nan­cially boost its on­line re­tailer par­ent.

Work­ing with large off­line re­tail­ers is part of the strat­egy driven by Flip­kart's new Chief Ex­ec­u­tive Of­fi­cer Binny Bansal, who is look­ing to po­si­tion the unit as a stand­alone busi­ness.

Ekart has al­ready started de­liv­er­ing ship­ments for ri­val etail­ers such as Paytm, Jabong and Shop­Clues, and has now won its first ma­jor off­line cus­tomer in the form of Aditya Birla group ven­ture Madura Fash­ion & Life­style, said sources fa­mil­iar with the devel­op­ment. “Ekart is look­ing to rope in a to­tal of 30-50 large clients by the end of the year,” said Amitesh Jha, a Vice Pres­i­dent at Ekart, who de­clined to name the clients that EKart is work­ing with.

The bulk of the third party clients for Ekart this year is ex­pected to come from off­line re­tail­ers and brands which are seek­ing to build a so called “om­nichan­nel” strat­egy.

Ekart banks on off­line re­tail­ers to boost par­ent Flip­kart’s rev­enues

Ekart will de­liver prod­ucts to off­line stores, multi-brand out­lets (MBOs), for ex­ports be­sides etail­ing de­liv­ery to con­sumers

Move will help Ekart work closely with top brands, in­crease util­i­sa­tion of ca­pac­ity & un­der­take ex­pan­sion to smaller towns in a more cap­i­tal ef­fi­cient man­ner

In­dia has seen the fastest growth in re­tail ecom­merce among Asia-Pa­cific coun­tries, surg­ing 133.8% in 2014 and 129.5% in 2015. Promis­ing as the In­dian ecom­merce mar­ket seems, it would be chal­leng­ing for Rakuten or any other new­comer to es­tab­lish it­self in the space as top play­ers such as Flip­kart, Ama­zon and Snapdeal dom­i­nate In­dian ecom­merce, each with bil­lions of dol­lars in gross sales.

In fact, the com­bined gross mer­chan­dise value (GMV), or to­tal value of sales, of the coun­try’s top three ecom­merce mar­ket­places last year at $13.8 bil­lion ex­ceeded that of the top 10 off­line re­tail­ers, which stood at $12.6 bil­lion for the same pe­riod.

Started in 1997 as a small on­line mar­ket­place with half-a-dozen em­ploy­ees, Rakuten cur­rently em­ploys more than 12,000 with sales of over $5 bil­lion. It ac­counts for more than a quar­ter of Ja- pan’s ecom­merce busi­ness, ahead of Ama­zon in that coun­try. It also has in­ter­ests in fi­nan­cial ser­vices, dig­i­tal con­tent and travel busi­nesses.

A foray into In­dia would form part of Rakuten’s ex­pan­sion strat­egy. In 2010, it ac­quired Buy.com in the US in a $250mil­lion all-cash deal as part of its push into North Amer­ica.

In 2014, it ac­quired San Fran­cisco-based on­line cash back com­pany Ebates Inc. for $1 bil­lion. Ebates deals with a host of US re­tail­ers in­clud­ing Ama­zon.com, Best Buy, Macy’s, Home De­pot and oth­ers. A few months be­fore that, Rakuten had bought the Viber in­ter­net mes­sag­ing and call­ing ser­vice for $900 mil­lion. Other tro­phy in­vest­ments by Rakuten in­clude US ride-hail­ing app Lyft and on­line scrap­book­ing site Pin­ter­est.

In Ja­pan, it op­er­ates the flag­ship Rakuten Ichiba mar­ket­place with more than 40,000 mer­chants. The com­pany also helps tra­di­tional re­tail­ers go on­line.

In­dia last month al­lowed 100% for­eign di­rect in­vest­ment in on­line mar­ket­places, clear­ing am­bi­gu­ity over the busi­ness mod­els of Ama­zon, Flip­kart and Snapdeal. The coun­try had ear­lier al­lowed 100% FDI only in busi­ness-to-busi­ness ecom­merce and brick-and-mor­tar re­tail­ers had ac­cused ecom­merce ri­vals of cir­cum­vent­ing the law and sell­ing di­rectly to con­sumers.

In the lat­est guide­lines, In­dia has barred mar­ket­place op­er­a­tors from of­fer­ing any dis­counts them­selves and in­flu­enc­ing prices on their plat­forms. Also, no ven­dor can have a share of more than 25% of to­tal sales on a plat­form.

About 40% of Rakuten’s rev­enue comes from its Ja­panese oper­a­tions and the com­pany is in­creas­ingly look­ing at in­ter­na­tional mar­kets for growth. Out­side Ja­pan, Rakuten op­er­ates in sev­eral mar­kets in­clud­ing the US, UK, Brazil, Spain, Malaysia and In­done­sia.

Ekart has started pi­lot with Aditya Birla Group unit Madura be­sides Paytm, Shop­Clues and Jabong

Ekart is tar­get­ing 30-50 ‘large clients’ by end of the year, ma­jor­ity of which are nonecom­merce play­ers

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