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
Madhav Chanchani &
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