Mega Deals To Add More Fizz To E-commerce Space

by Sohini Bagchi    Nov 27, 2014

fizz

Everyone is looking to have a slice of the e-commerce pie in India, adding more fizz to the already effervescent e-commerce space. According to several reports, e-commerce giants such as Amazon and Alibaba are in a major acquisition mode. While Alibaba is likely to invest in domestic company Snapdeal, a company which is making headlines in the recent months, especially after business tycoon Ratan Tata has invested in the e-commerce company, rival Amazon is looking to acquire Jabong, a deal that is expected to breakthrough anytime now.

On his visit to India for the first time, Alibaba CEO Jack Ma revealed that the company is going to invest in India and work in partnership with technology entrepreneurs in India. This is indeed big news for the country’s already vibrant e-commerce space that is looking to be a $15 billion market in two years, according to Forrester Consulting. Presently the market value of Alibaba is around $300 billion

While the Alibaba-Snapdeal acquisition has not been declared officially, experts believe it would not be surprising because both deal in similar businesses and that Softbank Internet from Japan is a common investor in both of these portals. Moreover Snapdeal’s founder Kunal Bahl stated their “business model is very close to Alibaba’s business model and we will see similar economics emerging out of our company as well,”

Experts believe, although Alibaba has a presence in India since 2010, its influence in the marketplace is negligible when compared to China where the company commands 80 percent of the market. Snapdeal, on the other hand, which has received investment from Ratan Tata, besides almost $1 billion venture capital is on an expansion mode globally and this partnership may be a great leap for Indian e-tailing business, believe experts. As for Alibaba too, which has various Indian organizations registered on its site, this is an opportunity to grab a lion’s share in this segment.

Consolidation is becoming a norm in the Indian e-commerce space, as experts believe another mega-deal will soon be announced as Amazon is reportedly looking to acquire Jabong. This, according to some will be the biggest acquisition till date. While, the Indian FDI laws doesn’t permit investments in Jabong, being an inventory based model, Amazon India follows a marketplace model. This makes it a perfect combination to woo the online fashion space, which is undoubtedly the biggest market at present, and nobody wants to miss the boat.

Read: Rising Online Retail To Boost India’s E-commerce Growth

This deal, if done successfully, will be similar to the Flipkart-Myntra acquisition, which was pegged around $340 million, the biggest acquisition in the Indian ecommerce sector until now, believe analysts. Amazon-Jabong acquisition is slated to be even bigger, expectedly in the range of $1.1-$1.2 billion, breaking all other records in this space.

“India’s etailing market is at an inflection point and will see rapid growth to become a $15 billion market by 2016, fuelled by an increased demand from both enterprise and end users and better web access,” says Google India Managing Director Rajan Anandan, who says 8 million people were shopping online in 2012 and the number this year is expected to be 35 million. By 2016, online shopper base will grow almost three times to 100 million, and over 50 million new buyers will come from tier I and II cities, he states.

Read: India’s E-commerce Sector On A Hiring Spree

In such a scenario, the entry of e-commerce majors in the Indian market will not only spur heightened competition, but also increase the pace of consolidation in the country’s e-tailing market, says consulting firm Technopak that expects more such mega deals to happen in this space in the coming months.