-Times of India-News
Over the past year, Wall Street hedge funds and big internet investors like Yuri Milner’s DST Global and Masayoshi Son’s SoftBank Corp have funnelled billions of dollars into India’s consumer internet story. Flipkart and Snapdeal alone have raised about $3 billion this year. What this, in effect, means is that Indian consumers are being subsidized by investors on Wall Street and elsewhere as they binge out on the latest and the sleekest.
Fund-raise values Flipkart at $10 billion
Most investors in these companies say Indian consumers can expect the good ride to continue unabated for the next couple of years making online shopping extremely attractive. It is not just computers, phones and washing machines that are being offered at mouth watering prices; joining the funfrom a consumer’s point of vieware app-driven cab companies. Again, flush with funds raised from bulge-bracket backers, cab services like Uber, Ola, TaxiForSure and others are offering cheap rides, often lower than auto rickshaw fares, to commuters in big Indian cities.
“By offering discounts, e-tailers are looking to expand the market. The bigger the deal a customer gets, the greater the chances of her shopping online,” said an investor in Snapdeal, who did not wish to be named. The company raised $627 million recently led by Japan’s SoftBank and is on course to clock annual sales of $2 billion, while Flipkart is said to be nearing a run rate of $5 billion in gross merchandise value (GMV) for 2014-2015. Amazon said earlier this year that it intended to spend $2 billion on its India operations without setting a timeline. It is learned to be advancing towards $2 billion in GMV. E-tailers usually make anywhere between 5% and 20% of GMV depending on the category.
Discounting in e-commerce parlance typically includes flat-out sale, cash-back given to first-time users, advertising and marketing expenses, and employee costs. The top six e-commerce players collectively spent about $200 million (approximately Rs 1200 crore) on advertising across print, television and digital, a media planner said on condition of anonymity. These six would now be among the top 25 advertisers in the country