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India’s ecommerce space set for next leap

India’s ecommerce space set for next leap

Aparna Dutt Sharma, Chief Executive Officer, IBEF

Apr 07, 2014 2:14 PM

Ecommerce has emerged as one of the most dynamic sectors in India over the past few years owing to a strong burst of entrepreneurial activity buoyed by strong interest from the venture capital (VC) community. Over the years, some of them have also attained critical mass. Flipkart has already crossed the US$ 1 billion mark in sales and Myntra and Snapdeal are also expected to cross that benchmark soon. Incidentally, four players – Flipkart, Lenskart, Myntra and Snapdeal - account for around INR 10,000 crore of the total estimated Indian ecommerce market of INR 12,000 crore currently.

Merger talks reported in the papers recently between two of India’s leading ecommerce players – Myntra and Flipkart – are worth being analysed. It can be seen as a harbinger of a critical realignment of the competitive dynamics of the sector in India. While the firms may be competing in the conventional sense, the two are known to have three investors in common – multinational VC firm Accel Partners, hedge fund Tiger Global and Belgium-based investment holding company Sofina. Newspaper reports say the merger proposal is receiving strong support from some quarters. It could lead to tremendous synergies between the two players in the online fashion retail segment.

Should two of the frontrunners in the ecommerce space combine their strengths, it would suggest that players are ready to raise their stakes in a major way. This appears to be a logical progression, considering how ecommerce players in India have not even touched the tip of the iceberg so far. A report by Accel Partners, the number of online shoppers in India will increase to twice their number to reach 40 million by 2016. The market size in value terms is expected to more than quadruple to US$ 8.6 billion by that time. With that kind of potential on offer, ecommerce companies can be expected to script more such strategic moves for competitive gains in market share in the near future.

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