2014: A promising year for e-commerce sector

Last week, ecommerce market leader Flipkart raised $700 million from a clutch of new investors - Baillie Gifford, Greenoaks Capital, Steadview Capital, T. Rowe Price Associates and Qatar Investment Authority - besides a group of existing investors.

It was for the third time in 2014 that Flipkart was raising funds and its valuation reportedly has now zoomed to $11 billion. Flipkart has said that these funds will be used for strategic investment in India and to build a world-class technology platform.

Year 2014 saw the biggest deals in Indian e-commerce arena, largely from global funds, both in terms of consolidation and investment. In July, in the single biggest round of funding ever by an Indian internet company, Flipkart had raised $1billion at a valuation of around $5 billion to $7 billion. This was followed by Flipkart's biggest competitor Amazon infusing $2 billion into its Indian arm. Flipkart has so far raised $2.4 billion.

Its close competitor Snapdeal had raised $100 million in May from group of investors, including Azim Premji's family office Premji Invest. Then its valuation had touched $1 billion. Later in August, the company made news when it raised an undisclosed amount from corporate giant Ratan Tata.

In fact, Tata's investment in Snapdeal was followed by further investments in other ecommerce companies such as furniture e-tailer Urbanladder and jewellery e-tailer Bluestone. In October, Snapdeal raised $627 million from the Japanese telecom and media group SoftBank, which also has a 37 per cent stake in China's ecommerce leader Alibaba.

With this deal, SoftBank's vice-chairman, Nikesh Arora, joined the company's board. The total amount of funds raised by the company now stands at $1 billion. In a television interview, Masayoshi Son, the Chief Executive of Softbank, announced his plans to invest about $10 billion in India's online industry over the next 10 years.

The global investor community's interest in Indian ecommerce has been buoyed with the Chinese ecommerce giant Alibaba breaking all records with its $25 billion IPO on NASDAQ in September. So has it been with global online giants, including Facebook's Zuckerberg and Alibaba's Jack Ma visiting India. Investors expect Indian e-commerce companies to repeat China's success.

Big ticket consolidation was also seen when after much speculation, Flipkart acquired fashion e-tailer Myntra in May for $370 million. Read more on the deal here: Flipkart buys Myntra: A deal which is win-win for both

Also in another big development in online fashion, German incubator Rocket Internet announced plans to merge Gurgaon-based fashion e-tailer Jabong with four other fashion entities backed by it in other geographies. These are Dafiti of Latin America, Lamoda of Russia, Namshi of the Middle East and Zalora of South East Asia and Australia.

2014 will also be remembered in Indian ecommerce as the year when mobile ecommerce took to its wings. Most e-tailers saw a significant jump in their mobile platform and the guys have started talking about the mobile-experience for consumers as one of the biggest differentiator. Most e-tailers are now getting more than 40 per cent to 50 per cent of their traffic from mobile and this will grow further in 2015. Flipkart this year launched the Big App Sale from December 8 to 12 to promote sales on its mobile platform.
 
Online retail saw an inflection this year specially during big-ticket, planned promotional events like Flipkart's Big Billion Day and Google's Great India Shopping Festival or GOSF. While Flipkart's site saw Gross Merchandise Value hitting $ 100 million in the first 10 hours of the sale itself, Google's gosf.in(Read more here on GOSF 2914 here: GOSF 2014 begins, Google anticipates multi-fold traffic) saw traffic on its site more than doubling since last year. As these events were heavily advertised, most other website also gained in sales during the event.

First-time online buyers flocked to these websites to amass products on heavy discounts, but most sites, including Flipkart were not able to cope with the spike in order volumes, leading to deliveries being delayed or products going out of stock. The situation brought to the fore the need for logistics companies to gear up for increased volumes during such events next year.

Many quarters within the investor community felt that the valuations of ecommerce companies have reached a tipping point and one must expect a correction sometime soon. Future Group Chairman Kishore Biyani's statement at an e-tailing event raised concerns about the ecommerce euphoria dying down over the next 18 months. (Read more on Kishore Biyani's thoughts on ecommerce here. E-commerce 'euphoria' to last 18 months only, says Kishore Biyani.)

This was also a year which saw Omni-Channel retail becoming a compulsion for brands that had mostly been following an offline strategy. Future Group announced plans to invest about Rs 100 crore to get going with its Omni-Channel retail strategy. Following suit were brands like Croma operated by Infinity Retail, textile manufacturer Arvind and Trendin which is the official e-commerce website of Aditya Birla Nuvo-run Madura Fashion & Lifestyle.

As e-commerce matures in the country, logistics is emerging as a significant parallely-growing niche industry. This year at least two companies showed signs of emergence. ECOM Express raised Rs. 100 crore from PE firm Peepul Capital and Delhi very raised $33 million led by Multiples Alternate Asset Management.

As per retail consultancy Technpak, the total size of the e-tailing industry in Indian stood at $2.3 billion in 2014 and this is expected to grow up to $32 billion by 2020.