E-Commerce Competition Heats Up

New York Times: July 29, 2014
India’s largest e-commerce firm and startup poster child showed its mettle in its latest round of fundraising, raising a whopping $1 billion from eight companies including South African firm Naspers, Facebook investor Tiger Global, Morgan Stanley, and Singaporean sovereign wealth fund GIC. Despite this resounding success, the company has no plans to go public.
  • “Tiger Global [and] Naspers put in about $250 million each—ICONIQ Capital and Accel Partners have together pumped in almost 60-70% of the money, people familiar with the deal said. In all, Flipkart has raised close to about $1.7 billion in risk capital as it fights it out with Amazon and domestic rival Snapdeal in the fast-growing e-commerce market touted to touch $8 billion in size by 2016. The funds will be used to step up investments in technology and logistics and set up a strong mobile ecosystem by rallying forces behind a mobile payments ecosystem.” (Times of India)
  • The haul, among the largest ever for a startup globally, has Flipkart valued at $7 billion  more than double its previous estimated valuation. This helps it in its competition with Amazon, and will spark a race among its competitors to stay in the market. (Livemint)
  • “By 2020 India will have more than half a billion mobile internet users. Our intense focus on mobile and technology puts us in a unique position to take advantage of this massive opportunity,” said the founders. (VCCircle)
Wall Street Journal: July 30, 2014
Betting on enormous growth in the Indian e-commerce market, Amazon replied to Flipkart with a landmark announcement of $2 billion. “It won’t be a lift and shift. I’m sure they will still have to do a lot of customization to the local needs from a delivery, logistics and payment standpoint,” said one analyst. Another added, “It is primarily an English-speaking market so it is fair game for most international firms…not every company will be able to raise as much capital (as Amazon) so it will be a game of who has got the deepest pockets.”
  • “At current scale and growth rates, India is on track to be our fastest country ever to a billion dollars in gross sales,” said Amazon CEO Jeff Bezos. (Times of India)

New York Times: July 30, 2014
The e-commerce industry has long been subordinate to the neighborhood general store or the roving vendor, both because of ingrained practices and the slowness of Indians to adopt credit cards as a method of payment. Successful companies built logistical networks, competing with a somnolent postal service. While many of the original challenges remain, the momentum of these companies has only grown. “Virality amongst small business owners is very acute,” [founder of e-commerce startup Snapdeal Kunal] Bahl said. “If one sees success, then word spreads really, really fast.”

Business

Economic Times: July 25, 2014
“Industry has developed wheels, venues have regular stand-up comedy acts and sponsors have realised they can interact with audience and bring in humour in brand messaging.”
Economic Times: July 25, 2014
Claiming that it is not a play to develop investment prospects, Google will host a week-long course, called Launchpad, for early stage startups, teaching them core business development concepts. ”It will be a first of its kind in Asia. It may then be rolled out to places like Tokyo,” said Sunil Rao, country head of startup ecosystem at Google India.”
Economic Times: July 25, 2014
After a failure to enter India going it alone in 2007, Starbucks has had success in the now-saturated coffee chain market by entering into a 50-50 joint venture with Tata. It sources coffee locally, uses local imagery and serves local food. But it remains to be seen whether consumers want a global Starbucks experience or a local coffee shop that just happens to be run by the multinational behemoth.
Wall Street Journal: July 24, 2014
Indian engineers with an educational background in the US have developed bluetooth-enabled shoes, a major advance in wearable tech. Manufactured in China, they will target vision-impaired and fitness data-hungry consumers alike.

Trade Policy

Wall Street Journal: July 27, 2014
“India effectively blocked an international agreement on easing trade regulations last week, saying the effort to promote global trade should be linked to food security. At a meeting of the World Trade Organization in Geneva on Friday, India said it wouldn’t support a “trade facilitation” agreement reached in the Indonesian resort city of Bali in December without a parallel agreement allowing developing countries more freedom to subsidize and stockpile food.”
  • India is trying to safeguard its interests in subsidizing (and stockpiling) food for the poor. India has maintained in the past that a 10% subsidy cap, pushed by the developed world, would put it at an unfair disadvantage. Moreover, some feel that “painful memories” of dependence on food aid allow this move to be domestically successful for Modi, who is trying to project an assertive, “India first,” image. (Reuters, Daily News & Analysis)
  • India’s leading industry lobby, FICCI, has long supported the agreement, and global pro-business groups have pressed for India to relent and allow the deal to pass (FICCI, Financial Times)
  • The international community is alarmed, to say the least. “Everybody including India recommitted publicly to the package,” said the Australian trade minister, and USTR Froman remarked, “reinvigorating the multilateral system is too important to put at risk with any backsliding on commitments.” (Wall Street Journal) Alyssa Ayres remarks, “This is not India against the West but against itself and the world, backing away from the terms of a deal it participated in designing as recently as December.” (Asia Unbound)
  • Some believe that it is not in the state’s long-term interest to break the deal. Arvind Subramanian encourages India to reconsider: ”Reculer pour mieux sauter (draw back to jump farther), as the shrewd French say.” (Economic Times, Business Standard)

Macroeconomy

Economic Times: July 25, 2014
“‘In India, activity is projected to pick up gradually after the post-election recovery in business sentiment, offsetting the effect of an unfavourable monsoon on agricultural growth,’ the IMF said.”

Policy

IBNLive: July 24, 2014
Building on the Finance Minister’s budget speech promise, the raise of the FDI cap in the insurance sector to 49% has been cleared by a cabinet committee—next stop, the parliament.
  • Meanwhile, there is a visible lack of movement from the central government to allow FDI in multi brand retail. However, the Department of Industrial Planning and Policy has fast-tracked the clearance process for single brand retail stores such as Forever 21 and Swarovski. (Bloomberg View, Economic Times)
CSIS: July 28, 2014
Richard Rossow
“In order to enact a true economic transformation, the BJP will either need the support of a wide range of unaligned parties—which would be a historical abnormality—or to consolidate its power at the state level by winning upcoming state elections. With the BJP’s powerful show of force across India in the Lok Sabha election, winning state elections appears to be a viable path.”
Silicon India: July, 27, 2014
A delegation of Indian CEOs from the Confederation of Indian Industry expressed unbridled optimism with Modi’s India so far. They maintained that the budget was a visionary one, and that the new administration’s attitude is demonstrably more open and encouraging to industry than in the past.