India’s FlipKart shops a $200m round
Indian e-commerce is in a state flux. While penetration is still relatively low compared to developed nations - just one in 10 Indians has access to the internet - the industry was worth $14 billion last year and growing rapidly. Competition for wallet space is fierce.
In the last six months alone there has been a wave of consolidation as youthful websites that have yet to achieve critical mass struggle with the twin burdens of high operating costs and low margins. Of the 193 e-commerce websites that were operational in October 2012, 89 have either shut down or absorbed by larger players.
Sitting near the top of this food chain is Flipkart, which last week closed the biggest round of venture funding the industry has ever seen. Existing investors Accel Partners, Tiger Global, Iconiq Capital and Naspers invested a total $200 million, valuing the company at $1.5 billion.
"E-commerce in India is still relatively new; however, the potential is quite large, given increasing Internet penetration on one side, and the lack of organized retail on the other," says Shekhar Kirani, a partner with Accel India. "Flipkart can continue to dominate this expanding market to become a really massive company, and therefore is attractive for investors."
This was the company's fifth round of investment. It first received $1 million in institutional funding from Accel back in 2009; Tiger Global put in $10 million in 2010, and another $20 million in 2011; and Accel returned to take part in a $150 million Series D round late last year that valued the company at $850 million.
AVCJ Research's records show that Flipkart has received $380 million from venture capital investors; its closest industry peer is Snapdeal on $102 million.
Flipkart currently commands 7.4 million unique visitors a month, and claims to be expanding its customer base at a pace of 431% per year. This is the product of acquisitions as well as organic growth. Assets picked up in the last three years include social book discovery tool WeRead; digital content platform Mime360; Bollywood content site ChakPak.com and competitor LetsBuy.com.
Nevertheless, Flipkart has found itself under pressure, resulting in a spate of lay-offs and the closure of its Delhi office and digital music download business Flyte. More significantly, the company is trying to switch from being an online retailer to become a marketplace where third-party suppliers and merchants, rather than Flipkart itself, bear the cost of inventory and storage in selling products to shoppers.
"Flipkart has done very well on the consumer side - in terms of buyers and repeat purchases - and it also has strong back-end of last mile delivery," says Kirani. "The marketplace is a great way to extend these services to our customers when they buy from partner merchants."
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