Earlier this month, Arun Sirdeshmukh quit his job as the head of Reliance Trends, the apparel retailing arm of Reliance Retail, to start an electronic commerce business. Similarly, Saurabh Chadha, who headed the rural retailing unit of the Future Group, ended his five-year association with the country?s largest retail group last year to strike out on his own in the online retailing venture called edabba.com.
Like Sirdeshmukh and Chadha, many retail executives are trying to win a slice of the country’s ballooning retail market by starting their own online ventures. The major attraction is that it is far less capital-intensive than starting a brick-and-mortar retailing business and does not involve the complex issues of running a physical retail firm.
Purnendu Kumar, vice president for retail at Technopak Advisors, says many executives are using their retail expertise to start online retail business as the segment holds immense opportunities.
Even though currently in its nascent stage, the e-commerce market in India is set to swell 20 times to become a $200-billion annual business by 2020 from the current level of $10 billion. The sector will be fueled by about 750 million Indians expected to have access to the Internet by then from the current level of about 100-110 millions, according to Technopak.
?In India, 110 million people with access to the Internet is just 10% of the population and we still have a long way to go,? says Sirdeshmukh whose online venture of selling multi-brand products will go live in the next six weeks. ?Across the world, the shift towards e-commerce is happening and in India it has just begun and the timing is right,? he added.
Though the market seems lucrative, stakes are high as the number of e-commerce companies in India are increasing by the day. Global giants such as eBay has been around for years and Amazon just started its venture in India earlier last month. In a way, it is reminiscent of the dotcom boom in the early 1990s when most of the ventures died out thanks to the lack of a proper business model.
Now, a host of online retailers have sprung up over the years and many of them may not survive in the extremely competitive segment, analysts say. However, many of those who get their business model right could even possibly go on to have billion-dollar enterprises.
Filpkart.com, founded in 2007 by former Amazon.com executive Sachin Bansal, was recently valued at $850 million when existing investors Accel Partners and Tiger Global Management invested closed to $150 million in January in a fresh round of funding. Flipkart quickly used a portion of its new-found money to snap up an online consumer electronic retailer Letsbuy.com for about $25 million.
?A lot of venture capital firms are looking at e-commerce in a big way and they are bullish about it,? says Kumar of Technopak. New Delhi-based online deal research firm VCCEdge says venture capital firms invested about $500 million in more than five-dozen deals in the e-commerce space last year.
Kumar says a former retail executive starting a business coupled with a sound business model could be the right combination to appeal to venture capitalists. ?A company run by a seasoned professional is less risky than an entrepreneur starting out of the IITs,? he says.
Manmohan Agarwal, a former head of corporate affairs at Vishal Retail who is currently spearheading Yebhi.com, a multi-branded e-commerce site says it will definitely help with people with domain knowledge of retailing to start such business.
?Basically, it is one more real estate of retailing and you need people with core retailing expertise,? he says.