Flipkart and Snapdeal to face more heat as Tatas get into e-commerce

Flipkart and Snapdeal to face more heat as Tatas get into e-commerce

Wednesday May 18, 2016,

3 min Read

The Tata Group through Tata Unistore is launching their e-commerce platform, Tata CLiQ. The website and apps (iOS and Android) will go live on May 27. The Tata Group owns offline chains - Westside, Landmark and Croma (operated by Infiniti Retail).

Tata-Cliq (Image source: iamwire.com)
Tata CLiQ (Image source: iamwire.com)

CLiQ will offer apparel, electronics and footwear products to begin with, and plans to introduce more categories in the coming months.

KRS Jamwal, Executive Director at Tata Industries Ltd, said there are two kinds of retailers in the market. The first are the pure play e-tailers, who have no links with brick-and-mortar stores and the other set sees online commerce as an extension to their brick-and-mortar businesses. He said,

Unlike e-retail 1.0 where two different sets of people are doing retail by themselves, we plan to merge these two different sides so the reality on the ground is that much more integrated.

In 2012, Infiniti Retail which runs electronics and durables retail store Croma launched cromaretail.com, but the website and retail chain were treated as separate entities. It was only in July 2015 that the company chose an integrated strategy across its online and offline platforms.

The Tata group isn’t the first conglomerate to foray into e-commerce. In October 2015, Aditya Birla Group launched a new online fashion store, abof.com, taking their brick and mortar stores online. This was followed by Reliance Industries, which launched its online fashion retail platform, Ajio, last month. Similarly, last week Arvind Ltd went live with their omni channel platform NNNow.com.

The Mahindra group in September 2015, also expressed their plans to launch their e-commerce venture M2ALL.com.

It is a rapidly growing e-commerce market that is attracting these conglomerates. Although e-commerce accounts for just two percent of the overall sales in the retail sector, industry bodies like Retailers Association of India claim this number will grow to almost 11 percent of the overall retail sales by 2019. Goldman Sachs predicts the e-commerce market to be facilitating 2.5 per cent of India’s gross domestic product (GDP) by 2030. The current size of the industry is worth $20 billion, which is expected to grow 15 times, reaching $300 billion in value by 2030.

Double trouble

The entry of these offline majors will add to the woes of homegrown e-commerce majors - Flipkart and Snapdeal. Over the past year, competition has heated up between Flipkart, Amazon India and Snapdeal. According to reports, in June 2015, Amazon India caught up with Flipkart after overtaking Snapdeal in terms of traffic.

It was reported this year that Amazon saw its market share, in terms of shipments, gallop to over 21 percent from 14 percent, making it the only major player to increase its share from a year ago. Flipkart slipped from 43 percent in March 2015 to 37 percent in March 2016. While Snapdeal slipped from 19 percent to 14-15 percent of the market share. Amazon has infused Rs 6,700 crore into its India unit since January 2015. Since their last investment in July 2015, Flipkart has seen consecutive valuation markdowns by its investors Morgan Stanley (marking down the value of its holding by 27 percent), Fidelity Rutland Square Trust II and Valic Co. In April, it was reported that e-commerce marketplaces – Flipkart and Snapdeal - were facing trouble raising their next rounds of funding.

With these new deep-pocketed players entering the e-commerce market, the balance of power in the industry could change dramatically in coming months.