Secured funding
India’s fast-growing online commerce market is getting a shot in the arm as Amazon-style shopping portal Flipkart secures a further USD160m in funding. As mature markets like the US and Western Europe start to see signs of slowing e-commerce growth and consumer spend, investors are increasingly turning to emerging economies where booming consumer economies and growing internet penetration are creating a huge opportunity for growth.
This latest funding extends Flipkart’s Series E round to USD360m since July and brings the Bangalore-based firm’s total raised more than half a billion dollars since its launch six years ago. It comes at what CEO Sachin Bansal describes as a “critical inflection point” for Indian e-commerce. Investment came from Dragoneer Investment Group, Morgan Stanley, Sofina, Vulcan Capital and Tiger Global.
“We are excited to work with a group of investors who strongly believe in our business strategy and are completely aligned with our long-term goals,” says Bansal. “India’s e-commerce market is at a critical inflection point and this additional capital will allow us to further expand our leadership position.”
Why Flipkart Needs Cash
Flipkart has 10m customers, with more than 1m unique visitors per day and employs nearly 5,000 staff. The company claims to sell 20 products per minute and says it is aiming to generate USD1bn in annual revenues by 2015. That sounds pretty solid. But it’s operating in a fiercely contested market as the landgrab for a share of India’s young e-commerce market becomes more competitive. Its biggest rival is Snapdeal, another Amazon-esque player that enjoys backing from eBay and claims to have 20m customers.
So where is Flipkart splashing the cash? Not on flashy new products it seems. The company says it will plough the capital into fleshing out and tightening up its existing platform, as well as speeding up the supply chain and hiring yet more staff as it attempts to improves its user experience and keep customers on board.
Apart from its rapid growth, another reason investors are taking a shine to Flipkart is likely the firm’s efforts to streamline India’s current e-commerce infrastructure, which is layered on top of traditional offline payments, meaning that customers often only pay once goods are delivered. The firm is attempting to speed this process up with the recent launch of its own PayPal-like online payments service.
Emerging e-commerce market opportunity
Emerging markets are turbo-charging the global e-commerce market, with spending growth in regions like India and Indonesia far outstripping the pace of the global market. Consumers are forecast to shell out a total of USD1.2 trillion this year, so it’s no surprise investors see plenty of room for growth. Nowhere is hotter than India. A third of all VC investment in the country this year has flowed to Indian e-commerce startups, according to StrategyEye deal data. Indian e-commerce spend is expected to top USD16.5bn this year, with that figure set to nearly double to USD30.2bn by 2016.
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