India is a critical market for eBay- at least its latest round of funding in Snapdeal worth Rs 830 crore says so. With Flipkart claiming to have more than one-third share of the e-commerce and Amazon lobbying hard with government to get 50% FDI in e-commerce, the American giant is catching up with the cut throat competition.
According to industry estimates, eBay has about 20% stake in Snapdeal which has been valued at about Rs 4,500 crore after the latest round of funding. Some industry insiders say that the latest round of funding is a part of its global hedging strategy to experiment with different e-commerce models, others say it’s a late response to the exponential growth that e-commerce has witnessed in the last year.
eBay has been in India for more than seven years and has been dragging its feet. The reason- About a couple of years ago no one believed that e-commerce will happen in India due to poor logistics and problems with payment mechanism, said a CEO of leading e-commerce company who did not want to be named. He further argued that the latest round of funding in Snapdeal is an attempt to engage more deeply with India. Others say that it is a part of eBay’s global strategy.
eBay has globally made some investments in e-commerce in countries like South Korea, Germany, United Kingdom, United States with different models than that in India. eBay’s Global Strategy Globally eBay has invested in Craiglist in United Kingdom, Billsage-an online payment Gateway based in Germany, which eBay later acquired for an undisclosed amount.
The global giant has recently acquired Braintree- a Chicago payments start-up,for $800 million in cash, according to a New York Times report. It also acquired Shutl, an online start up that promised one hour delivery of theproducts bought online in October 2013 for an undisclosed amount. eBay’sinvestment in Snapdeal should be viewed as part of their global hedging strategy.
They have invested in many start ups across the world with differentmodels and also in local competitors like in India. The debate in India isstill ripe whether it is the inventory, marketplace or a hybrid model that willwork for the country, said an expert working with a global consultancy services on condition of anonymity. He further argued that in India Snapdeal pursued the marketplace model aggressively and eBay put its bet on it.
If you assess compared to their last round of funding the investment is much bigger, said an expert working with a global consultancyservices on condition of anonymity.
The lastround of funding led by eBay in Snapdeal was worth Rs 309 crore in 2013. In thelatest round of funding Snapdeal has got Rs 830 crore from its existing investorsled by eBay
Will eBay buy out Snapdeal?
eBay hasbought various online start ups and e-commerce companies across the globe togain a foothold in the local market. However, the current stake of eBay in Snapdeal is just about 20% and the industry grapevine suggests no acquisition in near future.
The growthof e-commerce in the last one year has sent jitters to organized and traditionalretail. It’s only since last year e-commerce took off, this is not the time tosell but to sustain. Since the entry thresholds have gone up we don’t think anygiant like Flipkart or Snapdeal will go for sell out. They might dilute theirshare in the company said an industry insider from a rival company. But Kunal Bahl, CEO & Co-founder of Snapdeal in an interview to Business Standard on XXdid hint that he is open to all options. The exponential 500% growth in 2013 might have changed founders’ ambitions of a sell-out.
2013 hasbeen the best year so far. We have seen exponential growth of 500%,said Rohit Bansal in a recent interaction to Business Standard. Of thecountry's total retail market size of $500 billion, the e-commerce industry accounts for $3.1 billion (excluding travel). The e-commerce industry is expected to touch $22 billion in five years, according to a reserch firm CLSA. Snapdeal is expected to cross billion GMD mark by end of 2014.
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