Having frittered away its first-mover advantage in India with ineffective strategies and investment decisions, US e-commerce giant eBay Inc. is preparing to gain a stronger foothold in its second foray by focusing on cross-border opportunities, a senior company official said.
The San Jose-based eBay on 17 July announced an investment of $165 million in e-commerce marketplace Paytm Mall. It believes this is the first step towards recreating a large, sustainable business in India since relaunching eBay in early January. “The Indian market is incredibly dynamic, yet few players have found a sustainable pathway to growth and profitability. Ultimately, that means you have to be in the game and ready to change, eBay is doing both," Vidmay Naini, country manager, eBay India, said in response to emailed queries from Mint.
“For now, we are focused on the cross-border opportunities we have with eBay.in and Paytm Mall."
In 2004, eBay had acquired Baazee.com Inc., what was then the country’s largest online marketplace, and its unit Baazee.com India Pvt. Ltd for $50 million. While eBay had a head start over its rivals, the Indian market was not quite ready for an online offering. In fact, the company’s marketplace model, which was well-accepted globally, did not find much favour with buyers and sellers here.
In 2007, Flipkart managed to find a way to draw customers, mostly on the back of offering books, a non touch-and-feel category. To worsen matters, eBay made an investment in Snapdeal in 2013, putting $133.77 million in the e-commerce firm the following year. But four years later, eBay recorded $61 million in losses from the Snapdeal deal, as per its annual report.
In April 2017, eBay said it would sell its Indian unit eBay.in to Flipkart and also make a $500 million investment in it. A year later, Flipkart said it will shut eBay India. “eBay India will cease to exist. We will be launching a new value platform starting with refurbished goods very soon," Flipkart had said.
Despite its past failures, eBay is not giving up on India. Naini believes the Indian e-commerce market is large enough to sustain several large players. “While many other players have been spending huge sums to build market share with no guaranteed trajectory to profitability, eBay has made a number of highly profitable moves," Naini said. “We are still in the early stages of Indian e-commerce. It has a long way to go to reach its full potential and there is no guarantee that there won’t be seismic changes in the industry that shake up the current state of the market."
Since eBay.in’s relaunch in early January, the company has turned its attention to enabling India’s small- and medium-sized businesses export their products to eBay’s 182 million customers worldwide. Naini said this business model benefits all players as India-based sellers get access to a global market, while global customers can access Indian products that they would not otherwise be able to buy. “eBay benefits from a profitable and scalable business model," Naini added.
Industry observers and retail experts, however, said eBay needs to do a lot more, as firms such as Ikea and H&M have made big commitments only after years of market studies.
“A wholehearted connection and commitment to India seems to be missing. Especially for a consumer-oriented business, one needs to have a strategic engagement; it is not a market to dabble. This is true for both B2B and B2C businesses," said Devangshu Dutta, chief executive officer of retail consultancy Third Eyesight. “To deal with the diversity of the market, regulatory hurdles, the overall difficulties of running a business here, one needs commitment at a strategic level."
According to Dutta, for any global brand that has succeeded here, there has been a direct board level support, and acceptance that India is a market of the future, so investments, in terms of management mind space and capital, have to be made right now. “One needs to be ready to go the whole mile, wholeheartedly," he said.
Dutta believes that though Flipkart and Amazon dominate the market, e-commerce is still evolving and is a small fraction of the overall retail in India. “It is not ‘chapter closed’ or ‘game over’; there are possibilities of the dominant incumbents being upstaged by someone else. There is a large e-commerce play ahead of us for several decades," he said.
The e-commerce market in India has the potential to grow more than fourfold to $150 billion by 2022, fuelled by rising incomes and a surge in internet users, software industry lobby group Nasscom and consulting firm PwC India said in a report last year. To taste success, eBay will have to pull out all the stops to ensure that it makes most of the market opportunity this time around in India.