Flipkart vs Amazon vs SnapDeal: Indian Retail Scene Poised to Heat Up

Flipkart vs Amazon vs Snapdeal

The last few months have been nothing short of a roller coaster ride for the e-commerce industry in India. Flipkart, India’s home grown company recently raised 1 billion dollars from global investors. Not even a day had gone by that Amazon’s Jeff Bezos announced 2 billion dollars funding support to expand Amazon India’s operations.

Flipkart needed the treasure chest in its arsenal to expand its logistics and warehousing functions in the country.  Amazon with its large investor funds and growth potential has been trying to emerge the number one player in the e-tailing sector in India. The war between Flipkart and Amazon brings further questions of viability of other online players in the industry as they lack such major funding. The only company that can compete with these giants is Snapdeal.  Snapdeal’s major strength lies in its large base of sellers and warehousing functions.

There have been some unconfirmed reports that Ratan Tata, the chairman Emeritus of the Tata conglomerate may become a minority investor in Snapdeal so as to be a part of the booming Indian ecommerce sector.  All these developments have resulted in questions about the existence and profit potential of brick and mortar retailers. 

The funding raised will mostly be deployed to expand the categories of products, increase the number of sellers and warehouses in the country. This is necessary to combat rivals companies’ tactics of one day deliveries and discount wars, that has consumers across the country rejoicing. The biggest winner in the battle yet is the online customer. From great deals, to express deliveries the companies have left no stone unturned to attract consumers to their shop.

However with this cash influx, Flipkart’s headaches are far from over. They will have to rapidly develop their supply chain, while reducing costs and build customer loyalty that jumps ship during every discount/sale event. Also, the recent push by its investors to merge with Myntra, a premium apparel e-tailing competitor seems like a good move to tackle Amazon.

Amazon has its fair share of obstacles too. It has yet to show a profit and investors at Wall Street aren’t pleased. Also, with the issues it faced in China, and the entrance of AliBaba in the US markets, has resulted in Amazon setting its sights on India. It is clearly indicated that Amazon is in this race for the long run and is ready to forgo short term profits to emerge as the largest market share holder in India.

However, both companies are hopeful that they will present growth this year in the double digits. Their top executives believe that the battle has just begun and we will have to see who will emerge on top.

 

I could tell you, but then I’d have to kill you.

Startups numbers

Recently I was delighted to write a piece for this illustrious blog entitled Just because you build it doesn’t mean they will come and it appears to have gone down pretty well so the equally distinguished owner of the blog has asked me to have another go. He sent me an email in which he said:

“Any chance you could do me a post on 5/6 most critical numbers startups must know (or put together in Biz plan) to give investors a confidence that they really know their customers, and market.”

And it kind of got me thinking, on the face of it this was a really straightforward question which has a very clear answer, but actually this was a lot more difficult than I anticipated given the increasingly large number of business metrics, analytics and statistics available.

As a result I pondered the question over the weekend by the beach in Greece (I know it’s a hard life), I had a few extra cold coffees, got a bit of a tan and decided on the following 5 key numbers that early stage investors look for.

Now, before you continue I would like to point out that the key numbers I have highlighted below are by no means the only numbers an entrepreneur should know and this list is no a one-size-fits-all prescriptive list. Further, as you will see I am not really focussing on digital metrics per se, as you can tell from the above blog post I think the digital world somewhat deludes itself that it operates in a separate space from other traditional businesses. In my mind it doesn’t, it might have number of web based statistics rather than footfall through a shop door but actually in my mind these numbers are simply a means to an end rather than an end in itself.

So with that in mind here are my suggestions for the key numbers an entrepreneur should know in order to give investors confidence:

1. Cash, Cash and once again CASH!

Cash is king!This is the mantra within the exciting world of accountancy (no really, accountancy is all sex, drugs and rock and roll…honest), as it has become almost universal truth that early stage businesses fail because they run out of cash not because they aren’t profitable or their business concept is flawed.

Therefore we look firstly at your cash flow predictions to see how far the money you are looking for will take you. Ever watched Dragons Den? Often the Dragon(s) like a business but don’t think the money being asked for is enough to do what the entrepreneur wants to achieve and so they decline.

This is the reason. So know what your cash flows look like. What is your worse month in terms of cash balance? How many months “headroom” does that give you? What will your cash balance be if your sales forecast comes 2/3 months later than planed? How long with the investment sought last for? What can you do to manage costs? All of these questions are in the mind of the early stage investor as he wants to get the maximum time for the money being invested as, from bitter experience, they know that the optimistic plans that entrepreneurs present are far from conservative and will take a lot longer than anyone anticipates.

2. Proof of concept

Early stage investors largely want to see some proof that there is a business before they will invest. This is often the Catch-22 situation that entrepreneurs find themselves in as they have a great idea but that doesn’t interest the professional investors, be they angels or funds, unless there has been some start-up capital used to prove there is actually a product or market there. Entrepreneurs will usually have to source some initial proof of concept funding internally (recently I heard it described as Friends, Family or Fools which I thought rather uncharitable even if true).

If you have managed to raise that early capital to prove a concept then make sure you know the numbers inside and out. After watching over 100 presentations in the last year I can tell you that nothing ruins an entrepreneur or management team’s credibility faster than not knowing the detail of their initial results. So study them, learn them, inside and out, back to front. Understand what was good, what was bad and what the opportunities are to develop from this. And be honest, we have usually seen it all before and we are usually pretty good at spotting mistakes so tread carefully when we ask questions (and try to be nice…one entrepreneur decided to lecture 4 accountants about why we were wrong…only we weren’t, he was….didn’t go well).

3. Words = numbers, Numbers = words

The final tip I would give you is make sure your forecasts, or as we would call it a financial model, match the business plan and vice versa. And make sure, particularly if it is prepared by an accountant or advisor, that you spend time to get to know it and understand what is going on. You don’t have to become an accountant overnight but you do need to really know what is going on in your business (or in management jargon speak what are your Key Performance Indicators). Traditionally entrepreneurs spend hours pouring all over their words and presentations with barely a backward glance at their forecasts, which is odd when professional investors usually do the opposite.

To help you along I have previously written a piece on the art of financial forecasting which might offer some assistance when preparing forecasts but the key things that investors look for are:

Sensible revenue assumptions based on the proof of concept which show that the numbers look reasonable. e.g. for an online retailer key metrics such as number of page views, number of sales, cost per customer acquisition etc. are all vital so that they can judge whether the forecast scalability is achievable.

Understanding of cost base and the ability to match costs with scaling revenues (which is controllable) rather than costs dictating revenue requirements (which is not controllable). e.g. Sensible wages and infrastructure costs (such as offices and equipment) which grow as revenue grows, and hence can be restricted if revenue fails to grow as expected.

Detail which indicates planning and forethought. My biggest bugbear is entrepreneurs that simply state that they will spend £50,000 on “marketing”. What type? Where? Internal (i.e. recruitment) or external (i.e. via an agency)? And a million questions like this and whilst we don’t expect you to know every single detail we do expect you to have had some discussions so that you know that the costs you have included are achievable and that you know where you will start as soon as the investment is secured. My favourite presentation, by way of an example was the entrepreneur that was going to grow a market leading consumer brand spending £500 per month on PR (and for those of you that haven’t worked in PR…well lets just say this is unlikely to go a long way) albeit the entrepreneur confessed after questioning that he hadn’t bothered to speak with the PR agency in question to check if this was reasonable.

So there you have it. My top 3 tips when it comes to the numbers investors look for and I am 100% certain that this is not what was expected when the initial blog was requested a couple of weeks ago. I am sure the question was more concerned with click through rates, cost of acquisition, individual page views and the like. But here’s the thing, whilst all of those are very interesting and help build the picture an investor is only interested in one metric, ROI (Return on Investment) and so what they really care about is if their investment has a chance of making it to the next level (risk), whatever that might be, and what are their potential profits at that point (return). Everything else is just there to help them assess and justify the final decision.

Martin Spiller is on Twitter @MartinRSpiller

JustDial and InMobi are Leading the Indian Startup Scene

Indian startup scene

More continent than country, India is home to 17.5% of the world’s population. One of the emerging economies, it has no shortage of traditional entrepreneurs who have been part of the family business for ages, but the new wave of startups is still at a nascent stage.

The hottest sectors for startups seem to be E-commerce and Online Travel, with many companies having a valuation of about 1 billion dollars. Native companies like Flipkart, Jabong and Snapdeal are giving strong competition to Amazon, which is such a success story in the US.

India has its own Silicon Valley – Bangalore. About 41% of the startups are in Bangalore and 33% of them are ecommerce businesses.

The biggest advantage of starting up here is the sheer number of young people with access to online opportunities. Also, in a developing country, an organization that can develop unique solutions for its problems will be a sure success. For example, JustDial, a company that gives information to people having no internet access by sending it via SMS or InMobi, a startup creating waves in the Mobile Advertising sector.

There are an equal number of challenges to overcome too. The major cause for the slow growth is poor infrastructure, although much improvement has been made in recent years. Government regulations, risk-averse consumers and an overall lack in basic facilities are hampering further growth. It is said, that any organization that can take on the complexities of India may well be equipped to tackle the world!

In recent years, there has been just one Tech IPO (JustDial), while other startups have gone through successive rounds of funding. At the end of 2013, Zomato, a restaurant recommendations app, successfully raised funding from Sequoia Capital India and entered the 1,000 crore club (approximately 160 Million dollars).

India is attracting a steady flow of foreign investment because of its immense potential and fewer market entry barriers in comparison to China. With no dearth of talent and a passion to excel, India’s ‘Startup Age’ is just beginning.

Will Google, Facebook, Apple, and Microsoft reach their 100th Anniversary, like IBM?

IBM 100 YearsIn 2011 IBM celebrated its 100th Anniversary with a bang. The company was a merger of three companies: the Tabulating Machine Company, the International Time Recording Company, and the Computing Scale Company, and since then it has gone through many changes from high tech product manufacturing to a service-based company. But despite all these ups and downs, company survived and now employs over 450k employees, has a 100bn turnover and operates in over 170 countries!

In hindsight, two reasons stand out for IBM’s success. First, their ability to reinvent themselves time and again, and that includes change in the business model, new products and services, geographical expansion and becoming a more agile firm by cutting resources or selling off their business units, such as selling their hardware business to Lenovo. Second, focusing more on the enterprise market than business to consumer, as the enterprise market is more long lasting and cash rich.

Now the question is, will tech giants from the current age such as Google, Facebook, Apple, and Microsoft exist 100 years after their inception, like IBM?

And like IBM, the answer will lie in their ability to reinvent themselves and rebound at every tipping point they will have in their 100-year voyage. In fact, these giants have already gone through some rough patches and managed to negotiate them so far.

However competition is getting bigger and stiffer day by day, and the reduced price of infrastructure has levelled the playing field between big players and start-ups such as Dropbox and WhatsApp, which have recently disrupted and created their own space in the already established cloud and private messaging industries.

We have looked into some factors these companies are focusing on to survive longer.

Buy Start-ups with a huge user base or serious IPs

The big cash companies are not shying away from buying start-ups and already are on a spending spree. Microsoft bought Yammer, Skype and Nokia; Google bought Next, YouTube and Motorola ( which it then resold); Apple bought Topsy; Facebook bought Instagram, WhatsApp and Opus. However this is a very high-risk policy. Recently Google took a hit when it sold Motorola Mobility at half the buying price.

Keep innovating and launch new products and services

Another proven theory is innovate to keep going i.e. keep launching new products and services to remain ahead of the competition. Google and Apple are really ahead in this game and have huge future product pipelines ranging from wearable technology to renewable energy products to space programs. Microsoft and Facebook are more focused around mobile and cloud friendly technologies.

Expand aggressively into rapidly growing BRICS countries

Expanding business into emerging markets (Far East or BRICS countries) is a very popular option these days, as consumer spending is increasing in these markets and so is a craze for products and services from tech giants. This is therefore a great opportunity for these companies to leverage that market.

 

But there is problem with proven methods:

I am not sure if buyouts, geographical expansions and new products and services are enough to keep big companies going for another century, as product life cycles are shrinking. These days people discard their new phone in months, change cars in year or two, change jobs every three years and homes every five or six years. In this environment people don’t often remain loyal to one company’s products and services. Plus, in order to maintain cash flow sustainability, Google, Apple and Facebook, and to a certain extent Microsoft, have no serious products or services like CRM, ERP, DB servers or Cloud computing with which to break into the enterprise market. Finally, companies like Alibaba and Samsung from the Far East are also making inroads into the Western market and presenting very stiff competition.

Perhaps only the guardian of crowdsourcing might survive

I think, if Google, Apple, Facebook, and Microsoft really want to survive that long, they have to create a worldwide cross platform ecosystem (not like their existing vertical App stores) to crowdsource any future product and service, so nothing slips under their radar. Otherwise they will perish simply because easy access to high speed internet, software infrastructure (e.g. cloud computing), and technical talent abundance far beyond their labs means new product and service creation won’t be limited to these giants.

Kabir , Frank Underwood, Mark Zuckerberg, WhatsApp – hey ho 2014

Facebook and WhatsUp

I have finally managed to get a moment or two to spend writing a blog post. Following birth of our first baby, the last few days were as hectic as I have ever known in my life, with no respite from changing nappies, reorganizing furniture and looking after both mom and baby, however, during all this madness, I also watched house of cards series two, which like season one is full of Frank Underwood’s antics around Shakespearean emotions to gain ultimate power and made me rank this soap along with Thick of it, and Yes Minister!!

Let’s rewind the topic to kid again, we have called our new-born “Kabir”, a name that caused some disagreement with my other half, family and friends. Kabir being an ancient Indian saint, some find the name too dated and others question whether such a name is controversial because it could symbolise a certain section of society or religion. But luckily, with some deep convincing and back channelling (Frank Underwood, #HouseofCards), I managed to persuade everyone that Kabir was the right name for this kid;

My reasons were very simple. 1) It has a nice, simple, easy ring to it, unusual but easy for everyone to pronounce. 2) The original Kabir (The saint from India) did rise above cast, gender and religion and showed society that humanity is the best thing going forward, which always inspired me and influenced me to name my son after him!

OK, that all was personal. It’s rare for me to post personal stuff but emotion is pouring out from me. Everyone says life takes different turn after a child and it may be that that is forcing me to show personal emotion on my tech blog!!Probably this is the first and last time I will talk about things other than tech and product development here!

Let’s get back to business. Looking back to when I last blogged, the main stub was that Mark Zuckerberg (Facebook) bought WhatsApp for $19bn. Looking at the stats, WhatsApp has 450m active users with over 1bn of messages exchanged every day. Facebook is valued at almost $42/user despite the fact that per user revenue is just under a buck – as a result many questioned if WhatsApp was really worth that much. At MWC14 Mark replied to that question with some hesitant affirmation i.e. he thinks it is but he might be wrong for the first time!

So what does this mean for Facebook and especially for Mark Zuckerberg?

He Continues to Lead from the Front
I think Zuckerberg continues to show his astute foresight and strong leadership skills when it comes to social media or new age communication tools, because first he managed to buy Instagram and then WhatsApp, despite both Google and Apple (far more cash riche than Facebook) being on the lookout for new generation tools!

Most Respected Among 21st Century Entrepreneurs
It also show that Zuckerberg enjoys high respect among start-ups or 1st generation entrepreneurs because, if rumours are to be believed, Larry Page from Google tried to offer a higher price to WhatsApp before Facebook bought it. The same is believed to be true for Instagram, which Zuckerberg managed to grab despite Jack Dorsey (Twitter co-founder) being on the Instagram board!

Facebook won’t be vanishing in 4/5 years’ time
Despite promising that WhatsApp will remain as independent as Instagram after buyout, Zuckerberg has managed to expand the Facebook product inventory, especially when some reports suggest that Facebook has already reached maturity and a downhill path might now be inevitable.

But what does this mean for the product development industry?

The Cross-platform Subscription Model has Legs!
WhatsApp is a cross-platform subscription-based messaging service which is not a new phenomenon. Similar services existed from the inception of dot com in the shape of Yahoo, Hotmail and AOL chat and then BBM brought that in on the mobile platform, but WhatsApp made the money. i.e. a lesson can be learned that a product which is better than anyone else’s and accessible from any device can leverage its success!

2014 belongs to Social Commerce, Bitcoin, Wearable Tech and Sentiment Search

2013 saw the rise and rise of mobile commerce, the stock market launch (and surge in share price) of social media sites such as Twitter, LinkedIn & Facebook, the introduction of wearable technologies like Google Glass, and high demand for Bitcoin took its valuation to $1,000.

Google shares reached over $1,000, LinkedIn shares are trading at over 300% of their original value, Twitter and Facebook shares are strong too. Overall, the year was very exciting and reached heights that caused  critics to suspect a tech crunch just around the corner.

On  the downside, 2012 stars like Zynga and Groupon have struggled to maintain their share price and profits, and Samsung and Apple went to war over various patents.

Amid all these highs and lows, I have spotted some trends that might dominate the coming year’s technology developments.

1.Facebook, Twitter and LinkedIn might need to think beyond display advertising or parish

Social media networks have become the most popular and most time-consuming sites and applications for users and the big three ($FB, $TWTR and $LINKD) are already trading on Wall Street with a combined valuation of over $200bn and a valuation per user over $100,  but revenue per user still in single figures. Therefore, I think to justify their valuation and competitive advantage, these networks will be forced to find means for brands to do commerce solely on their platform, because revenue merely based on display advertising and industry specific marketing products is not good enough and might only take them to closure rather than leading them to flourish.

2.Google, Samsung and Apple will indulge in a big wearable technology domination war

The Consumer Electronics Show (CES) 2014 in Las Vegas is full of companies (including LG, Intel, Sony, and Samsung) demonstrating wearable technologies, such as: smart watches, smart bands, smart ear buds, and smart glasses.

Apple and Google are not participating in CES 2014 but undoubtedly they must be keeping track of their competitors with an eye on the almost saturated smartphone and tablet market.
Apple has already filed a patent for iWatch and, due to shareholder pressure, might launch this in 2014. If we believe in the continuation of historical trends around competitors product launches following Apple’s new product release, I am sure Google glasses will come out of beta and Samsung will improve their already launched Galaxy Gear in order to be top of their industry; a wearable technology war seems inevitable.

3.Sentiments and Location Search will replace Google Keyword Search

For many, Google keyword search is still the primary form of data finding service. However, the rising popularity of Q&A engines like Quora, Facebook’s Social Graph, Apple’s Siri, Google’s Map, and recently launched Social search app Jelly, by Twitter founder Biz Stone, indicate the futuristic search trend is more aligned to human sentiments, where users can search stuff based on real intention rather than generic search terms.

4.APIs accelerate Marketing Automation but surge bot rates too

“A study by Incapsula suggests 61.5% of all website traffic is now generated by bots. The security firm said that was a 21% rise on last year’s figure of 51%; however, Activity by ‘good bots,’ it added, had grown by 55% over the year.”

The trend will continue because marketing automation with artificial intelligence is gathering momentum and content networks and providers are giving access to their data via open APIs.

5.The direct messaging industry is poised for disruption or consolidation

Snapchat, WhatsApp, Blackberry Messenger (BBM), Twitter Direct Message, and Facebook Messenger process over ten billion direct messages every day. However, none of these has managed to determine their monetisation model, which means consolidation is inevitable. Biggies like Facebook and Twitter in particular are trying to spread their wing in this sector.

6.Bitcoin or virtual currency will become mainstream

Recent developments in the virtual currency industry are:

1) Bitcoin is trading at $1,000 after Zynga announced that they will take Bitcoin as formal currency to sell their products or games.

2) Many companies are already following the Bitcoin success story and launching their own currency such as “a new Bitcoin-like virtual currency inspired by rapper Kanye West is set to be launched, and has been named “Coinye West”. Kanye West is not involved and has yet to comment on its inception. It will follow in the footsteps of “Dogecoin”, another virtual currency based on the popular Doge meme.”

3) Amazon and Facebook are pondering their own currency too! Overall, 2014 will see virtual currencies become mainstream!

4) National government such as Singapore Tax Authorities (IRAS) Recognise Bitcoin;

Eight Qualities that make a good Product Developer

Product Development Recently product development has become very intriguing career choice in computer science field. People like Steve Jobs, Mark Zuckerberg, Jack Dorsey and Jeff Bezos have become household names and role models to aspiring entrepreneurs, and computing has, to a certain extent, replaced the oil and commodities sectors on Wall Street as a future investment bet. Many big universities have already introduced product development as a separate subject and unsurprisingly these courses are oversubscribed despite high fees.

However, having been involved in product development for both consumer and enterprise software and hardware, I am inclined to believe that product development cannot be learnt or taught over a relatively short time period as it is a continuously evolving process to find a solution for identified problems.

Based on personal experience, and after researching the thoughts and actions of many product developers from companies such as Facebook, Instagram, Google, Twitter, LinkedIn, eBay etc., the following characteristics have identified that might help product developers to become successful!

1.Passion:

Passion is about determination – finishing the job with calmness and confidence; it is not shouting and swearing.

Passion is the first characteristic everyone expects from a product developer, but I am not sure if all developers understand what passion stands for; some confuse it with obsessive aggression, argumentativeness and impatience, which can have an adverse effect.

In my opinion, the passion means a determination to finish what you start, regardless of pain and hurdles, and the work must be carried out with confidence so that you can remain focused, productive and immune to failures.

2.Drive:

There is nothing wrong with being driven by money or fame

Hunter Walk wrote a very good article and he emphasized the three most important things for product development: love, greed and fear. I must admit that the second one, greed, left the most lasting impact on me, as he rightly mentioned that greed relating to becoming famous and/or rich can potentially bring a focused and non-egoistic approach to developing a product quickly. 

3.Proving yourself:

Use personal grudges to motivate  yourself.

I was attending an event and one of the most experienced entrepreneurs in that meeting mentioned that he wanted to develop successful products  because, ”I need to prove many people wrong and rather than talk the talk, I like to do walk the walk and make things happen.”

Another example is in Nick Bilton’s new book Hatching Twitter:  Square is the byproduct of proving those people wrong that pushed Jack Dorsey out of Twitter.

4.Standing away:

Don’t get emotionally attached and learn every day.

Emotional attachment to a product can become hurdle to its development. Just because you want to shape a certain product in a specific way does not mean that everyone will buy in to your idea. As a product developer, you must be fixated on the problem you are solving but not on the way you choose to solve it i.e. if your product ends up completely different to what you first envisaged but solves the problem, you are winner!

5.Aptitude over qualifications:

You don’t need to be an engineer to build product.

Companies from Google to Facebook emphasize that product developers must be engineers. However, there are many examples in the technical world where people from a non-technical background become product developers. Steve Jobs was art school drop put was not a technical guy; he was a salesman at Atari and had vision to shape computer hardware in certain way to make it accessible. Working with the technical skills of Steve Wozniak, he developed the first personal computer and the rest is history.

6.Control the whole development cycle

Product development is not just about developing a piece of software and/or hardware; it needs a holistic approach.

As well as doing the things you love, you have to manage people, processes and technology.  You might have to be a tester one day and project manager or blogger or legal representative another day.For example, a developed product must go through legal checks to ensure that no copyright is infringed. As the product developer you can’t shy away from taking that responsibility and you will need to engage with non-technical people to ensure the whole product is ready.

 7.Build an honest team:

Surround yourself with people who can criticize.

Build a team that can identify issues with your product, not “Yes boss” colleagues, who are either charmed with your enthusiasm or have no clue about your product and therefore fail to pinpoint any issues. For example, I suspect that Microsoft’s failure to identify the internet opportunity and Yahoo’s inability to convert their content to context, losing the race to the likes of Facebook and Twitter, is result of this misinformation to their main product developers.

8.Step out of your comfort zone

Product development is a very time consuming activity and comes with huge responsibility and leadership. However, for greater productivity, and to remain in touch with the ground zero reality, every product manager must take some time out from their routine life and must involve themselves in activities that force them to think outside the box, such as become a volunteer worker at a sports club or charity, go to new places and work with people whose skills don’t match yours.

The key is you must work at something which doesn’t fall into your usual professional, social or personal domain and challenges you to step out of your comfort zone and broaden your horizons.