International Journal of Management Research and Social Science (IJMRSS) ISSN 2394-6407(Print) Volume 1, Issue 1, October - December 2014 ISSN 2394-6415(Online) Study of ‗Mergers & Acquisitions‘ Growth strategy in E-Tailing Industry (A case Study of Flipkart-Myntra: The Online Giants) Dr. Rajeshwari Malik Associate Professor, MSI (GGSIPU), New Delhi, India [email protected] "India's internet ecosystem is going to be one of the most vibrant in the world in the future with half a billion internet users" Sachin Bansal (Co-Founder FlipKart.com) Abstract— In a fiercely competitive e-commerce market, and medium entrepreneurs in India. The parallel biggies are sounding a death knell for the small and mid- advancement in information technology and sized players threatening to eventually wipe them out of communication paved the way for growth of e-commerce. India's burgeoning e-tailing landscape. The domestic The online retail popularly called as e-tailing is also the digital commerce market is expected to clock a higher new buzz word in business. The simple definition of growth in 2014-15 due to better internet penetration, electronic or e-tailing is ―the sale of goods and services increase in trust level and pricing advantage. Growing through internet, and includes business-to-business and number of internet users, a more secure and convenient business –to- consumer sales. CRISIL Research defines e- transaction system, coupled with lucrative offers and a commerce companies as those in the primary business of 24x7 delivery system are the common drivers of growth. providing web platform(s) and website(s) through which With Flipkart raising $1 billion in fresh funds and Amazon individuals, using a computer or smart phone, can purchase pouring $2 billion into the India market, many existing a product or service. The definition excludes classifieds players could fall off the investors' radar paving the way for and information portals, online transactions between a two or three-way race between Amazon, Flipkart and businesses, and websites offering online financial services. Snapdeal in India. Investor‘s appetite to pour money into E-tailing revenue can come from the sale of products and smaller horizontal players like Tradus, Infibeam and services, through subscriptions to website content, through ShopClues would come down substantially forcing some of The nova entrepreneurs in their late twenties or early them to hit the exit button. But the specialized online thirties, well breed and highly qualified, travelled around retailers such as Urban Ladder and HealthKart may hold on the globe are dominating this section of e-commerce. to their turfs despite the onslaught from the big e- Online retail may still be in nascent stage, but the top commerce players. So far, Flipkart has risen close to about players in the sector are doubling down on the brick-and- $1.7 billion from a clutch of investors as it fights out mortar retailers at a feverish pace. Amazon and domestic rival Snapdeal in a fast-growing e- Internet & Mobile Association of India (IAMAI) is the commerce market, projected to touch $8 billion by 2016. prime industry body, keenly observing the growth and India has 243 million internet users, and this number trends in e-commerce in India. Retailers around the world continues to grow rapidly due to increased smartphone are facing a digitally driven perfect storm. Connectivity, penetration. Merger and Acquisitions are the most common rising consumer influence, time scarcity, mobile payments, approach used by these major players to grow in size and and the internet of things, are changing where, when and fight the competition across the world. This paper is an how we shop. Smart machines, palm screens have not effort to study the M&A of Flipkart and Myntra and its already done the job. Add the sharing economy, driven by impact on the e-tailing industry of India. younger generations where experience and sustainable consumption are more important than ownership, and 1 Keywords— E-tailers, E-commerce, Entrepreneurs, traditional retail models break down. The future of shops Distinctive strategy, Mergers, acquisitions, Corporate will be increasingly defined by experiential spaces offering restructuring personalized service, integrated online and offline value propositions, and pop-up stores to satisfy demands for immediacy and surprise. Many Indians today are embracing e-retailing with enthusiasm. Popular portals 1. Online Retail industry (E-Tailers): The such as Flipkart are spearheading the conversion of offline virtual Market Landscape shoppers into online bargain hunters. Every week new dotcoms are coming up in retail sector, offering services Boom in retail industry had triggered rise of many small and products like never before. 9 International Journal of Management Research and Social Science (IJMRSS) ISSN 2394-6407(Print) Volume 1, Issue 1, October - December 2014 ISSN 2394-6415(Online) 550 600 487 500 440 400 2014 300 2020 200 74 51 75 100 0 Mobile phones Smart Phones PC/Notebook Fig. 1: Technology Driving the Growth of Retail Industry (Number of Users in millions) The e-commerce industry in India stands at $3.1 beat the competition. India‘s Internet user base is billion (excluding travelling) in year 2013. It is growing expected to touch 550 million by 2020, against about 243 at a whopping pace of 63% per annum and is projected to million users at present. take a big leap in the next three years and reach $8.5 Successful dot-coms have the following common billion in 2016. The numbers of internet users in India are characteristics, irrespective of the industry, market or 213 million today, and at a growth rate of 25% are project country of origin and management2. to cross 400 million by year 2016. The average online order value is Rs. 1,860 expected to cross Rs. 3600 by 1. Strong capabilities in Internet technology. 2016. The fashion, footwear and accessories industry is 2. A distinctive strategy vis-à-vis established today valued $ 559 m, and studies project it to reach $2.8 companies and other dot-coms, resting on a clear billion by 2016. The major e-tailers in India in various focus and meaningful advantages. categories are as follows: 3. Emphasis on creating customer value and Flipkart-Myntra (Multi- Product Category) charging for it directly, rather than relying on Snapdeal (Multi- Product Category) ancillary forms of revenue. 4. Distinctive ways of performing physical Amazon (Multi- Product Category) functions and assembling non-internet assets that Ebay (Multi- Product Category) complement their strategic positions. Jabong (Fashion, Lifestyle ) 5. Deep industry knowledge to allow proprietary Fashionandyou (Fashion, Lifestyle ) skills, information, and relationships to be Inkfruit (Fashion, Lifestyle ) established. Yebhi (Fashion, Lifestyle ) The recent acquisition of highly popular chat Caratlane (Jewellery) company Whatsapp by the social media giant Facebook Pepperfry (Furniture ) and consolidation of Ibibo and RedBus in the world Urbanladder (Furniture ) market showed the opportunity to the Indian players as Babyoye (Baby Products) well. Flipkart has taken over Myntra in May‘2014, which Firstcry (Baby Products) is the biggest consolidation in Indian e-commerce With the entry of global giants like Amazon.com in market21. The case is about M& A as an option for growth June‘2013, the Indian players are looking for new ways to and beating competition. 10 International Journal of Management Research and Social Science (IJMRSS) ISSN 2394-6407(Print) Volume 1, Issue 1, October - December 2014 ISSN 2394-6415(Online) 2.3 $525 Billion Overall size of India's retail market in 2014 525 Fig. 2: Overall Size of Retail Industry in India 2014 Fig. 3: Growth Rate of Retail Industry Future of E-tailing $ 32 Billion (Rs. 1,93,000 Crore) The estimated size of India's e- tailing market - 3% of global $1040 Billion market (Overall size of India's retail Industry in 2020 Fig. 4: Future of Retail Industry 11 International Journal of Management Research and Social Science (IJMRSS) ISSN 2394-6407(Print) Volume 1, Issue 1, October - December 2014 ISSN 2394-6415(Online) 2. Mergers and Acquisitions – A Popular the world. Not surprisingly, these actions often make the Strategic option For growth news. Deals can be worth hundreds of millions, or even billions, of dollars. They can dictate the fortunes of the Mergers, acquisitions, business alliances, and companies involved for years to come. In the year 2012, corporate restructuring activities are increasingly India witnessed a substantial slowdown in the mergers commonplace in both developed and emerging and acquisitions (―M&A‖). In 2012, M&A deals fell to economies. One plus one makes three: this equation is the almost a three year low and down nearly 61% from 2011 special alchemy of a Merger or an acquisition. The key and 138.5 % from 2010. The pressure on the M&A principle behind buying a company is to create activity was primarily due to a difficult macro-economic shareholder value over and above that of the sum of the climate throughout the year. The global slowdown and two companies. Two companies together are more the euro zone crisis had a significant impact on the Indian valuable than two separate companies -at least, that's the economy. On the domestic front, the growing fiscal reasoning behind M&A. Synergy is the magic force that deficit, high inflation and currency devaluation coupled allows for enhanced cost efficiencies of the new business. with high interest rates had a severe impact on the growth Synergy takes the form of revenue enhancement and cost trajectory. In the initial months of 2012, the India savings. Mergers and acquisitions represent the ultimate economy grew at its slowest rate since 2003 with GDP in change for a business. No other event is more difficult, growth of only 5.3%. challenging, or chaotic as a merger and acquisition.