Indian retailers to get an online wholesaler, courtesy ShopClues

Among Other ThingsThe Economic Times,

BANGALORE: India’s first exclusive online wholesaler opens shop this week, becoming the only one to allow retailers to buy products in bulk at wholesale prices. The wholesale site will be a part of shopclues.com, a retailer which is adapting to fierce competition in the Indian ecommerce industry.

“We could already see that a number of our buyers were purchasing in bulk on our retail platform. We decided to actively enable this,” said Sanjay Sethi, cofounder and chief executive officer of Shop-Clues who described the need for a wholesale portal as “obvious”.

Among other things, the online wholesaler will allow traders to provide services to retailers such as credit and buyback of unsold products.

Almost all the attention of investors has been focussed so far on the online retail business, which is forecast by retail advisory Technopak to grow to Rs 3.5 lakh crore in 2023 from Rs 12,400 crore at present.

In recent months, investors have demonstrated their interest in this space by pouring nearly $1 billion into companies such as Flipkart, Snapdeal and Myntra.

Experts said the diversification to wholesale will help ShopClues compete with larger and more established marketplaces like Flipkart and Snapdeal. “Shop-Clues can create a niche with their wholesale trade and create leadership,” said Ashish Jhalani, head of advisory firm eTailing India. “The wholesale market online has the potential to grow larger than retail.”

The three-year-old ShopClues, based in Delhi, is aiming for sales of Rs 350 crore this fiscal and Rs 1,200 crore next fiscal. About 15% of all sales on the site are already in the form of bulk orders, which are over 10 orders per product.

For comparison, Flipkart has said it will reach sales of more than Rs 6,000 crore by fiscal 2015.

While there are no reliable numbers for the potential market size of online business-to-business transactions in India, there are international examples of such sites growing into large standalone companies.

For instance, Alibaba’s China-focussed business-to-business platform 1688.com sold $679 million (Over Rs 4,200 crore) worth of products on a single day in September last year. In India, while sites like IndiaMart and Alibaba list wholesale traders on their sites, they do not allow transactions online.

Right Click Fro Shopping

In 2012, IndiaMart said it enabled members to do business of over Rs 10,000 crore a year. Other sites like Amazon, Snapdeal and Flipkart do allow bulk orders. But on these sites the order size is restricted to the number of products in stock, which will typically be small as they are geared to retail trade.

eBay is the only major retail portal in the country that has wholesale lots listed for online transaction. However, eBay’s spokeswoman Deepa Thomas said the site does not differentiate “in the fees or offerings for bulk orders versus retail orders”. Bulk orders account for between 5% and 10% of orders on eBay.

Delhi-based ShopClues, which has Rs 93 crore in investment from Helion Venture Partners and Nexus Venture Partners, will launch wholesale trade with about 60 merchants listing products in categories like electronics, auto accessories, health and beauty, fashion and home goods. Wholesale prices on the site will typically be 2-3% lower than retail for mobile phones and other electronic goods, while in less commoditised categories like apparel the price difference can go up to 50%.

For now the wholesale listings will be in the form of a separate category on the ShopClues site, but the company has not ruled out the possibility of launching an independent site.

Like in the offline world, wholesale merchants can opt to set a minimum order volume for a product. For wholesale overall on the site at least 10 orders per product must be made. Merchants can set differentiated prices for different order volumes for the same product.

Traders can also offer credit, where retailers will make a part payment upfront and the remainder could be paid in instalments. Wholesale traders could also offer to buy back unsold products from a retailer after a defined period.

eTailing India’s Jhalani said wholesale trade’s differences from retail will pose challenges. For instance, not many logistics companies can handle bulk deliveries.

“Pricing is also very dynamic; to be on top of this will be the challenge,” said Jhalani. “If they execute well, ShopClues will have an advantage as they are first to market.”

Read the story at http://articles.economictimes.indiatimes.com/2014-03-04/news/47894688_1_shopclues-flipkart-orders