E-commerce (Electronic Commerce or EC) is the buying and selling of goods and services over the Internet. These business transactions occur either between businesses (B2B), or between business and the actual consumer (B2C).
The size of the Indian retail segment is expected to increase from USD 585 billion in 2015 to USD 2,065 billion in 2025. The retail segment comprises of the merchandise segment and the services segment. The services segment includes food services, beauty,health and fitness. The merchandise and services segments are expected to increase from USD 543 billion in 2015 to USD1,857 billion in 2025 and USD 42 billion in 2015 to USD 208 billion in 2025 respectively.
The share of the merchandise segment constitutes 93% of the total retail whereas services segment constituted 7% of the total retail segment in 2015. However by 2025 ,it is expected that the share of merchandise segment will fall to 90% and that of the services segment will increase to 10%.
Flipkart has the biggest market share in the e-commerce business with an approximate market share of 45% followed by Snapdeal with 26%, Amazon India at 12% and Paytm at 7% while the rest is garnered by smaller players.
For the existing E-Retail business there are three possibilities going forward. One is that either the company acquires market share and becomes a significant player or it becomes an acquisition target for bigger companies, assuming it has substantial customer base with some market share or it may find it difficult to compete with big players and eventually has to fold up.
Infibeam is an e-commerce company, focused on developing successful e-commerce platforms and ecosystems. In addition to Infibeam.com, a multi-category B2C e-retail site, through Infibeam BuildaBazaar (“BaB”) e-commerce marketplace, the company provides a cloud-based, modular, customizable and scalable technology platform as well as e-commerce infrastructure and logistics support for a diverse universe of merchants, products and services.
Infibeam has entered into various strategic partnerships with vendors and service providers, other e-commerce marketplaces as well as telecom operators, media companies, and payment gateway service companies aimed at low-cost customer and vendor acquisition.
The company’s fully integrated and strategically synergistic e-commerce business model across Infibeam.com e-retail site and Infibeam BaB e-commerce marketplace enables it to provide comprehensive multi-channel e-commerce value added service (VAS) offerings to its merchant customers, including logistics and fulfilment services.
The business model of Infibeam seems to be unique in terms of its offering of products and services. The Company competes with Flipkart, Amazon and Snapdeal for the e-commerce business with a relatively small market share but its service business has made it profitable just before its initial public offer in the year 2016.The services segment of Infibeam includes sale of software and ecommerce ancillary services.
The Company reported profit after tax in the six months ended September 30, 2015 of Rs.65.75 million. The losses after tax for fiscal 2012, 2013, 2014 and 2015 were Rs.108.29 million, Rs.249.10 million, Rs.259.48 million and Rs.97.86 million respectively.
The Company has diversified its operations so that it does not depend on only one source of revenue and profitability. Due to tough competition, the company has incurred losses to the tune of Rs.27 million in the e-commerce segment of its business in the second quarter of FY 2016-17. The Company reported that segment revenue of Rs 336.1 million for the quarter ended September 2016 (Q2 FY17). This represents a rise of 29% from Rs 259.6 million in the same quarter last year. The services segment of Infibeam which includes sale of software and ecommerce ancillary services as mentioned above posted a profit of Rs 222.2 million for the quarter, up 53.7% from Rs 144.5 million in the same period last year.
The services segment includes BuildaBazaar platform which provides cloud-based solutions for merchants. The Company’s merchant base stood at 61,248 at the end of the September 2016. BuildaBazaar earns by charging a set-up cost to merchants, as well as through monthly fee and a per-transaction commission.
The company has provided various enterprise customers and established brands with comprehensive digital business solutions including Unitech Amusement Parks Limited, Panasonic India Private Limited, Crossword Bookstores Limited, Spice Retail Limited, Adlabs Entertainment Limited, Gulf Oil Lubricants India Limited, Hidesign India Private Limited, Eros Electricals LLC, Axiom Telecom LLC and Mumbai International Airport Private Limited.
It is important to note that the Infibeam has been able to report profits at a time when giants like Flipkart and Amazon (in its Indian business) are piling on huge losses to capture more and more market share. No wonder the valuation of this Company is in a bubble territory. Infibeam trades at a price to earnings ratio of 513 at the stock price of Rs.1120. The market cap to sales ratio is calculated at 14.16. It was the first player in the e-commerce industry to be listed on the bourses and currently no other listed company can be considered as a peer to compare valuations. The stock has given a return of 159.25% after listing in the month of April 2016 from its issue price of Rs.432.