Amazon's $3 bn will give Flipkart, Snapdeal the...

Amazon's $3 bn will give Flipkart, Snapdeal the nightmares. Here's why

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Forget the funding crunch and valuation mark downs, the Indian e-commerce sector is going to see more action. That is what Amazon’s pledge to invest $3 billion in India indicates.

The global retail giant said on Wednesday that it will provide more more funds for Indian operations taking its total investment in the country, including the earlier $2 billion, to $5 billion.

“I can assure you it’s only the beginning and as we say in Amazon, it’s only day one,” Amazon chief Jeff Bezos has been quoted as saying in aReuters report.

Interestingly, the funding pledge comes at a time when the country’s e-commerce sector is facing challenging times. Losses are mounting, investors are forcing companies to rein in discounts, fund flow has narrowed down and gone are the days of sky high valuations. On top of it all, there are new government norms that restrict these companies from becoming sellers.

Seen in this context, Amazon’s funding of Indian operations should shivers down the spine of the likes of Flipkart and Snapdeal.

As this report in the Mint newspaper says, both these companies are already losing market share to Amazon. According to media reports, as of March 2016 Amazon’s market share has risen to 21 percent from 14 percent a year earlier. Compare this with the fall in market share of Flipkart to 37 percent from 43 percent and 14-15 percent from 19 percent during the period.

With latest investments, Amazon is planning to go all out to acquire customers.

“…The investment will go towards enhancing our customer and seller experience, as we have done over the past three years,” Amazon India managing director Amit Agarwal has toldThe Economic Times in an interview.

“The past three years, our focus has been selection, low prices, and faster and reliable delivery. In the case of India, there is an additional aspect of convenient payments and mobile (transactions). When I look at selection, our focus has been on enabling sellers, training them, bringing them online and building infrastructure for them. When we look at lowering prices, our prime area of focus has been how we lower cost of operations for sellers so that they can offer lower prices,” he adds.

The aim, he says, is to “to transform how India buys and sells”.

And customer has been the focus of the company.

“I stay heads-down, focused. I encourage these guys (the India team) to not pay attention to a bunch of noise, and rather stay focused on the customer experience, do the right thing, figure out how to get products to customers faster with more reliability, earn trust with customers. The rest will take care of itself,” Jeff Bezos had told the Business Standard in aninterview after he first $2 billion pledge.

This strategy seems to have paid off. At least that is what Bezos claims when he says Amazon has become the most visited e-commerce site in India with 30 million unique visits monthly. Flipkart’s corresponding number is 27 million and Snapdeal’s 20 million.

What is also interesting is that Amazon’s fresh commitment comes just ahead of Chinese giant Alibaba’s launch in India. A report in the Mintsays Alibaba is likely to start operations around the festival season this year. However, Agarwal is not ready to acknowledge this is indeed so.

However, it is to be remembered that the Chinese company is also a giant with deep pockets. It already operates in India through its stakes in Snapdeal and Paytm. The Mint report says the company is already scouting for partnerships and has started building the team.

Meanwhile, the moot question to ask is with two global giants making the big splash in the country and distress in the sector, is there a consolidation on the way.

Moorthy K Uppaluri, Managing Director and CEO of Randstad had recenlty told Firstpostthat could be the way forward.

“The sector has not lost its potential and there is much scope for growth. What will not happen now is accelerated realizations. Consolidation may be the game-changer, instead,” he said.

Also, Agarwal of Amazon India has not ruled out acquisitions.

When asked whether the company is looking at acquisitions, this is what he told ET: We are excited by the momentum in our organic strategies. At the same time, we are always looking for visionaries who are building great experiences for consumers and sellers.

It is interesting times ahead for the Indian e-commerce.

Source-: firstpost.com

19 Comments  |  
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Good Share https://cdn1.desidime.com/assets/textile-editor/icon_smile.gif

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This is only the beginning. Amazon will wipe out both FK & Snapdeal in the long run. Amazon has tech, resources, funds and most importantly motivation to overthrow FK and Snapdeal. Snapdeal market model is more focused on margins so it may survive for a little longer than FK. FK will be the first to hang the boots. Recent IIM placement FK controversy is just the tip of the iceberg .

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@cybertechie wrote:

This is only the beginning. Amazon will wipe out both FK & Snapdeal in the long run. Amazon has tech, resources, funds and most importantly motivation to overthrow FK and Snapdeal. Snapdeal market model is more focused on margins so it may survive for a little longer than FK. FK will be the first to hang the boots. Recent IIM placement FK controversy is just the tip of the iceberg .


True! Flipkart has to change the way they treat customers!

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Deal Subedar
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Amazon vs Alibaba would be interesting story.Both are neck to neck.

PS excuse all the kids. Flipkart,SD and whatever is already dead in any sense

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Amazon will face great challenge from Shopclues https://cdn1.desidime.com/assets/textile-editor/icon_biggrin.gif

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@KuttaJi wrote:

Amazon will face great challenge from Shopclues https://cdn1.desidime.com/assets/textile-editor/icon_biggrin.gif


https://cdn3.desidime.com/assets/textile-editor/icon_lol.gif https://cdn3.desidime.com/assets/textile-editor/icon_lol.gif https://cdn3.desidime.com/assets/textile-editor/icon_lol.gif https://cdn3.desidime.com/assets/textile-editor/icon_lol.gif https://cdn3.desidime.com/assets/textile-editor/icon_lol.gif

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Deal Subedar
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@KuttaJi wrote:

Amazon will face great challenge from Shopclues https://cdn1.desidime.com/assets/textile-editor/icon_biggrin.gif

this buoy is the mantally the sick

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@cybertechie wrote:

This is only the beginning. Amazon will wipe out both FK & Snapdeal in the long run. Amazon has tech, resources, funds and most importantly motivation to overthrow FK and Snapdeal. Snapdeal market model is more focused on margins so it may survive for a little longer than FK. FK will be the first to hang the boots. Recent IIM placement FK controversy is just the tip of the iceberg .


Why Amazon’s $3 billion India bet goes beyond Flipkart, Snapdeal rivalry

Amazon’s $3 billion investment in its Indian unit isn’t just meant as challenge for Flipkart and Snapdeal, but also as a ‘take that’ gesture to Alibaba

Jack Ma, founder and executive chairman of Alibaba Group Holdings, and Jeff Bezos, founder and chief executive of Amazon. Photo: Bloomberg
Bengaluru/New Delhi: Amazon.com Inc, the world’s largest online retailer, said on Wednesday that it would invest another $3 billion in India after the company exhausted its earlier pledge of $2 billion.

The announcement isn’t just an indication that the US firm is going in for the kill in its market share battle with local rivals Flipkart Ltd and Snapdeal (Jasper Infotech Pvt. Ltd), but a “take that” gesture to Alibaba Group Holding Ltd which recently announced its entry into India. And unlike in China, where it entered late, Amazon has made all the right moves in India.

Is it too late for Alibaba?

Perhaps not, say analysts, although Amazon has used its early-mover advantage to good effect, building a large base of sellers, and a large and efficient delivery and customer service infrastructure.

Alibaba hasn’t exactly been idle in India. It has investments in Snapdeal (in which SoftBank, Alibaba’s largest shareholder, is the largest investor) and payment services provider and marketplace Paytm (One97 Communications Ltd), and its own marketplace should be off the ground by the time this year’s festive season (the period between September and January, when most Indian festivals are concentrated) comes around. The Chinese firm already runs a business-to-business (B2B) platform in the country. It has also started to build its team in India and is scouting for partnerships. Last month, it hired former Bain Consulting executive Bharati Balakrishnan as the head of its Indian operations. Alibaba has even held funding talks with Flipkart, Mint reported on 4 February. Indeed, some analysts have suggested that Alibaba would do well to consolidate its presence in India, with a helping hand from Softbank, and effect a merger between Snapdeal and Paytm’s marketplace, instead of launching on its own.

Alibaba, Flipkart and Snapdeal did not respond to Mint’s emailed queries, while Paytm declined to comment.

Alibaba’s marketplace will launch three years after Amazon’s. The US firm recently celebrated its third anniversary in India, and the announcement of the $3 billion investment was strategically timed with this as well as Prime Minister Narendra Modi’s US visit.

Mint has reached out to both Amazon and Alibaba for comment and this article will be updated with their responses shortly.

Alibaba’s moves will add a new dimension to the hitherto three-cornered fight in the marketplace space in India.

In July 2014, Flipkart and Amazon announced investments of $1 billion and $2 billion, respectively, dramatically raising the stakes in India’s booming e-commerce market. Three months later, Japan’s SoftBank Group, enriched from the record-breaking initial public offering of Alibaba, put its weight behind dark horse Snapdeal, pumping $627 million into the online marketplace.

Indian shoppers never had it so good as they did in the next year. Discounts of up to 90%, speedy delivery and a wide range of products across the three large online retailers became the norm.

ALSO READ

Amazon increases India investments to $5 billion to take on Flipkart, Snapdeal
Starting late last year, however, the party came to an end. Amazon was winning market share from Flipkart and Snapdeal, and the finances of all three companies were in shambles. Amazon, however, wasn’t bothered. For the time being, it only cares about becoming the most popular e-commerce brand in India, especially after losing to Alibaba in China. Investors at Flipkart and Snapdeal, however, started pulling back late last year. Stung by the massive losses at these two companies and by the rapid expansion of Amazon, both existing and potential new investors have altered their rosy outlook on the two largest Indian e-commerce start-ups. The two are struggling to raise fresh funds at their preferred valuations, Mint reported on 14 April.

Consequently, forced to start cutting back on discounts and advertising, sales at both companies have suffered. It’s a classic vicious cycle: if you don’t raise money, you cut discounts and advertising, which translates into lower sales, which in turn means lower valuations and a struggle to attract investors.

At the same time, the apparent ease with which Amazon India can access funds must terrify its two Indian rivals.

Analysts say that if Flipkart, which still has more than an estimated $1 billion in cash, can turn around its business under new chief executive officer Binny Bansal this year, it has sufficient time to ride out the downturn in the investment cycle. Snapdeal, however, is unlikely to find it easy to raise a new, large round of funds, at least not at its current valuation of $6.5 billion.

Mihir DalalShrutika Verma
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@KuttaJi wrote:

Amazon will face great challenge from Shopclues https://cdn1.desidime.com/assets/textile-editor/icon_biggrin.gif


Could you please explain when , how, what , where ,
Whom ?

#PareshRawal

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Deal Captain
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@[email protected]_0_0_D wrote:


@KuttaJi wrote:

Amazon will face great challenge from Shopclues https://cdn1.desidime.com/assets/textile-editor/icon_biggrin.gif


Could you please explain when , how, what , where ,
Whom ?

#PareshRawal

when amazon will statrt treasure hunt everyday https://cdn3.desidime.com/assets/textile-editor/icon_wink.gif

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Deal Colonel
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@KuttaJi wrote:

@[email protected]_0_0_D wrote:


@KuttaJi wrote:

Amazon will face great challenge from Shopclues https://cdn1.desidime.com/assets/textile-editor/icon_biggrin.gif


Could you please explain when , how, what , where ,
Whom ?

#PareshRawal

when amazon will statrt treasure hunt everyday https://cdn3.desidime.com/assets/textile-editor/icon_wink.gif

You mean ?

They will have to use @wolf
Whereas shopclues is still trusting on @KuttaJi

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@srocks

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