Flipkart and the bitter fight for a vast market
A textbook example of a local e-commerce success story, Flipkart was set up by two former Indian Institute of Technology students, Sachin Bansal and Binny Bansal (no relation), who saw the opportunities in a vast market where e-commerce arrived later, becoming the number one players in the subcontinent and joining Forbes’ billionaire list.
Flipkart soon established itself as India’s favorite online shopping site, but since February 2012, when Amazon, entered the Indian market, first with comparison site Junglee.com, and then in June 2013, with the launch of its own site, it has slowly had to cede ground: Flipkart is still the leader, but growing numbers of Indians prefer the Amazon shopping experience. Both have invested heavily, competing fiercely in terms of product and price, a fight that Amazon seems gradually to be winning, perhaps due to its long-term strategy and opening India to overseas markets.
But Flipkart is still a force to be reckoned with: a leader with a market like India’s behind it, the company has had no problem attracting investors like Japan’s Softbank.
Flipkart is important because it is not only the key to entering the Indian market, but making a profit from the world’s largest democracy. Whoever beats Flipkart not only beats a successful company and a hugely popular brand, but also an aggressive competitor with the potential to keep competitors locked in lengthy price wars. Which is why it’s been the object of a bitter bidding war between Amazon and Walmart, which has kept the Indian entrepreneur ecosystem on the edge of its collective seat, and that Walmart appears to have won. Walmart’s interest in India not hard to understand: it entered the market more than a decade ago, but its presence in the country has been limited to a few B2B stores, mainly due to the government’s restrictive policies and a failed joint-venture. The company has been saying since 2014 that it sees e-commerce as a way to expand its presence in the country, but until now had done nothing about it. The acquisition of a 70% controlling stake in Flipkart, could change that, as long as it’s able to overcome regulatory obstacles (we are talking about a country with a huge network of small local businesses that will be affected by market consolidation) and is properly managed.
The duel between Amazon and Walmart over Flipkart is high stakes stuff: for Amazon winning meant taking the Indian market. For Walmart, it’s pretty much all or nothing. Walmart appears to have won, but Amazon was the leading retailer in the United States in 2015 in terms of share value, and after buying Whole Foods in June 2017 is now the second largest generator of jobs in the country after Walmart, and is also the third most valuable company in the world and the leader in terms of turnover among the so-called internet companies.
Walmart bought Jet.com, the company founded by Marc Lore, the founder of Diapers.com, in an attempt to develop its online business. The Indian market is important for its size and potential, justifying a full-scale bidding war. Walmart’s passage to India is a $15 billion journey in search of success for a company that has taken years to grasp that the online world was the next and only frontier, and is set on dominating it at all costs. We will have to see how the e-commerce market develops in India in the coming years.
(En español, aquí)
