With its $3bn push, Amazon is preparing its foundation for the big battle with Alibaba; Flipkart & Snapdeal will either move aside or get crushed
article source: Business Standar – JUne 9, 2016
Amazon is moving in for the kill in India. Like any predatory animal, it has chosen its timing correctly. Its competitors in India have been pushed against the wall and it would need only a nudge to send them packing.
Taking the opportunity of Prime Minister Narendra Modi’s visit to the US, Amazon’s founder and Chief Executive Jeff Bezos announced an additional $3 billion investment in its Indian operations. The investment number has significance not only in term of its size but also the fact that it is higher than the company’s investment of $2 billion in the country.
But more importantly it is near the investment of $3 billion raised by the poster boy of Indian e-commerce Flipkart till date. Since its inception in 2007, Flipkart has raised a total of around $3.2 billion till date. But the company seems to be running out of cash and ideas. Amazon seems to be flaunting its $3 billion cheque on the face of Flipkart which is clearly running out of steam.
Earlier, commenting on Flipkart India Value Fund Advisors partner Haresh Chawla said Flipkart is facing significant turmoil in terms of top-level management. Growth, the article adds, has been elusive since the “middle of last year”, while innovation has been absent. Chawla, in the no-holds barred piece, had written: “Flipkart is the market leader. But Amazon is snipping at its heels and Flipkart has no clue which way to go.”
Since then, Flipkart has been in the news for all the wrong reasons. Investors have devalued Flipkart from $15.2 billion to $11 billion, which is not only a reduction in the perceived valuation of the company but also raises questions about the future fund -raising capability of the company.
Recent development where Flipkart has deferred IIM’s joining date has sent warning signals in the market that all is not well in the company. This coupled with senior team members leaving the company and the government disallowing ‘Big Billion Day sales’ has also impacted the company.
Amazon, however, is aiming at two birds with one stone. With its investment push, it is nudging space from Flipkart and Snapdeal while at the same time preparing its foundation for the big battle with Chinese giant Alibaba. The chinese company has been testing waters in India with its investment in Sanpdeal and Paytm. It also has a Business to Business (B2B) platform in the country.
Amazon has an axe to grind against Alibaba where it lost out in the fight for market space in the latter’s home territory – China. However, it has been lucky with India beating its own growth target. Bezos has been quoted as saying, “Our Amazon.in team is surpassing even our most ambitious milestones’. Amazon is setting up its largest software and development centre outside the US.
India will soon be the battleground for the fight of the big boys, the smaller ones like Flipkart and Snapdeal will either have to make way, take sides or get crushed in the process of fighting their own battle of survival.