Friday, July 15, 2016
SPECULATION ON INDIA'S E-COMMERCE RETAIL
Speculating on the future of Flipkart and Snapdeal has become fashionable over the past six months. It’s almost like what happens between Game of Thrones fans: No one knows what will happen next, but everyone has a theory that they can endlessly defend.
All possible permutations and combinations between the existing players have been written about in news reports and editorials, despite the companies’ vehement denials of each rumor. It’s also been suggested that a new, foreign company may enter the market and kill all the incumbents.
Here’s a quick rundown of what the speculators have been thinking:
In a July 13 piece for Bloomberg Gadfly, columnist Tim Culpan wrote that a Flipkart-Snapdeal merger “needs to happen,” so that the two homegrown e-commerce players can together beat Amazon, the US-based online retail giant that is fast becoming a threat to local companies.
Flipkart and Snapdeal are currently fierce rivals. The dislike between them is evident in the potshots that the companies’ founders have taken against one another, which might be one reason why Arvind Singhal, chairman of Indian consultancy Technopak, told Culpan it would be at least six months before a merger would occur.
Another frequently talked about theory is that either Flipkart or Snapdeal will make a large enough acquisition to put some real distance between the two firms. Last November, Business World suggested that Gurgaon-based Snapdeal, the smaller of the two rivals, might merge with competitor Paytm, which is one of the top five e-commerce companies in India.
Another theory is that Amazon will eventually buy out one of the leading domestic companies to become the market leader. In March, The Economic Times reported that Flipkart had been in merger discussions with Amazon.
“With or without a deal, the fact of negotiations involving potential sale of Flipkart is a major development for two reasons—it radically alters the narrative about online retail industry in India, and raises questions about willingness and ability of Indian startups to fight and win prolonged battles for market domination,” the newspaper said.
Flipkart vehemently denied any plans of a sellout, with an assist from co-founder Sachin Bansal.
Some believe that India will eventually just become a battlefield for US-based Amazon and China’s Alibaba, and that each will use Indian e-commerce companies to further their global interests.
Amazon operates in India through its Amazon.in arm. Alibaba is an investor in Snapdeal. And Japan’s Softbank, which is the largest investor in Alibaba, is the biggest shareholder in Snapdeal.
“Alibaba will eventually acquire Flipkart, merge it with Paytm, and fight Amazon in India,” FactorDaily’s editor-in-chief Pankaj Mishra wrote in a June editorial. “Why am I predicting this? It is based on a series of conversations with company insiders and other executives outside the firm, who pointed at the ongoing (often inconclusive) conversations between the people involved.”
Why are Indians so obsessed with the futures of Snapdeal and Flipkart?
The desire to contemplate is perhaps high because of the billions of dollars riding on Indian e-commerce companies, and because of the prominence of the global investors who hold bets here. The recent funding crunch for tech firms has only added fuel to the trend.