News publications in India were buzzed with the speculation on the acquisition of Flipkart by either Amazon or Walmart. The question is, “Why are the two e-commerce giants competing to take over Flipkart?” Actually, the rumor is not something new. Similar rumors have been around repeatedly during the last two years. No defined deals have been published, even though both e-commerce giants are believed to have been engaged with Flipkart for several times.
Does Acquisition of Flipkart Matter?
Some reports noted that Walmart has made an advanced step by completing due diligence with Flipkart. It expects to acquire a stake of at least 51% with estimated investment of $10-20 billion. Amazon is also targeting a similar deal. However, he offers from both e-commerce companies will be under tight scrutiny from Indian’s Competition Commission. If Amazon acquires Flipkart, then both will totally monopolize e-commerce sector in Indonesia.
The question is, “Is acquisition of Flipkart so important for both Amazon and Walmart?” Actually, both companies have their own reasons to do so. For instance:
Amazon has a kind of relationship with Flipkart. The India’s e-commerce company was founded by two former employees for Amazon, namely Sachin Bansal and Binny Bansal. It began as an online book store. It raised an investment of around $2.5 billion from big investors like SoftBank Vision Fund. Before the coming of Amazon to India, Flipkart was envisioned as India’s Amazon.
Even though it remains the largest retail in the world, Walmart is relatively slow in entering online marketplace. As generally accepted, India is an untapped market. It is projected to grow rapidly in the coming few years. Therefore, India is an important market for any business that is targeting global footprint. India can be an important battleground for online marketplace that wants to compete with the major international competitors, such as Alibaba.
What Does Acquisition of Flipkart Mean?
It is no wonder that acquisition of Flipkart is a strategic step for both Amazon and Walmart. Acquiring Flipkart means dominating major slice of this market. Take a look at what the economists say:
- If Amazon acquires Flipkart, they will control almost 80% of the online retail market in India. No other marketplaces will be able to compete with them.
- By joining with Amazons, Flipkart will enjoy double market shares, strengthen its supply chain, and increase efficiency.
- Walmart has been eyeing for Flipkart during the last few years. India is a potential market in the race to dominate the online retail industry. The acquisition of Flipkart will be its biggest investment in online marketplace and a major step in boosting its global presence.
However, both companies have their own problems in entering India’s market. Walmart seems to have a problem with the local regulation, which prevents US-based company from having a significant presence in India. It has to stay away from direct retail and had messy partnership with an Indian firm, namely Bharti Enterprises, which ended in 2013.
On ther other hand, Amazon has to go under close inspection by local authorities. As mentioned above, acquisition of Flipkart will make both companies totally dominate the online market. So, do you think either of the companies will make a deal in the near future?