Flipkart acquires eBay India to further its winning chances against Amazon

13 Apr

By Anmol Sachdeva, The Tech Portal

Flipkart had been plagued with fundraising troubles for the past couple of years, but all of its problems have come to an inevitable end today. The homegrown e-commerce giant’s coffers have been flooded with $1.4 billion and a cohort of major technology partners, at an undercut valuation of 11.6 billion (lower than $15 billion in the previous round).

The leading e-commerce company has not only bagged an investment from China’s Tencent and Microsoft but also from eBay Inc., which is reported to be close to $500 million. The financial details for each investor haven’t been detailed in the official statement for the company’s largest funding round. It has, however, been touted as a “landmark deal for Flipkart and for India” which reaffirms the company’s tech prowess and potential.

Commenting on the same, Flipkart co-founders Sachin and Binny Bansal said:

We are delighted that Tencent, eBay and Microsoft — all innovation powerhouses — have chosen to partner with us on their India journey.

But, there’s another facet to this rather massive investment. Accompanying the funds is also a ‘strategic commercial agreement’ that has been signed between eBay and Flipkart. It sees that latter finally taking over an operation which should’ve bigger than itself due to the name attached to it. If you couldn’t guess the hint I just dropped, then you should know that eBay is selling its Indian operations to the Flipkart Group as part of the deal.

Flipkart will now own and operate the eBay.in business under its own umbrella, but the website will continue to operate independent of the e-commerce giant’s. Upon the closure of this transaction, expected later in 2017, Flipkart would take over the buyers selling on eBay India’s platform. It will enable the homegrown e-commerce giant to add even more buyers to its arsenal, giving it an upper hand when compared to its fiercest rival Amazon India.

Also, the two e-commerce giants have signed an exclusive cross-border trade agreement to make each others’ inventories available to international customers. Now, Indian masses will be able to gain access to a variety of global inventory on eBay, while foreigners will have access to Flipkart’s Indian inventory. This is a significant opportunity for sellers to make their mark in the global market, which will make Flipkart an international brand as well.

Speaking on their partnership, Devin Wenig, President and CEO of eBay Inc said:

The combination of eBay’s position as a leading global e-commerce company and Flipkart’s market stature will allow us to accelerate and maximize the opportunity for both companies in India.

This addition to the company’s portfolio is pretty significant and is being applauded by analysts across the globe. This will enable the homegrown giant Flipkart to maintain its reign at the pole position in the booming e-commerce market of India. It will particularly help it keep its competitor Amazon India at bay, while also adding to the product range and diversity of the same. The former already leads in the electronics (smartphones) market by a rather large margin, where Flipkart owns a 57 percent share. Snapdeal is currently out of the scene, even though it is aiming to be profitable in the next two years, as SoftBank is planning its sale to Flipkart for as low as $950 million.

Thus, Flipkart may soon become this e-commerce giant with Myntra, Jabong, PhonePe, eBay and even Snapdeal under its umbrella, which is an unmatchable combo. It’ll be particularly helpful for the homegrown giant in its march against Amazon, who is gunning to court users with other services like Prime shipping and Prime Video. According to Forrester research, Indian e-commerce market is expected to reach $64 billion by 2021, growing at a five-year CAGR of 31.2 percent