Is Flipkart ready to take on Amazon in India?

by Shweta Verma    Oct 10, 2013

flipkart

It has gone through its share of ups and downs. But it seems Indian e-tailing giant Flipkart won’t give up so easily. The company recently managed to raise $160 million in another round of funding from a new set of investors - Dragoneer Investment Group, Morgan Stanley Investment Management, Vulcan and Sofina Capital.

According to estimates, the company has been able to mop up a total investment of about $550 million over the last 3-4 years. In a way, this reinstates Flipkart’s leadership position in the Indian e-commerce market. But at the same time it raises a pertinent question: Will all the moolah in its pocket, is Flipkart ready to take on the likes of Amazon and eBay in India? 

At a tipping point

“The Indian e-commerce market is at a critical inflection point and this additional capital will help us expand further,” Sachin Bansal, co-founder and CEO, Flipkart.com was quoted as saying.   

The e-tailing market in India might have been a late starter, but it is now showing signs of growth. According to Internet and Mobile Association of India, e-commerce market in India is expected to grow to $200 billion by 2020.  Experts say that companies like Flipkart have been instrumental in creating excitement for online shopping in India. With its catchy television commercials, easy-to-use services and popular product range, Flipkart has undoubtedly set the ground on fire.  

With the Indian e-commerce market showing signs of taking off, global players have also started warming up to the opportunities here. Amazon recently announced its entry into the Indian market, while eBay has established its third development in Bangalore and plans to hire 1,000 IT professionals by 2016.

Who will grab the biggest pie?

With the entry of global giants like Amazon and eBay into India, experts say that Flipkart will now have to really pull up its socks. “Strategic players like Amazon and eBay will play out a long-term strategy within the constraints imposed on them,” Aashish Bhinde, executive director (digital media and technology), Avendus Capital said in a report in LiveMint. “However, this level of capital does give Flipkart significant firepower to extend its lead to a level that makes it more challenging for Amazon and others to catch up.”

Among the Indian online retailers, companies like Jabong, Snapdeal and Myntra have shown promise and could be in a position to give a tough fight to Flipkart. The model that Flipkart follows requires a large amount of investment and creates huge pressure in managing the logistics at the backend. If any other e-commerce company can find an innovative way of reducing the operational costs, it could be in a more competitive position, suggests an expert.

Apart from the online players, Flipkart also faces competition from some of the brick-and-mortar retail companies that have begun to strengthen their online sales channels.

The game is all set

According to an ET report, the latest funding values Flipkart at over $1.6 billion, or Rs 9,760 crore, which makes it worth more than the total market cap of all 15 listed retail companies, including Future Retail, Shoppers Stop etc. Among brand-led firms, Flipkart’s valuation is comparable with heavyweights such as P&G India and Tata Global Beverages.

If one were to go by these figures, Flipkart is certainly in a strong position at this stage. The company has earlier been through major trouble managing its logistics network, with pressure on multiple fronts including people, technology, inventory and sales. With most factors working in its favour right now, the onus is now completely on Flipkart. The market is waiting to see how the company plans to streamline its operations and work out an innovative business strategy to take competition head on.