Flipkart is an Indian e-commerce company. It has been suffering huge losses and is now trying to revive itself.
Flipkart is losing big. Flipkart, which is known as the “Amazon of India,” has announced a funding round of $1.4B from bigwigs like Microsoft, eBay, and Chinese investment firm Tencent. It is important to note that Flipkart lost $800m last year. Running an e-commerce business in India is not that easy. Even it’s key competitors, Snapdeal and Amazon India, lost around $450m last year. So, if an online business in India is so risky, why do people invest in it? They do it in the hopes of scaling up. You can see the example of Amazon which owns 43% of all U.S. online retail sales. So if you aim to succeed, you must spend big. India has one of the world’s fastest growing, almost $48B online retail market. That is why investors are investing money into marketing and logistics, to survive competition and get ahead. Although things haven’t been looking up for Flipkart recently, this trend won’t last forever. The compay is trying to beat Amazon India. It has managed to collect $4.65B over several rounds of funding. Bezos from Amazon has allocated $5B in Amazon revenue. But, Flipkart has many strategic advantages in the latest round of funding. This includes purchasing eBay’s India business and arranging the required capital to buy competitor Snapdeal. Microsoft and Tencent are also supportive of Flipkart to prevent Amazon’s growing influence from spreading even more. Flipkart’s acquisitions of Jabong and Myntra were logical because as they allowed Flipkart to get into fashion retail, which was a weakness of Flipkart. However, acquisition of eBay and snapdeal are not likely to benefit Flipkart as they are horizontal players. It already has a very big customer base, bigger than that of snapdeal and eBay. So it does not make sense for Flipkart to acquire these two companies. Chances are that the customers of eBay and snapdeal are already customers of it. Snap deal and eBay are already struggling in India. They have been operating on losses since some years. Neither Snapdeal nor eBay offers anything that it does not already have. The company has very little to gain with these acquisitions.
Let’s see how everything pans out for this company and whether it is able to outlast Amazon in the bid to be the number one e-commerce company in India.
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