Indian E-commerce in a nutshell
A true take on Flipkart, Snapdeal and Amazon.
May 30, 2017
The period of time starting from 2007 to 2015 was truly a golden period for startups all aroud the globe.We saw the founding of Flipkart in 2007. Uber was incorporated in 2009 and the consumer internet space was changed forever. Snapdeal pivoted from a coupons business to an online marketplace in 2011. Indian Startups such as Zomato, PayTM, Oyo and Shopclues brought in disruption in their various areas of business.
However the real problem is the money.
The coming of big names in venture capital all around the world saw a massive rise in funding and valuations. Tiger Global has placed a bet of more than $1 billion on Flipkart. Softbank pumped in more than $700 million in Snapdeal at a valuation of $6 billion, only to scurry around for buyers at approximately one-sixth of that. Softbank's ex-President and COO,Nikesh Arora, displayed naïve courage and placed bets on Ola, Housing.com and Oyo. However, he quit just because Masayoshi Son, founder of Softbank Corp. intended to stay at the helm for about a decade more.
Let us focus on the evolution of e-commerce in India. Flipkart started off as an online store for books, and slowly and steadily kept adding higher margins categories. Tiger Global's Lee Fixel, fascinated by the sheer size of opportunity in India, placed a massive bet on Flipkart. Snapdeal also found a huge patron in Nikesh Arora of Softbank and started the price war for the higher discount. Each one was riding high in their own ivory tower. They were celebrated as Gods. Massive valuations, swanky offices, huge pay packages, employees from the best schools in India and abroad. Everything seemed to be working out for them.
The entry of Amazon into India in 2013, with a huge war chest of $5 billion, was the turning point for all e-commerce startups in the country. They started to become more serious into their business. Amazon re-shaped the e-commerce industry in India, by offering much higher discounts, a very reliable and likeable consumer support, and a very efficient return policy. Against approaching India via the inorganic way, i.e. to acquire an Indian company and build its operations, Amazon entered India via the organic way, i.e. to setup their own operations under the original company name.
Amazon always believed in the philosophy "Make versus Buy" and they have fulfilled that.
Flipkart's and Snapdeal's funds had dried up and they were looking for more funds. Amazon was steadily moving up in rankings in every respect. The brand name and trust associated with Amazon saw customers moving towards it. Also, lucrative offers like the Prime membership gained many customers. Jeff Bezos seemed ruthless to conquer India.
After playing catchup with Snapdeal for a year, Amazon grabbed the second spot, while Flipkart was still numero uno. Then in April of this year, Flipkart closed a massive funding round of $1.4 billion from Microsoft, Tencent, and eBay, and as part of the deal, Flipkart acquired the India arm of eBay. After this funding round, came the stunning news that Flipkart may be in the process of acquiring Snapdeal for $1 billion. This wave of consolidation brought about a much needed change in the startup ecosystem.
In this article, I have primarily focused on e-commerce in India. And that too about Flipkart, Snapdeal and Amazon in a nutshell.