18 Aug Son vs Bezos at India’s e-commerce market
*_The Hindu Editorial -*
Flipkart’s announcement that SoftBank Vision Fund, a private equity fund backed by Japanese billionaire Masayoshi Son, would take a stake in the company has energised India’s e-commerce space. The investment is widely reported to be about $2.5 billion, and the deal would leave Flipkart with a war chest of $4 billion in cash to sustain its operations. The move is seen as the Japanese billionaire’s response to the increasing domination of India’s e-commerce space by the American giant Amazon. Amazon chief Jeff Bezos claimed in April this year that his company had become India’s fastest-growing e-commerce company. He also said that Amazon plans to increase its investment in India. A number of private data sources have confirmed since then that Amazon, since its launch in India in 2013, has either matched or surpassed Flipkart’s performance on various counts. On the other hand, it is well-known that Mr. Son’s initial investment in Snapdeal, an Indian e-commerce venture, was far from successful. In fact, in May this year, SoftBank recognised losses of over $1.4 billion on its investments in Snapdeal and Ola. Mr. Son’s attempts to merge Snapdeal with Flipkart to create a larger rival to take on Amazon also failed to materialise last month. Yet the allure of the Indian e-commerce market is hard to resist. E-commerce is projected to grow at a rapid pace given the large potential in a country where people predominantly shop at traditional bricks-and-mortar retail stores.
The strength of Mr. Son’s investment pursuits has been doubted for long. But he has also picked super-winners such as Alibaba that have more than compensated for his losses. For now his investments in the Indian startup space have failed to take off, but he may still be counting on India to deliver his next big super-winner. With Mr. Son’s financial backing Flipkart will be looking to regain the ground it has lost to Amazon. Mr. Bezos, on the other hand, will be keen not to lose out to a rejuvenated Flipkart the way he lost the Chinese market to Alibaba. Meanwhile, other Amazon rivals too have entered the e-commerce fray in India. Microsoft, Tencent and eBay have also invested in Flipkart this year. Alibaba has invested in Paytm, the Indian payments company that also offers shopping services. Going forward, more e-commerce companies in India might evolve into similar payments-cum-shopping platforms. Such a strategy would be similar to the buy-and-pay model at the foundation of Alibaba’s rise in China. Notably, Tencent, Alibaba’s rival in China, has even come up with a chat App (WeChat) that lets users shop and pay. Amazon seems prepared for the challenge with the launch of its own wallet service in India. But regardless of who wins this battle, the Indian consumer looks set to be wooed by more competitive prices.