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In India, Flipkart Hunkers Down for Battle with Amazon

Reports of possible Snapdeal acquisition reflect a maturing market

May 31, 2017 | Retail & Ecommerce

India’s ecommerce sector is in the midst of a realignment, due to aggressive moves into the country by giants Amazon and Alibaba. Amazon has pledged to spend a total of $5 billion in its India ecommerce operations, while Alibaba is making its presence felt through investments in ecommerce and digital payments firm Paytm.

But there’s still one homegrown firm that’s hanging on: Flipkart.

The online marketplace is gearing up to defend its home turf, one that will consist of 180.1 million digital buyers in 2017, eMarketer estimates. Flipkart will be aided by an April funding round led by Tencent, the Chinese firm that runs popular messaging platform WeChat, that put $1.4 billion in its coffers.

Flipkart is also in negotiations to acquire Snapdeal, another locally founded ecommerce marketplace that has served as a smaller rival, according to several local media reports. Snapdeal was once a major player in India’s ecommerce sector, but after Amazon entered the fray it began to suffer. In mid-May, Deal Street Asia reported that Flipkart had made an informal all-stock offer of $1 billion for Snapdeal.

Top 10 Mcommerce Apps Among Android Users in India, Ranked by Reach, Sep 26-Oct 2, 2016 (% reach)

This week brought news that Snapdeal had received INR1.13 billion ($17.5 million) in an emergency funding round from existing investor Nexus Venture Partners, as well as company founders Kunal Bahl and Rohit Bansal. The new infusion will extend Snapdeal’s operating timeline, perhaps allowing it to nail down the details of an acquisition by Flipkart.

Regardless of whether the rumored Snapdeal acquisition goes through, Flipkart is making other moves to court India’s digital buyers. The company is planning to introduce consumer packaged goods (CPG) on its platform sometime in July or August, according to a recent report in The Economic Times. The new product category is designed to mirror Amazon’s Prime Pantry program, which sells similar items while offering customers a flat shipping fee and product discounts.

This year is one that’s set for increasing competition between Flipkart and Amazon, now India’s two largest ecommerce marketplaces. Up for grabs is the company’s growing ecommerce sector. eMarketer estimates that retail ecommerce sales in India will total $23.42 billion this year and grow to $47.45 billion by 2020.

—Rahul Chadha

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