E-commerce market: It's Walmart vs Amazon, till Alibaba joins in

Not too long ago, the list of e-commerce companies operating in India was long. Much longer than in many of the evolved markets around the world. Flipkart, Amazon, Snapdeal, Paytm, Myntra, Jabong, eBay and ShopClues were among the must-have names in any e-commerce pecking order. Jack Ma-led major Alibaba has been there too, not just as a top investor in Paytm but also as an online giant about to unleash a war in the promising e-commerce market. 

While Alibaba’s direct entry into the Indian e-commerce market has remained just a buzz for several years, many other compelling names in the list have either been acquired or have lost relevance as fundraising got tough and investors started demanding return on investment. Indeed, the dream run fuelled by marquee international investors is history, and the mainstream e-commerce business in the country is now a race between Jeff Bezos’ Amazon and home-grown Flipkart, founded by Sachin Bansal and Binny Bansal (not related to each other). Analysts believe the two-horse race will now be reinforced, leaving no room for a third player, with the $500-billion Walmart likely to buy a controlling stake in Flipkart. In other words, soon it will be an aggressive all-American war between Walmart and Amazon in Indian e-commerce, just like the two rivals have been fighting in the US market. In case Amazon, which has also been in discussion for picking up a stake in Flipkart, buys into the Bengaluru-headquartered firm, it will be a near-monopoly situation, one that could probably be blocked by the anti-trust body — the Competition Commission of India. 

Estimates suggest Flipkart holds as much as 55 per cent of the Indian e-commerce market while Amazon has cornered much of the rest. The total e-commerce pie is still very small at around $38.5 billion as of 2017. This is a tiny fraction of the Indian retail business valued at over $650 billion. The e-commerce market is expected to grow to $200 billion by 2026, according to projections. From the signals coming from the market, there’s hardly any doubt that the two companies spearheading the show would be Amazon and Walmart. At least, till Chinese biggie Alibaba decides to join the battle. 

At this point, Walmart and Flipkart are believed to be in the final stages of negotiation on who keeps what stake and who exits the poster boy of Indian e-commerce. Sources close to the developments pointed out that Walmart, which usually bets on deep discounts, is now willing to stretch its limits to buy a controlling stake in Flipkart. The Bentonville-based brick and mortar giant knows that India will be its next battlefield to take on Amazon, and Flipkart is the best route available for that. Not a surprise then that Flipkart is being valued at a premium, at around $18-20 billion, just months after many rounds of mark-downs in a somewhat depressed market. And, Walmart may pay as much as $12 billion for a majority stake in the Bengaluru-based company. Some have argued that it’s an illogical price to pay for Flipkart, which has raised a little over $7 billion of funding from international investors in more than 10 years. But, the other big player, Amazon, has also made lofty commitments — an investment of $5.5 billion for the India market in less than five years.

That explains the Indian focus of big international chains, blurring the line between online and offline. As Brett Biggs, executive vice-president and chief financial officer of Walmart Stores, pointed out recently, “We plan to allocate more capital to e-commerce, technology, logistics, and allocate less to new stores….” That may even mean Walmart dropping its multi-brand retail ambition in the India market, focusing all-out on online business and its targeted competition with Amazon. Other e-commerce companies may still be around, perhaps in niche areas such as fashion, furniture and lifestyle, but they are unlikely to emerge as significant players in a market controlled by two powerful brands.