eBay 2.0: E-commerce major trying to play catch-up in Indian market

With Flipkart deciding to pull the plug on eBay India on August 14, 2018, this will finally end the era of one of the earliest movers in the country’s online retail space. The San Jose-headquartered company, right after Walmart’s decision to acquire a majority stake, in Flipkart, on May 9 this year, had announced its plan of trying its luck in the country once more. But, the market today is not what it was 14 years ago when eBay entered the country. 

Back in 2004, when eBay forayed into the country with the acquisition of online auction site Bazee.com, the laws around shopping online were still fuzzy. Avnish Bajaj, the then chief executive officer (CEO) of Baazee.com, paid the price when he was arrested over the listing of smutty content on the website by a user. Despite this, the market was wide open as the concept of buying products online was just taking shape. 

eBay clearly had an early mover’s advantage which the company failed to capitalise on, eventually losing out to players who entered the space later. Finally, it ended up in Flipkart’s lap bruised and battered, only to be carted off.

In an email to employees on Monday, Kalyan Krishnamurthy, CEO of Flipkart, announced that eBay India would be shut and in its place the company would launch a new platform for used and refurbished goods under its F1 Info Solutions & Services subsidiary. eBay’s dream of riding on the coat-tails of Flipkart’s success in India to power cross-border 

e-commerce for its global audiences, a last resort of sorts to remain relevant in India, has also failed.

“eBay came to India after it acquired Baazee 14 years back. Time was lost in trying to find a foothold. I am not sure it was clear or committed to the opportunity in India as this country had its own set of challenges — regulation, technology adoption, and access,” said Sanjay Anandaram, a venture capitalist and start-up mentor.

While $50 million for Baazee back in 2004 was a lot of money, subsequently, eBay’s appetite to invest in India was wanting. Over the decade of Flipkart’s existence, the company raised $10 billion (with the completion of the Walmart deal) and still remains a loss-making firm. Similarly, Amazon which entered India in 2013, has so far invested close to $5 billion, but in the case of eBay, such a large commitment was clearly lacking.

eBay CEO Devin Wenig in an interview with ReCode in April 2017, reiterated that investments in India’s e-commerce space were not rational, being one of the biggest reasons the company decided to pack up its India unit to Flipkart and invest in the company rather than grow independently.

“The market has been overheated, not rational, and probably over-invested in too many companies. It has been a very unhealthy e-commerce dynamic for a few years. The conclusion was, it was going to have to consolidate, that fewer parties were probably a good thing for the market,” Wenig had said.

While it is true that one needed and still needs a big appetite to compete in India’s hungry e-commerce space, the flurry of investments only began flowing after 2014. For the first decade, eBay simply did not focus on becoming a dominant player in India, unlike how its peers who set up shop in the subsequent years felt, according to Devangshu Dutta, chief executive at Third Eyesight.

“It comes down to the importance you give the market. Flipkart’s focus was on winning the Indian market and Amazon entered India with the strategic mindset that this was an important market. Whereas India did not really figure very high on eBay’s plans, it saw India as another market to be in,” added Dutta.

Moreover, with eBay’s global business beginning to falter, the company’s India unit paid the price. The company cut employment, and scaled down its business twice after 2014. While it continues to have a development centre here, one can say eBay has failed at even using India’s technology prowess which other retailers such as Amazon, Walmart, and Target have excelled at.

Even now as eBay plans a second stint in India or what Wenig calls ‘re-platforming eBay’, its focus is on cross-border retail, which is still only a tiny chunk of the country’s e-commerce potential. Moreover, the US online retailer will have to once again build up a base of retailers who can list products to sell on its global platform. On the consumer front, players like Alibaba and even Amazon are already making strong headway in making it easy for Indian consumers to shop for products from overseas retailers.

“The anticipation is that we will come back into the Indian market, both through an import and an export strategy,” said Wenig in an investors call, announcing the company’s second quarter results this month.