India's largest e-commerce marketplace Flipkart clawed back market share from rival Amazon, showing steady growth in the nine months to March 2017 immediately after which it raised a massive $1.4 billion round at a valuation of $11.6 billion.
According to Naspers, which is one of the largest investors in Flipkart, the Indian e-commerce firm's market share among the top three players in India grew to around 57 per cent in March 2017 from 45 per cent in June 2016. Part of the increase in Flipkart's market share was on account of reporting sales of Myntra and Jabong since September 2016.
"Competition has intensified in the past year, with Amazon gaining market share in the early part of the year. Flipkart has maintained its leadership position, with recent market share trends suggesting gains," said Naspers, the South African internet investor in a statement announcing its annual results.
The growth prompted Naspers to participate in Flipkart's latest funding round with an investment of $71 million to take its total shareholding in the company up to 16.5 per cent. The South African Internet conglomerate says it is bullish on India's e-commerce space with estimates suggesting it could hit $50 billion by 2020.
Past analyst reports had suggested that Flipkart's market share had remained stagnant through most of 2016, while Amazon was growing by leaps and bounds by clawing away Snapdeal's share of the market. Naspers' estimate shows that Flipkart's market share surged by 5 per cent in just the three months from January to March.
Flipkart is now looking at strengthening its lead over Amazon by acquiring failing rival Snapdeal, a deal which is being pushed by Japanese investor SoftBank. While experts are split over whether the deal makes significant business sense for Flipkart, it seems to be primarily driven to bring Softbank, a long term investor with deep pockets, onboard.
Majority of the $1.4 billion Flipkart raised this year came from Tencent, e-Bay and Microsoft, all seen as strategic investors, essential if the company wants to battle Amazon and Alibaba. By investing in Flipkart, Softbank will be hedging its bets in India's e-commerce space, as it is already the biggest shareholder in Alibaba.
While Flipkart is showing gains, Amazon too says its business grew by 85 per cent in the three months that ended March 2017 when compared to the corresponding quarter last year. In a recent interview with Business Standard, Amazon India Country Manager Amit Agarwal said that he expected India's e-commerce market to grow by double digits for many years to come.
"The reason I think we're still growing at this pace is customers are shopping more, Prime members are spending more, new customers continue to come to us. Amazon.com at its current scale is still growing at 30 per cent plus, and the US market is 100 times bigger than India," said Agarwal.
India's e-commerce market entered 2017 on a positive note, with the overall market showing healthy growth after a year of cutbacks. The reduction in discounts being offered to customers by e-commerce players in 2016 meant slower growth, but healthy promotions by both Flipkart and Amazon in 2017 has seen a shift in customer sentiments.
Moreover, for India's e-commerce market to hit Naspers' $50 billion target, it will have to grow by nearly three times in the next four years. Amazon has already indicated that investments in India are not going to slow down, Alibaba has begun pumping in money through Paytm and Flipkart is armed with a war chest of $1.4 billion.
To read the full story, Subscribe Now at just Rs 249 a month
Already a subscriber? Log in
Subscribe To BS Premium
₹249
Renews automatically
₹1699₹1999
Opt for auto renewal and save Rs. 300 Renews automatically
₹1999
What you get on BS Premium?
- Unlock 30+ premium stories daily hand-picked by our editors, across devices on browser and app.
- Pick your 5 favourite companies, get a daily email with all news updates on them.
- Full access to our intuitive epaper - clip, save, share articles from any device; newspaper archives from 2006.
- Preferential invites to Business Standard events.
- Curated newsletters on markets, personal finance, policy & politics, start-ups, technology, and more.
Need More Information - write to us at assist@bsmail.in