Indian e-retailers are so scared of Amazon that they’re all joining forces

Indian e-retailers are so scared of Amazon that they’re all joining forces

By Shruti Chakraborty May 22, 2014

The race to the bottom is on.

India’s biggest players in e-commerce have seen a flurry of activity this week in their efforts to play defense to Amazon’s overtures on their home turf. Amazon has been scaling up its India operations, such as next-day delivery and a slew of TV ads.

On May 20, New Delhi-based e-tailer SnapDeal announced it has raised $100 millioneBay led a round of funding just three months ago. Then today came a deal between Flipkart, India’s largest internet retailer, and Myntra, a leading fashion and accessories e-tailer. The two companies declined to reveal details, only saying that it’s a 100% acquisition of the latter and that the two will operate independently.

And yet nobody in this space is really making any money yet, which—as anyone who has read Amazon’s playbook know—can be a losing proposition against the giant. Indeed, the Indian market is now characterised by loss-making rivals racing to the bottom (in terms of margins) hoping the gigantic potential makes it worth their while.


However, today’s acquisition will strengthen Flipkart’s position in fashion and lifestyle, a space that typically affords higher margins and hasn’t been a traditional strength for the Bangalore-based company; Flipkart was founded in 2007 by two former Amazon employees and now sells more than $1 billion worth of merchandise each year.

Reuters quoted unnamed sources who pegged the deal at $300 million.

“Most of the previous M&A deals have been distress sales in Indian e-commerce. Myntra didn’t need to do this and could take on funds from outside. We chose to do this to create a larger company,” Sachin Bansal, co-founder and CEO of Flipkart, says. The companies will both continue to sell fashion and lifestyle products online. “From Flipkart’s point of view, this makes sense because fashion is a fragmented space and customers want to buy on multiple platforms,” he added. “We feel that in a few months the fashion category could become the largest category on Flipkart,” he said.

Retail advisory firm Technopak forecasts that the e-tailing market will grow to at least $19 billion by 2019. By then, fashion and lifestyle will have a 30% share of the market and will be a category as big as $5.7 billion.

The combined entity expects to jointly control 50 percent of all online fashion retail in India. For the year ended March 2013, Flipkart posted a loss of Rs 281.7 crore ($48.6 million), while Myntra’s losses for the same period was Rs 134.7 crore ($23.2 million).

India’s online retailers have been swallowing each other up. Fashion retailer Zovi bought Inkfruit in early 2013, Flipkart bought electronics retailer Letsbuy, bought Urban Touch in 2012, Myntra bought lifestyle apparel brand Sher Singh and bought jewelry portal Stylishyou.

Amazon entered the Indian market in June of last year and has invested actively with expansion into more than 20 categories including fashion and lifestyle products. But it’s not just the behemoth’s threat propelling consolidation. Says Raja Lahiri, partner for transaction advisory services at Grant Thornton: “A move like this by larger players like Flipkart is driven by the urge to build scale as well as acquire niche segments of the market and not necessarily triggered by the presence of competitors like Amazon.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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