Snapdeal’s woes lift Amazon’s prospects in India

Wednesday 09th August 2017 06:41 EDT

The talks over the sale of Snapdeal to Flipkart did not materialise and Kunal Bahl, co-founder of Snapdeal, in an e-mail to its remaining 1,200 staff said, “The opportunity of e-commerce in India is immense, and the surface . . . has barely been scratched.” Even as he wrote, however, Softbank’s new $93bn Vision Fund was proceeding with talks on a large-scale investment in Flipkart, having lost hope in Snapdeal’s ability to compete with its homegrown rival and Amazon’s Indian subsidiary.
Facing no prospect of further investment from its Japanese backer, Snapdeal’s senior management is preparing for life in a drastically slimmed-down entity, with perhaps a 15th of the nearly 9,000 employees at its peak.
With Snapdeal’s elimination as a contender, analysts say the fight to take the top spot in Indian e-commerce - potentially one of the global sector’s most valuable prizes - has been narrowed down to Flipkart and Amazon India.
Even with only 17 per cent of internet users buying online, e-commerce sales in India hit $16bn last year, and are on course to reach $63bn by 2021, according to Forrester Research. With Amazon already having committed $5bn of funding to its Indian unit since its 2013 launch - and with Flipkart flush with funding from global groups including Microsoft, Tencent, eBay and perhaps now SoftBank - the second phase of this fight may prove still more intense than the first.
“This is still one of the most attractive e-commerce opportunities in the world - a large market with a large population, growing in a way that others are not,” says Devangshu Dutta, chief executive of Third Eyesight, a consultancy.
Sachin and Binny Bansal, Flipkart’s founders, could be forgiven for having mixed feelings as they watch Bahl’s efforts to revive his ailing business. While Flipkart is in a far stronger position, the Bansals themselves have stepped back from operational control at the behest of Tiger Global Management of New York, their lead investor. Since the appointment of Kalyan Krishnamurthy, a former Tiger executive, as Flipkart chief executive in October, analysts have noted an improved performance, helped by a successful expansion into fashion retail.
But while Flipkart still accounts for a bigger share of online sales than Amazon India, the latter is steadily catching up, says Satish Meena, an analyst at Forrester. “Amazon has not been in a hurry to overtake Flipkart, but the lead is shrinking and now it’s just a matter of time,” he says, estimating that Amazon will pull ahead in the next six to nine months.

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