Here’s what India’s e-commerce war will boil down to

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10-Jun-2016

 

I will keep it short and come straight to the point.

Alibaba will eventually acquire Flipkart, merge it with Paytm, and fight Amazon in India–the world’s most exciting e-commerce battlefield that doesn’t offer any hopes of profitability soon.

Why am I predicting this? It is based on a series of conversations with company insiders and other executives outside the firm, who pointed at the ongoing (often inconclusive) conversations between the people involved.

But behind these hushed talks and intense e-commerce cold wars, an important trend is playing out.

India is today the battlefield for Amazon+Uber versus Alibaba+Didi. It’s America versus China in India. Period.  

Earlier this year, the founders of Ola, Lyft and Grabtaxi met Didi Kuaidi’s Cheng Wei in China, where strategic templates on fighting Uber, the common enemy, were discussed. According to a person present at the meeting, the Uber rivals were assured of a perennial war-chest in terms of funding.

At Amazon, Jeff Bezos’ blue-eyed India head, Amit Aggarwal, has pledged to relocate back to the U.S. only after winning the war against Flipkart and others in the country. As we’d written last year, Amazon has also earmarked nearly $5 bn to conquer the Indian market.

For its part, Flipkart has been making changes after a series of flip-flops that cost market share over last year (also read: 6 charts that tell you about Flipkart’s growth). But the timing of these mistakes couldn’t be worse: Amazon has been breathing down Flipkart’s neck, raising fresh capital at a respectable valuation is near impossible now and lack of consistency in terms of government regulations is not making things any better.

At least until a year ago, executives at Flipkart wouldn’t rule out a potential public listing completely. Now, that possibility is being scoffed at, ruled out anytime in the near future.

For Flipkart, a deal with Alibaba will create a good outcome. It will not only ensure adequate capital to survive the battle, but also bring innovation recipes from Alibaba’s core engine. With this, Alibaba will have a payments play through Paytm, ecommerce play through Flipkart and potentially a logistics arm through another investment.

Don’t even ask where Snapdeal is amid all this. It’s a difficult spot to be in. You’re either number one or number two. Or you’re a nobody.

Coming back to the outcome that awaits Flipkart, the company can still go on, find a middle path, and instead of a complete acquisition, dole out some strategic equity to Alibaba. That’s not a bad outcome either. But it will mean a long, slow burn against a ruthless, fast-moving rival of Amazon’s stature.

Disclosure: FactorDaily is owned by SourceCode Media, which counts Accel Partners among its investors. None of FactorDaily’s investors have any influence on its reporting about India’s technology and startup ecosystem.



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