While Walmart has been holding talks to buy majority stake in Flipkart, market was abuzz with reports of Amazon likely to make a bid for the rival e-commerce company.
Reports claimed that initial level talks are being held to discuss about making such an offer in a bid to end the competition in the market. However, industry insiders felt it was too early for a top-level consolidation in the e-commerce market, which is still in its infancy.
“Amazon can do it. It has the muscle power to go for it. But the question is whether it will go for it,” said an industry expert.
Amazon has burnt around $2 billion in the market and is committed to spend another $3 billion in India. Flipkart too has burnt around $6 billion towards reinforcing its position in the market. As per the reports, Walmart wants to pick up 55 per cent stake in the company and is valuing Flipkart at around $20 billion, much higher than the $15 billion valuation during the latest funding round.
“Whether Amazon would want to make an offer better than this to buy a loss-making Flipkart is the question,” experts said.
However, merging Flipkart with Amazon will eliminate competition, which has been making the US e-commerce giant burn money on discounts and offers. Amazon can use the funds to build itself and the market.
Moreover, entry of Walmart into the Indian market, by joining hands with its rival, will put Amazon in a tougher situation. It would probably want to avoid taking on its American rival in the Indian market.
Walmart finds this as an opportunity to own a pie of the growing e-commerce market in India. It does not want to repeat the mistake of being a late entrant in the American e-commerce market.
“But for Flipkart, merging itself with Amazon at this stage will be like leaving a lot at the table. The e-commerce market is still in its early years.
Associating with Walmart will give Flipkart a much-needed fillip to pursue growth. A retailer like Walmart will bring in money, efficiencies, technology and capabilities that can further strengthen Flipkart’s position. It might not want to leave the game this early,” said Ujjawal Chaudhry, engagement manager, e-tailing, RedSeer. “Further, the industry has not grown to a phase where it can start thinking about a consolidation of this kind,” he added.