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Amazon-Walmart Tussle Over Flipkart Heats Up E-commerce

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The e-commerce market in India holds tremendous promise. Several e-commerce giants like Amazon AMZN and Walmart WMT are leaving no stone unturned to make the most of it. Interestingly, this has led to fresh contention between the retail bigwigs over the Flipkart deal.

Recently rounds were made that Amazon has offered to acquire a majority stake (60%) in Flipkart to strengthen its footprint in India. The move will help the company to improve its competitive edge against Flipkart - the biggest rival of Amazon in India.

Amazon's recent plan seems to have stemmed from its intention to prevent Walmart from acquiring a majority stake of Flipkart. The company has offered $2 billion as breakup fee to Flipkart for discussing the deal.

However, there lies an antitrust concern with the transaction. The combination of Amazon and Flipkart will create a monopoly in Indian e-commerce market which might not get regulatory approval in India.

Moreover, Walmart is reportedly gearing up to finalize the Flipkart deal in a few days, which can put Amazon's plan in jeopardy.

India Holds Promise

Per the latest report of India Brand Equity Foundation, Indian e-commerce market is expected to reach $200 billion by 2026 from $38.5 billion in 2017. Moreover, the market is anticipated to exceed $50 billion in 2018.

The increasing use of smartphone and internet in the country, courtesy of the ongoing digitalization in the country, is likely to boost the internet user base in the country. Internet users are expected to reach 829 million by 2021, up from 373 million in 2016.

Further, online shopping in the country is expected to reach $135.8 billion in 2018, surging 31% on a year-over-year basis.

Given the viability of the market, several players like Alibaba BABA and Microsoft MSFT have entered the space giving rise to cut-throat competition.

Alibaba's strong efforts to reap benefits from the Indian e-commerce market pose a serious threat to the existing players in the market. The company's investment of $200 million in Paytm Mall has strengthened its position in India. The Paytm Mall is modeled on TMall, China's leading e-commerce platform. Further, the company has also invested in online ticketing platform TicketNew.

Aliababa's further plans to expand business in India. Its payments affiliate Ant Financial has agreed to invest in food-ordering app Zomato. Additionally, Alibaba is likely to invest $250-$300 million in online grocer, Bigbasket.

Amazon in India

Amazon's continuous efforts to bolster its business in India will help the company gain traction in the market. Amazon's e-commerce platform in India has been a big success and it is expected to continue to boost the top-line growth of the company.

The company's efforts to bolster presence in the Indian e-commerce space will position it to become the fifth largest market in the world after the United States, the UK, Japan and Germany.

According to a survey by the market research firm, Forrester, out of 2000 respondents, 80% shopped on Amazon India, while 65% preferred buying on Flipkart.

According to a Business Today report , Amazon India has issued paid up capital of $2.7 billion toward Amazon Seller Services, its marketplace arm. Moreover, Amazon has almost 41 warehouses in India, owns a captive logistics unit and operates a payments arm.

Currently, Amazon sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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