What the Flipkart funding and Amazon investment mean for e-commerce sector

What the Flipkart funding and Amazon investment mean for e-commerce sector

By Nikita Peer

  • 01 Aug 2014
What the Flipkart funding and Amazon investment mean for e-commerce sector

The twin announcement of Flipkart’s big funding and Amazon’s going one up with a mega investment plan has shaken the e-commerce space. On the positive side it would expand the infrastructure, talent pool and build customer confidence in buying things online; on the flip side not many peers would survive to see the benefits for their own ventures.

Let’s look at it from two viewpoints—one for horizontal players and the other for vertical e-tailers.

Horizontal players


Besides Amazon and Flipkart the horizontal e-com space is occupied by names such as Snapdeal, eBay, HomeShop18, Tradus, ShopClues among many others including some which are alive just in name.

Snapdeal already has a big alliance with eBay and has shown promise in raising more money while HomeShop18 is looking to go public in the US.

Tradus is a peculiar case as it is part of Ibibo, a Naspers company. In this case its parent itself is now a huge backer of Flipkart.


ShopClues, which is backed by Helion Venture Partners and Nexus Venture Partners and trying to leave behind its past when one of its co-founders got mired in a insider trading case in the US, could face challenge in getting new or even existing investors to back with more money as the market gets polarised at the top.

Sanjay Sethi, CEO of ShopClues.com, did not comment specifically on the company’s strategy in the market after the big announcements this week but he opines Flipkart could either spend a lot of capital to compete with other horizontal players through advertisements or freebees to get customers who were otherwise buying from its peers or spend significant capital in aligning with other players resulting in several mergers.

“Price war among the two biggies look inevitable and the customer is going to benefit from it,” added Manu Agarwal, founder and CEO, Naaptol.com. Naaptol started as a comparison-based social shopping portal but changed track a couple of years ago to foray into teleshopping and e-commerce. It is backed by names like NEA and Canaan.


Active angel investor Rehan Yar Khan, who is currently involved with early stage fund Orios Venture Partners, says it will be tough for other horizontal players to survive while there could be acquisitions of category specific players.

One area of key importance for both Amazon and Flipkart would be mobile shopping experience. Indeed, Flipkart has said it is looking to boost its mobile shopping resource significantly.

One player which is specifically focusing on m-commerce is One97 Communications’ Paytm.


Vijay Shekhar Sharma, founder & CEO, One97, feels that e-commerce has arrived at a stage where only players who have over 10 million users and a sizable gross merchandise value (GMV) can survive. “Players who are big here will just get bigger and there is no room for newer players,” Sharma said.

Commenting on battling competition, Sharma said, “The next big thing within the space is mobile commerce and large players still don’t have a huge mobile play. Fortunately, we have been constantly investing in building better technology that has helped us attract 91 per cent organic users without even allowing cash on delivery.”

He added: “The biggies will have to unlearn everything to build a scalable platform on mobile. They could attract users by providing freebies but consolidation in this space is likely to be quite similar to what happened in telecom a few years ago.”


He cited the case of Japan’s NTT Docomo which came in as a partner for Tata Teleservices and positioned as a low-cost player but is not able to sustain itself. The Japanese firm is exiting the Indian JV.

That leaves eBay, one of the oldest players in town, which in effect created the marketplace model in India. It is to be seen if it maintains a status quo or rides on Snapdeal in the future in India.

Vertical players

The real action would be in the vertical e-tailers. While some would continue to remain in the business as has been seen in mature markets too, others would hope for an acqui-hire by one of the biggies.

These may include players in verticals such as baby products, where FirstCry has built a strong position though BabyOye is another significant VC-backed venture or lifestyle, furniture & furnishings and grocery among others.

“If this funding is used for price war and for monopolistic reason, and not for synergy tendencies then that will have adverse implication on the e-commerce evolution in India,” Praveen Sinha, co-founder and MD, Jabong, said.

Jabong is backed by Rocket Internet, which is known to create e-commerce clones of successful ventures only to sell them. Besides Jabong, it has a string of other ventures in India, including FabFurnish.

However, Sinha said the investment is a good indication for the sector overall and will give strong message and a sense of confidence to other investors in the country in the e-commerce market.

“It will encourage interest from other investors who may have rejected a startup a year ago citing uncertainties in the market,” he said.

There is a flip side too, however, to this argument. Investors could see no light at the end of the tunnel for the newer entrants now.

Most players in the vertical space claim and at least on the face believe that they can stand up to a horizontal marketplace player.

“In the home and lifestyle space consumers buy online only due to the presence of variety and not on the basis of discounts. It requires lots of differentiated experience and speciality to build this vertical business. The products that we sell are quite bulky and require specialised delivery service,” said Pepperfry’s founder & CEO Ambareesh Murty.

(Edited by Joby Puthuparampil Johnson)

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