Key Reasons For Why Amazon Wants Flipkart

Race For Flipkart

While world’s largest retailer Walmart moves to the final lap of a in a $12 billion deal to buyout Flipkart, a formal offer from rival Amazon to pick up a 60% stake makes matters the biggest deal in India’s e-commerce market. According to a report by CNBC TV18, Amazon has made a formal offer to pick up a 60% stake, which is likely to be on par with Walmart’s bid for the Indian e-commerce major.  Further, billionaire Jeff Bezos-run Amazon is also seeking a non-compete agreement with Flipkart’s founders, sources told the channel. According to the currently available details, Amazon is also offering a breakup fee of up to $2 billion. We take a closer look at why Amazon is keen on buying out India’s Flipkart.

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Ploy To Block Walmart

The offer by Amazon could be a ploy to block Walmart from bringing its expertise in logistics and supply chain management to Flipkart, Reuters reported citing sources. Interestingly, Flipkart’s board had already seriously considered Walmart and Amazon as potential partners, but ultimately decided Walmart, as a deal with Walmart would mean lesser regulatory hurdles due to its lack of India presence, Bloomberg reported recently. Further, major investors in Flipkart including Tiger Global, South Africa’s Naspers as well as founders Sachin and Binny Bansal prefer Walmart over Amazon, CNBC TV18 report said.

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Expand India Market

The development of a potential Flipkart-Amazon deal comes at a time when Amazon’s top boss Jeff Bezos has planned to invest upto $5.5 billion in the year. Jeff Bezos noted recently that Amazon.in (Amazon.com’s India business) is the fastest growing marketplace in India, and the most visited site on both desktop and mobile, according to comScore and SimilarWeb. Currently, Amazon.com holds 27 percent of India’s $30 billion e-commerce market. A potential deal with Flipkart could give Amazon a bigger pie of India’s growing e-commerce market.

Tackle Heightened Competition

While Walmart looks to correct it’s China mistake by betting on India’s Flipkart, wherein it initially bought an unprofitable, second-tier online marketplace only to exchanged it five years later for a stake in JD.com according to Bloomberg, Amazon looks to go all out to retain its higher online market share. While Walmart is already the world’s largest retailer, the firm faces heightened rivalry from Amazon as consumers migrate the online channel. Notably, according to a report by Assocham and Deloitte, the digital commerce market in the country is expected to cross USD 50 billion in value by the end of 2018. “There isn’t another country with this kind of an opportunity. India may not be a big deal now, but it’s the future opportunity that Walmart and Amazon are eyeing,” Satish Meena, a New Delhi-based senior forecast analyst at Forrester Research Inc told Bloomberg.

 

 

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