Flipkart buys eBay! What comes first to our mind? obviously, for some people it will be wow! Undoubtedly we are seeing an Indian giant getting bigger and bigger. But not many of us know that it is just not buying or acquiring the company you still have a lot to do after this. Understanding the market scenario, evaluating the acquisition, specifying future goals of the parent as well as child company and much more. In contrast, there is more to what we see as Flipkart buys eBay and we need to understand that. But how? We aren’t some market gurus or business expertise! In the same way to understand this let us begin with the deal.
Flipkart announced its biggest funding ever. Moreover, it said that it is buying its rival eBay’s Indian operations as it goes even bigger to counter Amazon which is an American ecomm and cloud computing company.
The Rs. 9,000 crores ($1.4 billion) deal is led by China’s Tencent with an investment of $700 million, whereas eBay Inc. contribution is worth $500 million. In addition, eBay has sold its India business to Flipkart. In conclusion, eBay is also receiving stocks worth $200 million of Flipkart. At the same time, Microsoft has also signed a cloud computing software Azure deal with Flipkart and invested $200 million to round off the deal.
Above all Flipkart has now raised a total of $4.6 billion including some other investments which are almost close to Amazon’s $5 billion capital commitment for India. The Bengaluru based company currently records gross annualized sales of over $4 billion. Furthermore, Softbank is also in talks of Investing $1-1.5 billion in Flipkart.
Why The Deal??
Flipkart buys eBay but why? The answer to that is not very difficult. Flipkart’s gross sale was reported to be less than Rs. 2,000 crores whereas Amazon was climbing above Rs. 2,000 crores. This stat reveals the real winner at some point in time. But if one understands the gravity of situation it would be best to say there is no clear winner as the difference is minimal. Amazon is already offering some great features ranging from Prime Membership to Prime Video and its next plan is to switch to the grocery. On the contrary, Flipkart has just raised up to $4.6 billion for advancement. We can say that it will soon launch its own service, as it was invested by Microsoft as well.
The giants always take over the smaller ones. First and foremost reason is to sell your product to their customers. Flipkart will now get a large share of eBay’s customers for its overtaking. No doubt eBay will continue to function as an independent firm a large share of users will shift to Flipkart. Secondly, to leverage the technology. Flipkart owns PhonePe which is a payments app, Myntra and Jabong and many more. Using this Flipkart can sell its product with ease to someone who prefers PhonePe or buys stuff from Myntra or Jabong. This move will also get them new customers.
Third, to get smartest of employees. By this, the company gets updated with some employees who are experienced and helpful. Lastly, to get a new place to sell their stuff. Ironically a person who is looking to buy something while paying a bill using PhonePe sees an advertisement of Flipkart on its page will at least give it a shot!
Fourth, eBay might not be a very popular choice in India but is has huge appeal and its own market abroad. The products available across the eBay platform are more inclined towards foreign production, hence Flipkart would now be able to provide its customers with a more wider range of foreign products which would increase its reach in the Indian market.
Flipkart’s humongous raise will give it enough firepower and strengthen its position as it fights a fierce battle with Amazon. On the other hand, Amazon has allocated $5 billion for the Indian market. As a matter of fact, it has a wide range of offerings from Prime Subscription to Prime Video. However, it prepares to push forward to grocery and food.
In a statement, Flipkart’s founders said "This is a landmark deal for Flipkart and for India as it endorses our tech prowess, our innovative mindset and the potential we have to disrupt traditional markets. It is a resounding acknowledgment that the homegrown tech ecosystem is indeed thriving and succeeding in solving genuine problems in people's daily lives across all of India."
Tencent joins as a strategic investor, bringing experience in linking social networking and ecomm.
"This strategic partnership enables Tencent to participate in the exciting opportunities in ecomm and payments in India. We look forward to helping Flipkart to deliver compelling experiences to users throughout India, and to contribute to the development of the internet ecosystem there," said Martin Lau, president of Tencent who seems to be really happy and positive about the deal.
Flipkart’s valuation has increased in the first place from the previous one which is a boost for the Indian giant. Since it was the first Indian company app which crossed 50 million downloads. Arguably it is also strengthened by various acquisitions like PhonePe, Myntra and many more. This company is growing and growing since 2007 and there is no looking back. We feel that this large investment would be a huge opportunity for Flipkart to get back in lead. To sum up "Flipkart buys eBay" – will make sense in due time but not instantly and Amazon will have to be ready for the war of the online juggernaut.