Flipkart Buys Out Snapdeal. But, Can it Outsmart Amazon?

The pact seems to be an outcome of a complex politics, working in layers, in business with the ultimate motive of keeping Amazon at bay
Flipkart Buys Out Snapdeal. But, Can it Outsmart Amazon?
Image credit: Entrepreneur.com

You can term it a business drama of sorts which reached its climax on Wednesday morning. Finally, Flipkart succeeded in winning over Snapdeal, albeit on the latter's terms, offering $950Mn.

Regarded as the largest acquisition in the Indian e-commerce space, it has put to rest speculations that have become rife in the past couple of months.

On the Flipside

But a question that lingered in everyone's mind is why would Flipkart buy Snapdeal — a company that has already been scrambling for twigs to stay afloat. What garnered Flipkart's interest is Snapdeal's investor Softbank. Softbank has been pushing for the deal to happen for a long time now.

The investment group is also reported to be in discussions to put in money into Flipkart for buying out Snapdeal. Earlier this year, Softbank was reported to have suffered a loss of $1.4 billion in India because of its major investments in Snapdeal and Ola.

Plan B

The deal had moved on to the final deck when Flipkart made its first offer of $550 million against Snapdeal's asking offer of $1 billion. But what surprised most was Snapdeal's rejection. Not the one to back down, Snapdeal's founders set out their Plan B with Infibeam. This was until Flipkart bounced back with a revised offer that promises an amount closer to Snapdeal's initial demand.

An Eye on the Archrival

A casual read will give one the impression that finally, Snapdeal has clinched the deal. But on pondering over the recent development, it becomes clear that the pact is actually an outcome of a complex politics, working in layers, in business with an apparent motive of keeping Amazon at bay.

This brings us to the politics of business. With Amazon's growing stronghold in India and its ability to wither losses, they have been marked as Flipkart's arch rivals for long. Flipkart, too, has had its fair share of run-ins to troubles with its valuations brought down by 38 per cent by Morgan Stanley's mutual fund. The Indian e-commerce giant then moved on to make a few strategic acquisitions, bringing on board Jabong and subsequently Myntra. All these and now the recent pact has been signed with the ultimate motive of restricting Amazon's spreading roots in India.

Racing Neck-and-Neck

Claims of Flipkart outselling Amazon and vice versa have run thick and fast in the past. Earlier this month, Flipkart also said Amazon was taking the lead in the grocery section of the e-commerce market simply because it has not yet forayed into the section.

Talking about foraying into different sectors, while Flipkart is looking into Fintech with PhonePe if reports are to be believed, Amazon is now bidding to buyout Snapdeal's Freecharge.

Is Amazon Amazed?

When Amazon entered the Indian market, Flipkart sat up and took notice. It came as an experienced, big brother in the segment -- one that was fast to acquire not just customers but also sellers on its platform and one that can cut its way to the top in a new country with its absolute money power. Not to forget, Jeff Bezos' genius mind and the great technology that they are working on at an international level, giving Amazon a leverage, which only it can enjoy.
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