With SoftBank Confirming Flipkart's Buyout, is this the End of an Era For Indian ecommerce?
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Flipkart, the first home-grown startup company that emerged as the face of India's answer to the Silicon Valley is up for sale. Now, Softbank CEO Masayoshi Son has confirmed that world's largest brick and mortar retailer Walmart Inc will pick up a majority stake in the biggest e-tailer in India.
While it may make all the business sense for Flipkart owners Sachin and Binny Bansal to sell the business that captures a market of 1.3 billion people, the question arises if this is what will be the fate of every startup that India produces.
Since its inception in 2007, Flipkart has been looked at as the most illustrious pioneer among Indian businesses for the youth to get inspired to take the tough path of entrepreneurship. Sachin and Binny Bansal have been the blue-eyed boys of the Indian startup ecosystem and rightly so as they built an ecommerce giant valued at a whopping $20 billion as of today from what started as an online store for selling books.
Flipkart today employs 33,000 people and has been the inspiration for thousands of college-goers and passouts to start their own technology business. With Flipkart at the brink of being sold out to an international giant, it makes one wonder if Indian startups will ever grow to sail through to become India's Infosys. the Tata Group or the Reliance Group.
An exit with a big margin is any investor's dream. But for entrepreneurs, the dream is to make businesses. In the case of Flipkart, the company started out as the first success story that soon became an example for any and all technology startups that emerged out of India. With Flipkart soon to be engulfed, the Indian startup tale has begun to look different.
If the Walmart-Flipkart deal indeed goes through, it would be the largest so far in the Indian e-tailing market that is forecast to grow to $200 billion by 2026 according to Morgan Stanley.
Press Trust of India reports that 2017 saw merger and acquisition activity in the Indian e-commerce industry to the tune of $2.1 billion. According to data from Grant Thornton, 21 deals worth $2,112 million were seen in 2017 with participation from players like Paytm and Flipkart.
This, however, was lower compared to 2016 which saw deals worth $2,224 million being inked, as per the global audit and advisory firm. In the January-April 2018 period, six transactions worth USD 226 million were seen, according to the data reports PTI.
A recent report by Mumbai-based debt lending firm InnoVen Capital in its third Annual Startup Outlook survey curated responses from more than 100 startup leaders and found that about 80 percent founders expected to achieve an exit within six years. This is alarming for a country like India, whose government believes the nation's startups are the real flag bearers of entrepreneurship.
If the most celebrated startups like Flipkart will present an example of exiting the business in a short entrepreneurial cycle of 11 years, what promise will emerging home-grown startups hold to steer India's growth is a question that will need answers.
Death of Indian Ecommerce
Among the key players in the Indian ecommerce space, Flipkart has held the top position with neck-to-neck competition with American giant Amazon Inc. With Flipkart selling out to Walmart, the top Flipkart's peer Snapdeal, founded by Kunal Bahl, is now operating with a Snapdeal 2.0 new vision post prospective merger with Flipkart failed last year.
Among smaller peers exist Shopclues, Voonik, Limeroad, Pepperfry and BigBasket. While the likes of Paytm are also counted under Indian ecommerce, they are better known for their digital wallets and now digital payments bank.
Morgan Stanley expects India to have 475 million online shoppers by 2026. This is significantly up from 60 million in 2016. According to study done by Indian Institute of eCommerce, by 2021 India is expected to generate $100 billion online retail revenue out of which $35 billion will be through fashion e-commerce. Online apparel sales are set to grow four times in coming years.
It is this promise of booming growth that all international giants such as Amazon, Alibaba and Walmart are looking to put their eggs in India's basket.