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FlipKart targets India e-commerce

BONANZA:One in three Indians uses the Internet, but the number is forecast to swell by 300 million by 2020, constituting a market that could be worth US$120bn


Flipkart chief operating officer Binny Bansal on Oct. 30, 2015, speaks at the launch of the firm’s largest fulfillment center on the outskirts of Hyderabad, India.

Photo: AFP

With 100 million new Internet users every year, Inc is betting big on India, but a major new investment in homegrown rival Flipkart Online Services Pvt means the battle to dominate the fast-growing e-commerce market is set to heat up.

Flipkart this week announced that top international companies including Microsoft Corp, eBay Inc and China’s Tencent Holdings Ltd (騰訊) had pledged investments totaling US$1.4 billion, among the largest sums ever raised by an Indian start-up.

The 10-year-old e-commerce company needs all the help it can get to compete with Amazon after the Seattle-based giant made India’s 1.25 billion inhabitants a global strategic priority, earmarking US$5 billion in investment funds.

“They need to have a substantial amount of cash in order to fight in the market with Amazon,” International Data Corp analyst Jaideep Mehta said.

Every three seconds, an Indian connects to the Internet for the first time, according to Google.

One in three Indians uses the Internet, but the number is forecast to swell by 300 million by 2020, mainly due to growing smartphone use.

McKinsey & Co analyst Ashish Tuteja said 70 percent of online sales in India were done on a smartphone.

“It’s very much a mobile-first market,” he said.

Projections for the size of the market by 2020 differ wildly, ranging from US$50 billion to US$120 billion.

However, all agree that it will be worth considerably more than the current US$15 billion, thanks to an expanding middle class and rapidly growing Internet use.

Amazon only opened its doors in India in 2013, but quickly overtook local start-up to become the second-biggest player.

E-retailers in India typically adopt a “marketplace” structure, acting as platforms that connect buyers and sellers rather than stocking their own products.

Amazon marketed its services aggressively, touring markets around the country with its “chai carts” to sell the idea of e-commerce to small traders over a cup of tea.

Under another initiative dubbed “Feet-on-Street,” an Amazon employee would be sent to photograph their products and help them to sign up online.

Flipkart, Amazon and Snapdeal are now engaged in a price war, with each Indian festival an occasion for aggressive cuts.

“At some point, they will have to make money,” Mehta said.

However, experts say that would necessitate consolidation of the sector.

That process has already begun, with Flipkart absorbing two rival portals, Myntra and Jabong.

Local media outlets have reported that a deal for Flipkart to buy Snapdeal is next.

India also represents a chance for a rematch after Amazon lost out to Alibaba Group Holding Ltd (阿里巴巴) in China. Although more focused on Southeast Asia, the group has made no secret of its interest in India.

The Chinese giant has taken a stake in Indian online payments company Paytm and has ambitions to develop as an online sales platform in its own right.

For Amazon, India is the “last big frontier,” Mehta said.

“Amazon is a 100-billion-dollars-plus retailer. To keep driving growth, they need to keep leadership positions in large markets outside the US,” he said. “They will continue to be very committed.”

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