(Source: Business Insider | May 3, 2018)
Amazon has made an offer to purchase approximately 60% of Indian e-commerce company Flipkart, according to CNBC.
The US e-commerce titan has been interested in acquiring Flipkart for awhile; it made a bid to purchase 51% to 55% of Flipkart two years ago, a source told Reuters, but the offer was rejected because its price was too low. It’s worth noting that a combination of Amazon and Flipkart could raise antitrust concerns, potentially putting an end to such a deal even if both sides come to terms.
Amazon is battling with Walmart for the Indian e-tailer. When rumors of Amazon’s interest popped up in early April, it was believed that a deal with Walmart was more likely to come to fruition. Walmart has reportedly been on the verge of closing a deal for 55-60% of Flipkart, valuing it at $18 billion to $20 billion, but Amazon’s reemergence with an offer that matches Walmart’s throws that deal into uncertainty.
It’s currently unclear if Flipkart favors one offer over the other, but it’s possible that it has a preference between competing for the lead in the market alongside Walmart, and immediately becoming the dominant e-tailer in India in conjunction with Amazon.
If Amazon acquires Flipkart, the two will have tremendous control of India’s burgeoning e-commerce market. Amazon’s share of unique visitors in India surpassed Flipkart’s during 2015, according to data from 7Park Data sent to Business Insider Intelligence, and it held a 44% share of unique visitors as of April 2018.
Despite being passed by Amazon, Flipkart had a 40% share of unique visitors in India as of April 2018, which shows that the two companies have absorbed more and more of the total market. An acquisition of Flipkart would make Amazon the unquestioned leader in India’s e-commerce market, a valuable position, as India’s consumer spending is estimated to climb to $3.6 trillion by 2020, with e-commerce’s share of the market increasing.
Acquiring Flipkart could allow Amazon to replicate its US dominance in India. The combined market share of the two companies in India would give Amazon a level of ubiquity closer to its US positioning, rather than the good-not-great standing it’s found in many foreign markets.
Amazon has been trying expand and improve its business beyond the US to reach more consumers and avoid issues like Prime reaching saturation. And the prospect of dominating in India may justify Flipkart’s hefty price tag.
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