WHEN India's biggest e-commerce company Flipkart bought lifestyle e-commerce portal Myntra in a cash-and-stock deal last month, it wasn't just one big company acquiring a rival to become bigger and better. Touted as the biggest deal in the short history of the Indian internet business, the deal was actually Flipkart's way of preparing itself for a formidable future —a future dominated by the aggressive moves of international biggies such as Amazon. “With a new government in place, policies such as foreign direct investment (FDI) in e-commerce which were stuck till now are expected to get cleared. In a way Flipkart is readying itself to fight a battle against international giants such as Amazon and eBay,” said Ashvin Vellody, partner, KPMG in India, a management consultancy.
Since Amazon entered India last June, Flipkart has been on its toes trying to keep one step ahead. Last December, Flipkart followed in the footsteps of Amazon and introduc-ed single day guaranteed delivery aptly called 'In a day guarantee'. Within days of the Myntra acquisition, Flipkart pumped up its war chest with an investment of around $210 million by Russian investment firm DST Global.
Industry watchers put the Flipkart-Myntra deal at $250-350 million. To begin with, Flipkart will invest $100 million in building the fashion category. “The e-commerce market in India is still in its early stage and is growing steadily. The acquisition of Myntra allows us to take a bigger market share in the e-commerce category, where fashion and lifestyle is a big part of the eco-system,” said Binny Bansal, co-founder and chief operating officer, Flipkart.
Sandeep Ladda, India technology leader, PwC India, an audit firm, says that the deal will give Flipkart an upper hand in the fashion and fashion accessories segment which is Myntra’s core area. “This is also an area where Flipkart was focusing of late but it had failed to surpass Myntra. Additionally, this segment is one of the fastest growing verticals in the e-commerce space,” he added.
Observers believe that the deal comes at a time when the e-commerce sector is gearing up for consolidation. The category has seen a lot of new online companies mushrooming in the last one year, many of them ‘me-too’ ventures. One of the implications of the deal is that only niche and/or players with good financial muscle will survive while the rest are gobbled up