Big bang entry of Amazon and its focus on delivery, forced mid sized Indian e-com companies to consolidate.

What forced the Deal?

Industry estimates there are more than 1500 e-commerce entities in India fighting for not more than 20-25 million buyers, increasing 30-50% annually. Amazon’s entry is well timed, as most of the work to develop the market was done by the likes of e-Bay, Snapdeal, Flipkart, Myntra and other companies.

Coming to India Amazon left behind the challenges of accessibility, non-standardized addresses and online payment in India and launched the same day delivery, cash on delivery, easy return policies. Step by step Amazon has given some of these established players run for their money.

Logistics, international learning’s, best practices are some of Amazon’s inherent strengths and they had to focus on getting the consumer experience right.

One of the strategies to counter a large multinational player, like Amazon, is to match it in size (in the local market), breadth of its offerings and ability to deliver the same quality and quantity in the least possible time. Myntra’s acquisition is counter strategy by Flipkart, extending product lines, improving supply chain and cash optimization by finding synergies. This deal will make the joint entity a dominating online business in the country.

Speculation about FDI (foreign Direct Investment) in e-commerce can drive valuations and is effective exit strategy for the investors. Flipkart and Myntra have both been able to create a strong niche for themselves as well as initial mover advantage.

Lastly, cost rationalization by investors, shareholders value/ investors investments, product/market synergy, growing opportunity are some other drivers.

How it is going to affect e-comm industry in India?

Because of this acquisition there is clear impact, which can be seen across industry

• Make existence for smaller players difficult in time to come
• We will see more consolidation, hostile buyouts, and many shutdowns
• Increasing competition to Physical retail stores as it can move enthusiastic buyers away because of the choices, offers and user experience these etailers can provide.

However e-commerce in India is still a growing sector. As the number of Internet users increase, these companies will have enough opportunities to expand their turf without bleeding each other. Having said that e-commerce sector in India just got a little more exciting.

What should existing/ new Players do now- Monk Mantra

• Focus on Consumer “wow” factor
• Fight offline prices
• Supply Chain Management is king, find areas of influence rather spreading thin (may be top 60 cities)
• Be ready for more consolidation

Authors: Gaurav Meena / Girish Trivedi

Further Reading: Monk Consulting Research on “Evolving Business Model in E-Commerce 2013 study”.