For the past many years, Amazon has been the undisputed ruler of the e-commerce market. Selling good quality products at discounted rates, repeated Amazon offers and festive sales, has helped the company create a large dedicated and committed customer base. However, its rival Walmart has not left any stone unturned to give the latter a tough competition.
It can be righteously said, the war between Amazon and Walmart is spilling over to faraway countries. Walmart is planning to buy a multi-billion dollar stake in Flipkart, Amazon’s biggest rival in the country.
This deal is valued at 20 billion dollars and will expectedly complete by the end of March. According to some reports, the news is that another company named Bentonville, which is a brick and mortar conglomerate, is ready to invest up to 10 billion dollars to get the majority of their stakes in Flipkart.
These heavy investments can shake the market for Amazon and make things difficult as Amazon has been betting heavily on its operations in the country. It is in battle with other Indian e-commerce giants Flipkart and Paytm Mall backed by Alibaba on the dominance of the online commerce market. Amazon has invested a capital of more than 5.5 billion dollars for its operations in India.
Walmart on the other hand, has a great deal of financial experience and it’s intervening can thus stretch this battle for few more years. This will definitely have some short-term as well as long-term impacts on the finance department of Amazon. However, Amazon still has an upper hand in this situation as it owns some warrants that allow it to buy stakes in Aegis merged with Startek, which is an America based business process outsourcing company.
India’s Aegis Global is a portfolio company of a private equity firm named Capital Square Partners which merged with New York Stock Exchange-listed Startek and it made them take 55% stake in the combined US entity. This new firm will also provide customer services to the Indian rivals of Amazon- Paytm and Flipkart. Amazon has a warrant to buy up to 4 million shares of Startek. This is because Amazon has made a commitment to outsourcing $600 million worth of back-office services to Startek over a period of eight years. This information is based on the disclosure made by Startek to US Securities and Exchange Commission.
Amazon is taking all the major steps to dominate over India’s e-commerce industry. They are rebuilding their infrastructure for delivery through warehouses and are making big investments in digital payments infrastructure with the aim of making the country, less cash based and more digital.
Further they are investing to provide the best of services to their prime members and are creating local content for their video services available to prime customers. As per a recent study, Indians spend 93% of their online viewing time by way high videos of local content. To support this, Amazon has signed a five-year content deal with a certain actor’s home production and also forecasts the addition of produce 18 original series in India. This investment is reaping benefits in the favor of Amazon. In the financial year for 2017, Amazon’s marketplace revenue grew by 105% in India. Amazon Prime videos in India have taken over Netflix. This has happened in two more countries. According to the CFO of Amazon, Brain Olsaavsky, the number of prime members who joined India’s Prime membership in the first year is more than any other country in the history of their world.
Flipkart is trying all its ways to increase its cash reserve to stay up in competition with Amazon. Flipkart raised a total of 1.4 billion dollars from the stocks of Tencent, eBay, and Microsoft in April 2017. This helped Flipkart in effectively putting its resources in the holiday season and gaining market share.