SUMMARY
How Flipkart Beat Amazon and Was Acquired for $16B – A Case Study for Entrepreneurs
Sachin and Binny Bansal left Amazon and started their dream entrepreneurship project in the name of Flipkart in 2007-2008. At the start, they were operating as an online book reseller and running merely with a hundred orders per day. With the progress and the passage of time, they dreamed of acquiring other companies to offer other products. One interesting point, the Indian does not want to use credit cards, and a huge number of the population of India does not access such facilities. For risk aversion, Cash on Delivery (COD) is a preferred shopping method in India as 83% of people prefer COD and buy products online through Flipkart in 2016. Flipkart knows the culture of the country, so they started to take orders and supply products on COD. Flipkart invested 1 million dollars in 2010 to 11 billion dollars in 2016. During this period, they bought, let’s buy, and Myntra online fashion with other investment projects. The deal with Motorola G and Motorola phone in 2014 to sell exclusively through Flipkart app was a great achievement. Tiger was a big investor (1 billion dollars) in Flipkart during 2014-2015, and this investment was made through Leaf Excel. Flipkart (Amazon of India) earned 2.6 billion dollars in revenue in 2016.
Flipkart had got licensed the name of eBay and was running under the name of eBay India, but after a deal with Walmart, eBay got one billion dollars from Wal-Mart and cancelled the licensing deal with Flipkart to re-launch in the Indian market. Wal-Mart bought a 77 % stake in Flipkart for 16 billion dollars and had 10 billion dollars in the shape of new debt on this acquisition. According to Wal-Mart, this loss would be covered with improved operating efficiencies. Some experts might say that it was an expensive deal for Wal-Mart that would have an impact on the stock price of the company, but it was a strategic deal for a long period.
Amazon had the benefit of entering the market. So, India is a new battlefield for Walmart and Amazon after the United States after this deal as some studies indicate that only 25% Indian population make e-commerce purchase and there is a huge potential for Wal-Mart with Flipkart (Value Entertainment, 2018).
Reference
Value Entertainment (2018) How Flipkart Beat Amazon and Was Acquired for $16B – A Case Study for Entrepreneurs, 1 June, [Online], Available: https://www.youtube.com/watch?v=ltDepllHuSg&feature=youtu.be [31 March 2019].
