Amazon or flipkart, which will survive in long run in India? - Business & Economy - Retail - TIK Share

Amazon or flipkart, which will survive in long run in India?


Prakash mehta

2014-05-15

Flipkart controls more than 75% online retail market in India. Amazon, the world leader in online commerce is slowly but is increasing the market share.

Flipkart, used heavy advertisements to penitrate in Indian online market.

What you think will amazon takeover the market share from flipkart or flipkart will be the market leader in Indian Online Commerce?

Stock Guru

2014-05-15

First lets analyse how the E-commerce market will perform in next few years.

Indian online market was valued at $2.5 Billion (around Rs.12500 crore). It is expected to reach at $24 Billion (around Rs.144000 crore) in 2015.

The market is huge and even the competition is very tough.

Strategy of Flipkart: Flipkart captured market by heavy advertisements, discounts, cash on delivery etc. The intresting point to note is that flipkart was never made positive cash flows. The company is continuing with the negative cashflow. Positive part is that flipkart reached at $1 billion mark in 2014, they projected it in 2015. They are making good revenue but not able to generate profits.

Source of funding for flipkart: As already mentioned that flipkart makes losses every year. Where does flipkart gets fund from? Flipkart is funded by venture capital firms. The VC's keep pouring money in flipkart and flipkart keeps making losses. VC's are in trouble, they cant stop flows as they have already invested heavily in flipkart and are looking for a profitable exit. Once flipkart runs out of the available funds (they might as no profits till date), and VC's dont fund more flipkart will start falling down. Flipkart requires good cash to keep operation running.

Now, coming to Amazon. Amazon is one of the biggest e-commerce player in world and is happily making profits.

Amazon have lot of cash in parent country. Once FDI is allowed in multibrand FDI, Amazon will bring the cash to Indian subsidiary and to the same things as flipkart did. But, flipkart by then will be out of cash (if VC's no longer pour funds).

The game to watch will be whether flipkart would be able to generate retained earnings or not. If flipkart does not start generating positive cash flow, the future looks dark.

Currently, the amazon is investing in TV commercials to promote the brand and flipkart can not compete with amazon at this time.

Online commerce is not a stable niche, consumers are not loyal here. The more you can spend on marketing and customers service is better, but after all the investments cashflow should be positive.

I believe flipkart will loose some market to amazon in long run.

Reply

Prakash mehta

2014-05-15

What will happen to other players like Jabong, yebhi, myntra? Amazon or flipkart will aquire any of those?

Reply

Stock Guru

2014-05-15

Other players have the huge chances of being bought out by big players. Amazon or flipkart may buy any or all existing e-commerce websites.

Some may die naturally and some may close down. Chances are high that profitable companies will be bought by amazon and flipkart and lose making will close down.

Reply