Amazon, the world’s largest online retailer, tried acquiring India’s biggest e-commerce company, Flipkart, not once, not twice but thrice! However, it failed miserably even after repeated attempts. Here’s what happened-
First Acquisition Attempt
2012 was the year when Amazon was about to enter the Indian market. Flipkart, on the other hand, was soaring upwards with a valuation of 1 Billion US Dollars. Amazon wanted to acquire Flipkart desperately as it was doing good in India and they wanted an upper hand in the Indian Market. However, the amount they offered Flipkart was around 600 Million US Dollars only! They tried pulling off the deal at a discount, but guess what happened, Flipkart declined the offer!
Second Acquisition Attempt
Amazon again tried to acquire Flipkart in 2015. They made a whopping offer of 8 Billion US Dollars to Flipkart, but Flipkart was even higher with a valuation of 15.5 Billion US Dollars. What were you thinking, Amazon?! Obviously, it didn’t go well with the decision makers at Flipkart. Amazon tried to settle for a low-ball deal trying to acquire Flipkart at half the price, but failed.
Third Acquisition Attempt
Walmart, the retail giant of USA, entered Indian markets in 2018 trying to make its presence strongly felt. Having acquired Jet.com for 3 Billion US Dollars, they already were giving tough competition to Amazon US. Walmart eyed Flipkart in India and was in talks since early 2018 to acquire 75% stakes for about 15-16 Billion US Dollars which would raise Flipkart’s valuation to 20 Billion US Dollars. A great deal, indeed!
Amazon tried really hard to acquire Flipkart this time. It offered to buy 60% stake which would have raised Flipkart’s valuation to 22 Billion US Dollars. Amazon additionally got ready to give 2 Billion US Dollars as a breakup fee to have Flipkart back out of the deal with Walmart. This was a great deal and Flipkart should have nodded the head, but even if they shook hands on this awesome deal, it wouldn’t have been possible.
The Competition Commission of India (CCI) strictly would have objected to this deal being signed because the combined Amazon and Flipkart entity would have more than 70% of market share which is not allowed as per current market regulations. A lot of regulatory hurdles would have had to be overcome to have the Amazon-Flipkart deal possible which, of course, would have raised CCI’s eyebrows. The Flipkart investors didn’t want any such hassles.
The Walmart deal, on the other hand, was smooth and without any legal hassles which is why Walmart was successful in acquiring a major stake in Flipkart; and Amazon couldn’t be successful. With Walmart here in India, Amazon India will face stiff competition as Walmart prepares to operate with an Omni-Channel Model.
For Amazon India, Walmart is the real threat and there could very well be a possibility of Amazon doubling its bets on Indian Markets. It will have to keep adding more categories to its business and spread across various sectors with a strong focus on food-retailing, grocery and subscription services!
By Bhavishya Pahwa