Flipkart: a rare defensive bid by Amazon?

Is Bezos rattled by Walmart’s interest?

Updated - May 07, 2018 02:18 pm IST

Published - May 06, 2018 08:41 pm IST

Jeff Bezos, Chairman and CEO of Amazon, speaks at the George W. Bush Presidential Center's Forum on Leadership in Dallas, Texas, U.S., April 20, 2018. Picture taken on April 20, 2018.  REUTERS/Rex Curry

Jeff Bezos, Chairman and CEO of Amazon, speaks at the George W. Bush Presidential Center's Forum on Leadership in Dallas, Texas, U.S., April 20, 2018. Picture taken on April 20, 2018. REUTERS/Rex Curry

Jeff Bezos may be getting rattled in India. Amazon is circling Flipkart, according to media reports. Chasing a business started by two former employees suggests the $760-billion e-commerce giant is worried by the idea of its main local rival joining forces with Walmart.

The battle underscores the significance of the large developing market. The $255 billion U.S. retailer was close to wrapping up a deal with Flipkart, valuing it at up to $19 billion, Reuters reported on April 12. The firm led by Doug McMillon has spent months negotiating with the online marketplace and its large backers, including SoftBank’s Vision Fund, which invested last year.

‘Less confident’

Joining the fray would send a signal that Amazon is less confident of closing the gap with the company founded by Sachin Bansal and Binny Bansal, the unrelated software engineers who briefly worked for the Seattle-based outfit before starting Flipkart in 2007. Amazon entered the Indian market around 2012 and has 31% of the online retail market, according to Forrester, eight percentage points behind its homegrown rival.

Though Amazon’s interest in Flipkart is unconfirmed and could just be sly negotiating tactics by either side, any show of insecurity would be surprising. Mr. Bezos last month said Amazon was the fastest-growing marketplace in India. He has committed $5 billion to conquer the market where Morgan Stanley reckons online shopping will be worth $200 billion in a decade.

Taking control of its rival would reduce the pain of a discount war that Walmart’s entry would prolong. It’s unclear, however, whether India’s competition authority would permit a Flipkart merger with Amazon, even though both have just a tiny share of the wider $800 billion retail market.

A successful Amazon bid also would upend much of Walmart’s international strategy. Earlier misadventures in China prompted the Arkansas-based group to join forces with online retailer JD.com in return for a small stake. Last week, it announced a plan to sell its U.K. business to J. Sainsbury for nearly $10 billion. The only consolation is that, in contrast to Amazon’s $14 billion purchase of Whole Foods last year, an Indian deal would be from a defensive position.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own)

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