Flipkart acquiring eBay's Indian business

Dive Brief:

  • Indian e-commerce giant Flipkart has acquired eBay’s India operations, with the U.S. digital marketplace also investing $500 million cash in Flipkart for an equity stake.

  • Under the agreement with eBay, the two companies will jointly “pursue cross-border trade opportunities to make eBay’s global inventory accessible to more India consumers,” while eBay’s millions of active buyers globally will have access to more unique Indian inventory provided by Flipkart, the companies said. Upon the close of the transaction, expected later this year, Flipkart will acquire eBay’s buyers in India, and eBay will remove the number of active buyers in India from its reporting during the quarter in which the transaction closes.

  • Flipkart has also received investments from Chinese conglomerate Tencent and Microsoft; in tandem with eBay's stake, the investments from the three companies add up to $1.4 billion .

Dive Insight:

Even prior to new guidelines from the Indian government last year designed to spur online marketplaces, India posed an undeniably intriguing opportunity for e-commerce players. A study from the Internet and Mobile Association of India found there were 52 million new Internet users there in the first six months of 2015, bringing the country’s total user base to 352 million as of mid-2016. And of those, 213 million — more than 60% — accessed the web through their mobile devices.

“If you look at the numbers, every three seconds an Indian experiences the internet for the first time,” Mihir Kittur, co-founder and chief innovation officer at managed analytics company Ugam, explained in an email to Retail Dive last year.

Not surprisingly, as India's internet and mobile use has exploded, so has e-commerce. While it's still a small fraction of the overall Indian retail market — just 4% to 6% — it’s growing rapidly and expected to scale up exponentially in coming years: India’s top 25 retail websites already account for some 62% of all web traffic nationwide, according to digital market intelligence company SimilarWeb, and around 12% of all Internet users in India are online shoppers, according to the Economic Times. Analysts believe that online shopper penetration could grow to 20% by 2017.

Looking further into the future, overall retail sales in India are projected to double to $1 trillion by 2020 from $600 billion last year, according to the Boston Consulting Group, which adds that e-commerce sales there are projected to quadruple in the next five years, to $60 billion or $70 billion.

And competition in India is fierce. Bengaluru-based Flipkart, launched by former Amazon employees in 2007, is India’s largest homegrown e-retailer, with a gross merchandise value of $10 billion and a track record of raising $3.15 billion in venture financing. The latest funding round from the three global technology giants, at a post-transaction valuation of $11.6 billion, adds to an existing group of marquee investors that include Tiger Global Management, Naspers Group, Accel Partners and DST Global, Flipkart said Monday.

But Amazon India has given Flipkart a run for its money since arriving in 2013. Then there's six-year-old Snapdeal: The New Delhi-based firm recently said that it is well on its way to the kind of volume and diversity of sellers that the government aims to encourage, doubling the number of sellers on its marketplace last year to more than 300,000 sellers, on its way to a projected 500,000 sellers by the end of this year.

Flipkart and Snapdeal (among others), along with Amazon India, have already benefited from outside investments — deals that critics long alleged weren’t quite legal under the country’s confounding foreign direct investment rules, a situation that was clarified by the new rules enacted last year.

“We are delighted that Tencent, eBay and Microsoft — all innovation powerhouses — have chosen to partner with us on their India journey. We have chosen these partners based on their long histories of pioneering industries, and the unique expertise and insights each of them bring to Flipkart. This deal reaffirms our resolve to hasten the transformation of commerce in India through technology,” Flipkart founders Sachin Bansal and Binny Bansal said in a statement.

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