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  1. Amazon’s extra $3 bn India play: Jeff Bezos sends signal to Flipkart, Alibaba

Amazon’s extra $3 bn India play: Jeff Bezos sends signal to Flipkart, Alibaba

The story of e-tailing in India so far has been one of ratcheting up what’s called the gross merchandise value (GMV) by offering customers chunky discounts.

By: | Updated: June 10, 2016 7:19 AM
Jeff Bezos Amazon is clearly going for the kill, confident of its India play and having already committed billion. (Reuters)

If Jeff Bezos’s $3 billion cheque for India comes with a message, it is that Amazon’s not about to be cowed down by Alibaba’s presence here. The Chinese e-retailer has deep pockets and the financial muscle to play catch-up in whichever way it chooses—whether by setting up shop on its own or by buying up incumbents. But Amazon is clearly going for the kill, confident of its India play and having already committed $2 billion. Bezos has a penchant for drama—somewhat akin to Richard Branson, though undoubtedly a lot more tempered—and timed the announcement to coincide with prime minister Narendra Modi’s visit to the US. The businessman would probably be hoping to win a few concessions—Amazon wants some restrictions on inventory-led business models lifted—and there’s no better way to do this than by putting money on the table.

But even otherwise, the salvo has been fired at a time when, by all appearances, the American e-tailer is fast forging ahead of rivals Flipkart and Snapdeal, forcing them onto the back foot. To be sure, much of the evidence is anecdotal and based on customer feedback but not entirely so—Amazon has been moving up in some of the website rankings.

The story of e-tailing in India so far has been one of ratcheting up what’s called the gross merchandise value (GMV) by offering customers chunky discounts. Amazon hasn’t been doing it very differently. Unfortunately, however, to keep the business afloat until shoppers are hooked to the platform and can be weaned away from discounts, takes a lot of staying power. In the meanwhile, the government has disrupted the business model by banning marketplaces from influencing, in any manner, prices of products on their platforms. In other words, it has put an end to the huge discounting which was the bait for bringing in customers.

Even before this e-tailers have been slugging it out in an increasingly crowded market leaving each of them less of a top line and more of a loss. In such an environment, retailers such as Flipkart and Snapdeal appear to be running out of not just money, but ideas too. Media reports suggest Snapdeal is scouting for funds but has so far not been been able to convince investors to back it at a valuation of $6.5 billion. Flipkart has cash but its move to model its fashion portal Myntra as an app-only product backfired badly while its offering in the food and grocery space hasn’t taken off. Amazon, however, seems to be winning consumers with variety and verve. And that’s what it takes to deliver the goods.

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