How Amazon missed three opportunities to acquire Flipkart

BENGALURU: When Amazon began operations in India in 2013, it decided it needed to be aggressive and not repeat the mistakes it made in China. The online commerce giant also realised its global playbook that had served it well in developed markets such as Germany and Japan would not work in India.

“We are not afraid to do things differently or do things completely new, even if we don’t have existing models elsewhere,” Amazon India head Amit Agarwal said in an interview in December. “We call it being cowboys.” Amazon’s India operation has certainly changed the playbook in terms of managing shipments and using the scale of the world’s largest online retailer while remaining “nimble like a startup.” Yet, it hasn’t been able to move fast enough on acquisitions, which may have held back Amazon from quickly wresting market leadership from Flipkart.

Amazon entered the latest negotiations midway with an attempt to outbid Walmart by offering a deal valuation of $22.5 billion for Flipkart. Walmart’s lower bid at a valuation of about $20 billion triumphed because Flipkart’s board decided regulatory clearance would be easier for this, as ET reported on May 2. The Seattle-based online retail giant had a chance to acquire Flipkart at least twice before. Amazon offered $500-700 million for Flipkart before it launched operations in India in 2012. It bid again with an $8 billion offer in 2015.

Both times it lowballed Flipkart’s investors, for whom a sale to Amazon was exit plan A. Amazon also missed opportunities to buy India’s largest online grocer BigBasket and online fashion retailer Jabong. The Jeff Bezos-owned online retailer may now need to double its investment commitment to its India operations to $10 billion, say analysts. “We believe (Amazon’s commitment to India) will be close to $8-10 billion when all is said and done,” said Daniel Ives, chief strategy officer at New York-based GBH Insights. “Breaking into the Indian retail industry is going to take some time to play out and a massive investment profile, which we believe is nearterm pain for long-term gain in this fertile market for Bezos & Co.” Vivek Wadhwa, a professor at College of Engineering, Carnegie Mellon University, too, expects Amazon will double its investment in India.

“With Walmart emerging as a real threat in India, I would not be surprised if Amazon doubled its bets on the Indian market. It will do whatever it can to own the Indian market, dumping as much capital as is needed,” Wadhwa said. Manish Ti- wary, vice president for ca- tegory management at Amazon India, said the online marketplace remained aggressive in building infrastructure and adding categories, sugges ting the company was choosy about closing acquisitions. “We are at a stage where we can build internally and provide better service, selection, and value to the customer,” he said.

With Walmart expected to focus strongly, Amazon India will now have to devote more attention to its food-retailing and grocery businesses. Amazon has committed $500 million to its food-retailing business in India but progress has been slow so far. The government has asked Amazon not to share the warehouses of its food-retail business with its marketplace business, which has delayed by months the company’s plans to take its food venture nationwide, ET reported in April. “Our preparation on Amazon Retail Private (which will sell food products) has nothing to do with the competitive scenario. Building up the capability to handle fresh food is a learning process. If you are asking if we are delayed, it is going as per our plan,” Tiwary said.

Amazon’s deadliest weapon in India is its subscription service, Prime, with customers using it for anything including music and movies as well as new products such as Amazon’s smart speaker, Echo. Prime, which covers 40 million products for priority delivery, has about 8-10 million subscribers in India. While Amazon may have been slow on acquisitions, it has been active in making investments across sectors, including in financial marketplace BankBazaar, gifting platform Qwikcilver, and digital lender Capital Float. The strategy is to have a presence across categories, said Sachin Dalal, cofounder of ecommerce firm Infibeam. “Initial investments help in due diligence and gathering market intelligence for potential acquisitions later,” he said.