“This is a fundamental moment for Flipkart to think again,” says Chawla.
He maintains that even though Flipkart and Amazon have roughly the same amount of cash and are around the same size, they’re not even playing the same game.
And that is Flipkart’s key challenge.
“They may both be burning billions, but GMV is certainly not the score for Amazon,” he says.
Attracting the customers
Chawla is hinting at a widely-held opinion among industry watchers that while Flipkart plays the GMV game, Amazon is creating as many hooks as it can to consumers and households, in an attempt to make itself a habit for Indian consumers.
These hooks now include, other than general e-commerce—groceries, Kindle e-books, Prime subscriptions, and Prime Video. Amazon is also learned to be prepping for the launch of its popular voice-controlled smart speaker, Echo, which in turn is powered by its highly-acclaimed intelligent personal assistant, Alexa.
Take groceries for instance. Last October after the culmination of the two companies’ annual flagship sales, Flipkart mocked Amazon for selling “hing and churan” (spices and digestive powders) in its sale.
“Yeah, but Amazon was selling groceries at a 10% margin while Flipkart was selling smartphones at a 2% margin,” says Kunal Walia, who heads boutique investment banking firm Khetal Partners.
In addition, groceries are a repetitive and habit forming purchase. Something that Flipkart is bound to rediscover soon.
There is no doubt that the additional funding gives Flipkart the luxury of trying out new things, especially in segments and domains where it has no presence today. Groceries for one. Amazon has already launched its own foray into groceries—a high-volume, high-frequency shopping use case albeit with low margins and cutthroat competition. It is also learned to be currently in talks to acquire India’s largest online grocer, BigBasket.
Flipkart might also attempt to enter areas where Amazon has free-reign today—digital content and a subscriber or loyalty program a la Amazon Prime. The interesting thing though is that these are all initiatives that Flipkart has attempted earlier and abandoned.
The moot question is whether Flipkart believes that it now knows what it did wrong earlier and can, therefore, do a better job at it. Or alternatively, does it believe that the earlier failures were due to the environment then and the time and context today are likely to be far more amenable to such attempts.
The complexity of these decisions will be compounded if the leaders making them are once again the same ones who earlier made them and reversed them—Flipkart’s founders.
Return of the prodigals
One byproduct of the second exit that Tiger has managed to get is that Flipkart’s founders are likely to move back into the spotlight sooner rather than later.
It is no secret that Tiger was running the show at Flipkart—from the shadows earlier and more recently directly, by installing Kalyan Krishnamurthy as the CEO. This thinly-veiled proxy control of Flipkart by Tiger has now served its immediate purpose of securing a financial return for a bold bet it made eight years ago. It is, therefore, likely that Tiger will cede the stage to the founders and Softbank and adopt a far more passive role.
The moot question is whether Flipkart believes that it now knows what it did wrong earlier and can, therefore, do a better job at it.
After all, Softbank is no garden-variety investor.