SoftBank's potential USD 1 billion investment in Paytm and another USD 1 billion bet on Flipkart is likely to make its chief Masayoshi Son the toughest competitor Amazon CEO Jeff Bezos will ever have faced in India.
There are two parallel deals expected in 2017 that could define the way Indian ecommerce sector moves for at least the next three years. SoftBank is reportedly in talks to buy a 20 percent stake in Paytm for an investment of USD 1.4-1.9 billion. Besides, the Japanese investor is already in talks with Flipkart for the sale of its biggest portfolio startup Snapdeal. As a result of this merger, SoftBank is likely to invest over USD 1 billion in the combined entity.
On the other hand, Jeff Bezos-backed Amazon Inc has already committed a USD 5 billion investment in India. Of this, the company has already spent about USD 2 billion and plans to spend the rest in the next three years.
With SoftBank’s USD 2.4-billion-plus investment line-up for Indian ecommerce segment Amazon will find it tough to compete.
Discounts during Diwali?
If the two deals — Paytm and Flipkart-Snapdeal merger — conclude by Diwali, Indian consumers can expect a re-run of discount fireworks in ecommerce. Media companies can expect a return of the marketing spend across TV, print, outdoor and online as both groups are likely to capture as much market share as they can.
If the deals go through in 2017, Amazon’s grocery unit — Amazon Now — is likely to compete with Grofers, SoftBank’s online grocery bet. In the e-wallet segment, Amazon Pay will compete with Paytm and Freecharge. In online retail, Amazon India is likely to compete head on with Flipkart, Snapdeal and Paytm Mall.
Amazon India head Amit Agarwal doesn’t seem perturbed from SoftBank’s threat. The company’s India strategy will remain unchanged, he said. "We have significant competition in every country. No matter what happens even after 20 years, customers would want great selection, a great product and fast delivery. So, I am going to keep my focus on that...I am not getting distracted when everything else is changing," he told Moneycontrol this week.
During his visit to India last year, Son said that SoftBank would invest USD 10 billion in India in the next 10 years.
"Geography wise, India holds the best opportunity. This is the biggest country in terms of population with democracy... many of you speak English. This is where new technology is going to happen. There is new excitement in front of us. India is where I am very interested in investing in now," said Son.
"We have already invested USD 2 billion in the last couple of years. I am going to surpass my words of commitment," he added.
The investments from both Bezos and Son will also trickle down to the hiring market, their vendors, sellers and affiliate marketing websites.
SoftBank’s Startup Play
Son has other bets too in India. SoftBank-funded Ola is fighting the heavily invested Uber. It is fighting the established players such as MakeMyTrip and GoIbibo with OyoRooms in hotel aggregation.
Son is reknown for making very long-term bets. Amazon has entered India for the long-term. And both Alibaba and eBay are not willing to let go over 450 million Internet users and 1 billion mobile subscribers this market offers. Online retail is just about USD 15-17 billion and is likely to cross USD 50 billion in 2020.
Industry body Assocham pegs the number of online shoppers to reach 100 million users from 69 million in 2016.
Retail market is over USD 500 billion in India and with improved infrastructure and tax reforms, the online trade is only going to rise. Clearly, the big firms from China, Japan and the US want to have a share of this pie.
The doors for entrepreneurship in horizontal ecommerce have been shut due to the entry of big firms. However, there are windows of opportunity available in vertical e-commerce and allied services, which will become attractive buys for these firms as they look grow big in the country.
(This is an opinion piece.)
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