eBay India is More a Merger than Acquisition for Flipkart
The announced “takeover” of eBay India operations by Flipkart is one more milestone in the journey of a pioneer. eBay was founded in 1995 and started India dedicated operations in 2004 (upon acquiring what was formerly Bazee.com).
Maybe, it is not accurate to say things never took off in India. Maybe, it was a lack of aggression in how much money eBay invested in India. Compared to the billions Flipkart (founded in 2007) and Snapdeal raised, and the $5 billion Amazon says it has dedicated to India, eBay never put in money that hit those heights. And this reflects in their slowing revenue growth.
According to January 2016 media reports, the Registrar of Companies (RoC) records show that eBay earnings rose 23 per cent to Rs 132.10 crore in FY15. But in FY14, revenue had risen 33 per cent to Rs 107.60 crore from Rs 81 crore the previous year. RoC records for FY15 show that Flipkart revenue was Rs 772.49 crore up from Rs 179 crore, a year ago.
In April, Flipkart announced it will acquire eBay India operations. Analysts believe it was not so much on eBay as much as it was about Flipkart being able to bolster its artillery against Amazon (and the $5 billion). The acquisition was announced as part of a $1.4 billion investment from Tencent and Microsoft along with $500 million from eBay and its entire operations in the country.
One industry analyst familiar with e-commerce and startups in India, says, “eBay is a large global brand and is one of the early movers of Internet commerce in India. They have been catering to a certain set of customers and have a strong refurbished market place. With this acquisition, Flipkart is set to gain access to eBay’s customer base in India. By leveraging some of the key operational elements such as logistics and supply chain, eBay too could benefit from this deal.
Yes, eBay and Flipkart are merging in India. But this will also provide an opportunity for Flipkart to go global. The two companies have agreed to form an exclusive partnership — eBay merchants anywhere in the world can reach Indian customers via Flipkart while Flipkart merchants get to sell to eBay buyers anywhere in the world. Co-founders of Flipkart, Binny Bansal, and Sachin Bansal, had said in a statement, “This is a landmark deal for Flipkart and for India as it endorses our tech prowess, our innovative mindset and the potential we have to disrupt traditional markets.”
eBay will continue to act as an independent entity. The company is going to great lengths to make the integration with Flipkart smooth. eBay told media that on 3 July, it received permission from Department of Commerce to transfer some of its assets in Bengaluru under SEZ rules, to an entity called ES Online, which eBay created especially to make the integration smoother. And that’s something eBay and Flipkart’s management, leadership, investor boards, their veteran M&A specialists are strongly aware of.
When Kalyan Krishnamurthy took over as Flipkart CEO in January, he also brought HR under his domain within months. Clearly he knows how important talent retention is. “The integration processes could still be work-in-progress, but to you and me on the outside, eBay will remain the go-to brand for refurbished products. And Flipkart too will retain its own brand identity as one of the biggest marketplaces,” says Perry Madan, director of Praaxis Consultants, an HR consulting firm.
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