Flipkart Will Deliver Paytm Orders – 3 Massive Changes Indian Ecommerce Sector May Soon Witness
The equations of Indian ecommerce industry are changing faster than anyone had anticipated. Flipkart’s ‘independent’ logistics arm Ekart will now deliver Paytm orders; and this has the potential to change everything about Indian ecommerce we knew.
As per reports, Paytm and Flipkart had been talking since last three weeks, and they have finally settled for a never seen before partnership in this sector. Flipkart, whose valuation was decreased to $11 billion recently by Morgan Stanley, is still India’s largest ecommerce portal and most valued startup, while $3 billion worth Paytm is the only Indian company to have 10 crore registered users; and India’s biggest mobile wallet company.
This is a major strategic decision, which will have far reaching impact on the entire industry. Not only Paytm’s reach will increase in Tier 2/3 cities, this news will also give Amazon quite a few sleepless nights.
Amazon India, which is right now 2nd biggest ecommerce portal in India would be looking at this development very closely, as the cards have now been laid and the consolidation game is about to begin.
Here are three major changes which this partnership may trigger very soon; and change Indian ecommerce industry for ever.
a) Alibaba may finally invest in Flipkart
In March this year, rumors were abuzz that Amazon is attempting to buy a stake in Flipkart, but their offered amount was low and as per the rumors, Flipkart had rejected the offer. However, the fact is that Flipkart is right now struggling for funds, and they desperately need atleast $1 billion within couple of months to sustain their aggression in the market.
Considering that Paytm-Flipkart partnership is now on, it doesn’t take rocket science to understand that Alibaba, who owns majority stake in Paytm, is actually calling the shots; and there may have been a deal already in place. Alibaba, backed by SoftBank, has no problem with cash, and they would more than happy to invest $1 billion into Flipkart and acquire a stake.
And once that happens, then the Indian ecommerce battle would be between Amazon and Alibaba.
b) Paytm’s Wallet May Be Integrated With Flipkart
Based on our interviews and insider reports, we have realized that Paytm is now focusing more on their mobile wallet business, and the new upcoming payment bank, which would be India’s first such privately held payment bank.
When Flipkart launched their own wallet called Flipkart Money, then we had assumed that they will take on Paytm’s massive reach and challenge them. But now, it seems that Paytm will eventually implement their own wallet, and most probably acquire Flipkart Money or shut it down (once Alibaba invests in Flipkart).
While announcing the partnership between Paytm and Ekart, Vijay Shekhar Sharma said, “Ekart will be an interesting experiment for us. Since we are a marketplace, we work with different vendors to enable our merchants reach a wider consumer base.”
If we read the hidden lines, then Vijay makes it clear that this ‘experiment’ will very well go beyond logistics, very soon.
c) Logistics & Advertisement Will Become Flipkart’s Primary Business
Alibaba is using Paytm’s ecommerce platform as a front to sell their own products from Chinese vendors. Once Alibaba’s investment in Flipkart is announced, the same business logic may be applied to Flipkart as well, and this will induce a major change in Flipkart’s business model.
We are speculating that Ekart will eventually become larger, and directly compete against bigger logistics players like Delhivery and Bluekart. Thus, Flipkart will sell out their ecommerce business and concentrate on monetizing logistics and advertisements. Already Ekart has announced that they are open for delivering other 3rd party orders, and very soon they may partner with Shopclues and Jabong, for whom they had earlier worked for deliveries.
Amitesh Jha, a VP at Ekart, has already said, “Ekart has the capability to transport over 5 lakh shipments from different sellers across India. We will be using the same capabilities to offer services to other companies,”
The question is, why doesn’t Flipkart aim to increase their market share, and use the full capabilities of Ekart, which is 5 lakh shipments, for their own good? Maybe investors of Flipkart are in a hurry to encash their investment, and their patience has run out.
Will we see American and Chinese business magnets fighting it out to capture the entire $60 billion Indian ecommerce market by 2020? Do share your opinions by commenting right here!