Losing big. FlipKart, the “Amazon of India,” made headlines yesterday when it announced a funding round of $1.4B from big hitters like eBay, Microsoft, and Chinese investment firm Tencent.
Which seems great, until you consider the company lost $800m last year.
Apparently, e-commerce in India is a tough nut to crack and FlipKart’s main competitors, Snapdeal and Amazon India, both lost over $450m last year as well. So, if online sales in India are a big money pit, why do people keep investing?
It’s all in the name of scaling
As Amazon has already shown at home by owning 43% of all U.S. online retail sales, it pays to be top dog.
And, considering India has the world’s fastest growing, soon-to-be $48B online retail market, investors are pouring money into marketing and logistics, hoping to beat out the competition.
However, the race to the bottom can’t go on indefinitely, and experts predict the next few years will determine who’ll come out on top.
But when you come at the king, you best not miss
It’s hard to imagine beating Amazon at its own game.
While Flipkart’s parsed together $4.65B over several rounds of funding, Bezos allocated $5B in Amazon revenue with a few strokes in an Excel sheet.
However, Flipkart does have a number of recent, strategic advantages in its latest round of funding, including purchasing eBay’s India business and getting the necessary capital to buy struggling competitor Snapdeal.
And like kids teaming up on the playground to fight a bully, this is also the largest India deals by Microsoft and Tencent, illustrating the growing international support for chipping away at Amazon.