Apr 14, 2017 · 4 minutes

I first met the founders of Flipkart back in 2009 or 2010.

Back then, it was a hot up and coming company. One of the few that was mentioned to me again and again as the great hope for India to build a major multi-billion consumer Internet company.

And there were reasons for the optimism. Back then, Amazon couldn’t operate in India, for one. And while ecommerce has become a difficult business in the US, in emerging markets, ecommerce tends to be the first place that large, local Internet companies are built. Think CTrip in China, Mercadolibre in South America, Ozon in Russia. Ecommerce is one of the few sectors where local tends to matter on the Web, whether it’s because of logistics, payments or infrastructure. US-backed ecommerce has rarely scaled in other countries the way Facebook, Twitter, or even Google and Yahoo have.

It’s notable that it was a Chinese company that handed Uber its ass, not another American company.

Since that meeting, capital has again surged into India, startups have gotten carried away with valuations and money-losing schemes to acquire customers, just as they have in most of the rest of the world. In this podcast, FactorDaily’s Pankaj Mishra paints a picture of Indian CEOs looking at the bro economy in the Valley and copying some of its worst characteristics.

That has played out even worse in India than it has here.

Companies like Flipkart and Ola -- two of the largest left standing in the consumer space-- have gone so far as to beg for government intervention so they can be more like China. But the biggest problem isn’t a level playing field for international rivals. It’s the fact that Indians simply want the best product and service at the cheapest price. As we’ve reported a few times, they don’t seem to care one jot about supporting the local player.

Data released yesterday from 7ParkData, shows more of the same worrying trend: Amazon is just eviscerating that market position it took Flipkart years to build. Flipkart has about 30.7% of monthly ecommerce users in India, barely edging out Amazon at 30.3%. Snapdeal has 10.8%.

But the problem is all the trends underneath those numbers. Flipkart has declined by 11% in market share year-over-year, while Amazon has increased 46%. Time in app shows a potentially worse story: Minutes per active user decreased more than 40% year-over-year for Flipkart, compared to a nearly 15% increase for Amazon. 7ParkData surmises this is an indication that Amazon has a breadth of product that Flipkart simply can’t match.

The problem is in part unique to India: It is such a massive market, and a must own for international players like Amazon and Facebook and Uber who have not succeeded in China.

India has 462 million people online, the second largest in the world after China. And that’s only one-third of the population. Only about 10% of Indians use ecommerce at all.

But it is a slow growing market, compared to other emerging markets. 7ParkData said that Indian ecommerce is actually growing slower in 2017. Both Amazon and Flipkart had declining growth in unique purchasers. So while huge and strategic, this isn’t a market that is growing so rapidly, it forgives mistakes.

And that kind of long, expensive ground game is where Amazon excels. And if Amazon dominates ecommerce in India, it will have the best position of any major Silicon Valley company in the country. And that should worry Google, Facebook and the rest. Because once it’s owned ecommerce, it will expand cloud services, business services, and entertainment offerings and anything else it wants to roll out in the country.

That isn’t a future Snapdeal backer Softbank wants to see, given its many bets throughout Asia. Nor is it a future an Alibaba wants to see.

So Indian entrepreneurs should want Flipkart to win. Major US tech giants not operated by Jeff Bezos should want Flipkart to win. Indian consumers should want Flipkart to win, because long term a local thriving Web ecosystem will build better products for them. And deep-pocketed investors and unicorns in China and Japan definitely want Flipkart to win because they’d rather carve up their own hemisphere than watch the US do it.

Flipkart has exactly one shot: A much rumored acquisition of Snapdeal that should close in May. It’s rare that the answer to declining growth is a major acquisition. Lots of things will be hairy and distracting about it, should it finally occur. And the deal would almost definitely be a downround for Flipkart, and could have negative ramifications for the staff of both companies.

It’s not a “no-brainer” in that it will definitely work or even likely work. But it’s a “no-brainer” in that it’s the only plausible way Flipkart comes out of the last ten years of work with a viable, competitive company.


It’s not just the only shot Flipkart has left, it may be the only real shot an Indian unicorn has left in this cycle. This is what success looks like in a “lucrative” market like India: It’s a big enough market that players like Amazon want it, but it’s slow growing enough that startups need a warchest of capital and flawless execution. There’s little government protection, and little nationalist pride for users to support the Indian company. So the “winners” get a long, slow, painful ground war. Congratulations, Flipkart, you’ve arrived.