Amazon waited all of 24 hours for Flipkart to officially announce their $ 1 Billion fund raising amount to announce that they will be investing $2 billion into India. This is a big deal for a few reasons – it is clear that India is an important part of Amazon’s future thus they did not wait to announce this massive investment into Amazon.in. It clearly is an arms race between Flipkart and Amazon for market leadership in Indian ecommerce but I cant help but wonder this leaves Snapdeal. Does Snapdeal look for more investment? I am honest when I say Indian ecommerce has me thinking – is it the size of the opportunity that is leading to this investment race? Is it investor angst that India might become another China? Those not familiar with Chinese ecommerce – the market is dominated by one company (Alibaba) and international investors got shun by local investors. I don’t necessarily think that Indian ecommerce is at all similar to Chinese ecommerce but there are definitely similarities.
The other big news is the TrunkClub acquisition done by Nordstrom. I believe Nordstrom to be one of a handful of retailers that understands ecommerce; thus they continue to acquire ecommerce businesses that will provide them long term sustainability. Every acquisition that Nordstrom has done is to provide them with scale in a part of retailer that they were lacking. Their investment into Bonobos was to ensure that they have a front row seat at the men’s fashion industry. Hautelook was to ensure that they could provide their digital clients with a selection of deals. Trunkclub is in my opinion a combination of a lifestyle and business acquisition. Lifestyle is to be able to provide male clients with a stylist to help them solve a clothing situation. The business part is to add this on top of their own business to their clients. I am a Nordstrom fan (visit their stores when I am in the US) and believe that they will continue to acquire ecommerce companies that fit their needs).
I have been thinking about eBay over the last 6 weeks. The primary reason for it is “why did eBay repratriate $6 billion?” but also other news such as – David Marcus leaving Paypal into a newly created role at facebook, eBay being hacked and not saying much about it and the continued focus on Russian ecommerce. The company also announced moves into Latin America and an acquisition (AppTek) which is suppose to aid it in moving into new regions. The point is that eBay has been in the news for a variety of reasons and seems to be going a hundred miles a hour in a hundred directions.
PayPal – the “unifying element of commerce”
I am firm of the belief that eBay should have spun PayPal off. Why? Payments is a hot industry which is seeing an enormous amount of innovation. Tell me – where does PayPal fit into that? Close to the end of the line for payments businesses? I thought so.
I read the excellent piece about the PayPal mafia that was in the TechRepublic and I could not help but wonder why eBay could not keep any of the founding team to stay at the business. Would PayPal have been spun off by now?
The week is in the record books and a few stories dominated the ecommerce industry. Unconfirmed reports that Flipkart is / has raised a billion dollar round. This round of capital is supposedly led by DST, Tiger Global and Accel Industries. Flipkart has me scratching my head – it is burning cash at astounding rates? I get the feeling that investors are interested in the company due to the size of the opportunity in Indian ecommerce. Is this the last round of investment before an IPO? What will the company be doing with the fresh round of capital? I believe that Flipkart will be looking to augment their mobile commerce efforts – thus a mobile wallet / payment startup is a target. I suspect that some of the cash will be going to a new facility for the staff to work at (not to be confused with a distribution center). Is Flipkart going to be the Indian version of Alibaba?
The week also contained Amazon results and lots of blogposts and opinions have been made public about the companies poor performance. Lets recap what the company has done in 2014 – launched Kindle Fire TV, launched a Fire phone, invested heavily in Prime and grocery delivery. Then Amazon has been hiring new staff in all of their various businesses, spend millions on new content for their video platform and is facing pressure in their Webservices business which has lead to discounts for customers. Put all of that together and it is clear that Amazon is spending any profit back into their business which is what Bezos has been doing for the last 10 years. Is Bezos testing WallStreets patience or is WallStreet willing to continue to believe in Amazon and Bezos?
Last week was dominated by 2 stories – eBay posting disappointing results and Amazon unveiling a “all you can read” Kindle package. The eBay news is not surprising – Google hit the company with a search penalty based on low quality content and also eBay is still battling with the after effects of being hacked. Those two elements by themselves will harm any Internet business – together they will harm a large business for a few quarters. The bad results could not come at a worse time for eBay. They have potential competition entering a part of the business (11 Main) and am also facing less than desired results on their eBay Now business.
Amazon seems to be moving at a faster rate than normal with regards to the ecommerce business. The Kindle unlimited service seems to me to be an unAmazon product. The selection at launch is poor (not one of the big 5 publishers has books that you can read) and seemingly this product went to public release inside 7 days. I am still trying to understand why Amazon would want to do this? Is it a reaction to Oyster? Is it to force the big 5 publishers to provide them with ebooks? or is this primarily to drive more revenue to the Amazon published ebooks?
The week is in the history books and it contained news that will have significant impact on ecommerce over the next 12 – 18 months. Google is to increase their investment into same day delivery to the rumored amount of $500 million. Commerce is one of the few online industries in which Google is not the dominant first point of contact for Internet users. In terms of their core business (which is advertising) the fact that Amazon is the first place on which customers search for products means that Google is losing the opportunity to show ads and make revenue.
Flipkart is at the moment the market leader in ecommerce in India. They are raising money at astounding rates and will most probably IPO in the next 12 months. Flipkart is having to battle Amazon in India which is burning the cash they raised. They are supposedly looking to raise another $500 million before they go public but I keep wondering whether they are growing too fast – what Amazon took 20 years build, Flipkart has almost done in 25% of the time.
Alibaba is also on route to their IPO. The investment banks are all trying to get a piece of the action as the money they will make from this event is astonishing. Goldman Sachs was an early investor in Alibaba and then sold their stake way too early. Goldman Sachs invested $3.5 million and then sold that stake for $22 million in 2004 – I wonder what that stake would be worth today?