Monday, April 10, 2017

Opinion: It’s curtains for India’s oldest ecommerce player, eBay

Photo credit: Pixabay.

The US$1.4 billion funding of Flipkart, announced today, includes an investment from eBay as well as a merger of eBay India’s business with Flipkart in exchange for equity. This marks an exit of sorts for eBay from India, although eBay.in will continue to function as a part of Flipkart. It also brings the curtain down on a journey that began 13 years ago.

Long before the arrival of Amazon and Alibaba, or even the launch of Flipkart and Snapdeal, it was eBay that made a foray into Indian ecommerce with the acquisition of Bazee for US$50 million in 2004. “This agreement will allow eBay to expand its global footprint into the nascent but growing Indian market,” an eBay vice-president had then said.

A lot of water has flowed under the bridge since then. Flipkart launched in 2007 and Snapdeal in 2010. Backing from large hedge funds Tiger Global and SoftBank sucked them into a race to grab market share with discounts. The entry of Amazon in 2013 ushered in an era of broad-based horizontal marketplaces.

The eBay model, which originally connected buyers and sellers in auctions, got pushed to the periphery with the broader range of categories on Amazon and Flipkart as well as the discounts. eBay India’s revenue growth actually slowed down in the boom years of 2014 and 2015, even as the main ecommerce players had their revenues rocketing, along with mounting losses bankrolled by hedge funds.

In an effort to remain a significant player in Indian ecommerce, after the entry of Amazon, eBay chose to invest substantially in Snapdeal. But a US$5 billion infusion by Amazon into its Indian arm put paid to that bet. Last year, Snapdeal saw its market share sinking and now it is under pressure from its main investor SoftBank to merge with Flipkart at a fifth of its peak valuation.

See: Snapdeal sale to Flipkart closer, but not a done deal yet: the real story

eBay HQ

Photo credit: Wikipedia.

Too little, too late

Late last year, eBay fired its product and tech team at its development center in Bangalore, in a sign it was winding down its India operations. “We are shifting work to other global centers around the world,” eBay’s official spokesperson said, claiming that it remains committed to India.

It was part of a restructuring of eBay’s business after a split from PayPal which it had acquired for US$1.5 billion in 2002. This led to layoffs of 350 people in 2015 across eBay India’s marketplace and PayPal, which has development centers in Bangalore and Chennai. Last year’s layoffs were a continuation of that process.

eBay has been trying to rethink its ecommerce model to serve small retailers and millennial shoppers, but the Indian market already has three huge players in Flipkart-Snapdeal, Amazon, and Alibaba-Paytm. The cash-rich Alibaba’s US$200 million investment to take the lead position in Paytm’s ecommerce arm makes it a hands-on player this year, after biding its time studying the market through its investments in Paytm and Snapdeal earlier. That put eBay in a distant spot in the pecking order.

See: How the latest $1.4b Flipkart funding changes the ecommerce game in India

It’s too late in the day for eBay to adapt its model to India even if it wished to emulate Amazon. Jeff Bezos made no secret of his commitment to the long-term potential of the Indian market, and made several visits to India to get Amazon India’s act together. He had no hesitation in getting into a bruising war of discounts, even if it impacted Amazon’s bottomline in the short term.

eBay’s commitment to India was modest in comparison, and its platform model of connecting buyers and sellers was no match for the various initiatives Amazon and Flipkart took to onboard sellers and shift customers to online retail. Parking eBay.in in Flipkart was the only face-saver left for the first global ecommerce player to set foot in India.

This post Opinion: It’s curtains for India’s oldest ecommerce player, eBay appeared first on Tech in Asia.



from Tech in Asia https://www.techinasia.com/ebay-quits-india-with-flipkart-funding
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