Flipkart and India’s startup growth points to a future in which there is a lot of potential for the country as it continues to make strides, but there are challenges ahead for tech companies as the battle between governments and big businesses grow.
Who is Flipkart?
Flipkart, India’s most popular online shopping website, reported earlier this month that they raised over US$3.6 billion in their most recent fundraiser. This puts the company’s valuation at a staggering US$37.6 billion
Flipkart is an online e-commerce website based in India that originally started out by selling online books before expanding into a broader market.
So while this is a similar narrative to Amazon Inc., Walmart Inc., which currently has an 82.1% controlling stake in Flipkart after investing US$20 billion back in 2018, doesn’t want consumers comparing Flipkart to Amazon.
Amazon has already faced several anti-monopoly probes and are currently facing one in India. It is perhaps because of their similar markets, Flipkart also got pulled into the investigation.
Despite being pulled into the probe, Walmart says that Flipkart “ought to have been treated differently from Amazon.”
But, regardless, Flipkart was started back in 2007 by two former Amazon employees, and the company has been making huge waves as it continues to increase in value.
What makes Flipkart unique as a startup?
While Amazon may be the biggest e-commerce company in the world, Flipkart has steadily held its ground against Amazon, and it has continued to grow throughout the pandemic.
Data taken in October 2020 indicated that 31.9% of online shoppers in India used Flipkart – making it the largest online retailer in the country. Amazon India is only slightly behind with a 31.2% market share.
Flipkart’s popularity in India is in large part thanks to the company catering to the country’s unique demographic, which primarily shops at brick-and-mortar shops rather than online.
According to research from late 2020, 90% of shopping done in India is completed through person-to-person interactions, and Flipkart has catered to their customers by giving businesses the options to use their services in a brick-and-mortar setting through Flipkart Wholesale.
Flipkart isn’t the only startup seeing massive success in India, in fact, the country sees a historic amount of unicorns popping up in 2021.
Why is India’s startup market blowing up?
When you hear financial experts talking about unicorns, they aren’t talking about mythological one-horned horses, but instead, they are referring to a new businesses with a valuation over US$1 billion.
Currently, there are over 764 unicorns in the world with 390 of those in the US and 251 of those in China, which means that both countries combined account for 84% of all unicorns.
India is in third with 52 unicorns. And, while that may seem significantly less, India has introduced 16 of its 52 unicorns this year alone.
Part of the reason for India’s rapid rise in the startup market comes from the country’s advancements in infrastructure and technology.
“Indian entrepreneurs have been quietly building startups for a decade now, the country’s internet infrastructure has vastly improved in that time and there’s a very good appetite for tech stocks globally,” said Hans Tung of GGV Capital. “Investors are beginning to see the huge upside and they expect India to be a China.”
How are experts responding?
Other than Walmart’s acquisition of Flipkart, there are plenty of startups in India that clearly have investors excited as the country’s startups raise close to US$10.5 billion in the first half of 2021.
Zomato Ltd., the popular food-delivery app, recently became India’s first unicorn to go public in the US stock market, raising US$1.3 billion after being backed by Morgan Stanley, Tiger Global and Fidelity Investments.
After DiDi Global Inc’s downward spiral in the US stock markets, investors have reportedly become afraid to invest in Chinese companies, and turned to India, the second most populated country in the world behind China.
Indian tech companies “can attract global investors who’ve burnt their hands in Chinese tech companies,” said Nilesh Shah, managing director at Kotak Mahindra Asset Management Co. in Mumbai.
Flipkart and India’s startup growth points to a future in which there is a lot of potential for the country as it continues to make strides, but there are challenges ahead for tech companies as the power struggle between governments and big businesses grow.
What comes next for Flipkart?
Much like the growing criticism around monopolies in the US and China, India’s government is also laying down the law when it comes to the growing powers of big tech companies.
Flipkart is currently facing antitrust lawsuits similar to Amazon’s as the company rides the wave of its recent valuation.
Both companies were put under investigation by the Indian government back in 2020 for monopolistic practices, with the government officials claiming that the companies provide preferential treatment to some sellers on their platforms.
While the company has received massive funding and support from investors, Flipkart hasn’t been entirely welcomed by everyone, including the Confederation of All India Traders (CAIT) – an organization dedicated to assisting brick-and-mortar stores in India.
“Both Amazon and Flipkart have left no stone unturned in destroying and devastating the e-commerce and retail trade market by indulging in all kinds of malpractices,” said CAIT Secretary General Praveen Khandelwal in 2020 after the announcement of the antitrust investigation.
“Their autocratic business model has resulted in the closure of thousands of shops.”
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