E-commerce giant Flipkart, which owns eBay India, will shut the service on August 14
Written By Alnoor Peermohamed & Romita Majumdar
With Flipkart deciding to pull the plug on eBay India on August 14, 2018, this will finally bring to an end the era of one of the earliest movers in the country’s online retail space. The San Jose-headquartered company, right after Walmart’s decision to acquire majority stake in Flipkart on May 9 this year, had announced its plan of trying luck in the country on its own once more. But, the market today is no more the same as it was 14 years ago when eBay entered the country.
Back in 2004 when eBay forayed into the country with the acquisition of online auction site Bazee.com, the laws around shopping on Internet were not clear. Avnish Bajaj, the then CEO of Baazee.com, paid the price when he was arrested over the listing of a pornographic content on the website by a user. Despite this, the market was wide open as the concept of buying products online was just taking shape.
eBay clearly an early mover’s advantage which the company failed to capitalize on, eventually losing out to players who even entered the space much later than it. Finally, it ended up in the lap of Flipkart, bruised and battered and only to be shelved.
In an email to employees on Monday, Kalyan Krishnamurthy, CEO of Flipkart, announced that eBay India would be shut and in its place the company would launch a new platform for used and refurbished goods under its F1 Info Solutions & Services subsidiary. eBay’s dream of riding on the back of Flipkart’s success in India to power cross-border e-commerce for its global audiences, a last resort of sorts to remain relevant in India, has also failed.
“eBay came to India after they acquired Baazee 14 years back and after that, a lot of the initial time was lost in trying to find a space for themselves. I’m not sure that they were clear or committed to the opportunity in India as this country had its own challenges – regulation, technology adoption, access,” said Sanjay Anandaram, a venture capitalist and startup mentor.
While $50 million for Baazee back in 2004 was a lot of money, subsequently eBay’s appetite to invest in India was lacking. Over the decade of Flipkart’s existence, the company has raised $10 billion (with the completion of the Walmart deal) and still remains to be a loss-making company. Similarly, Amazon which entered India in 2013 has so far invested close to $5 billion, but in the case of eBay, such a large commitment was certainly lacking.
eBay CEO Devin Wenig in an interview with ReCode in April 2017, reiterated that investments in India’s e-commerce space were not rational, being one of the biggest reasons the company decided to pack off its India unit to Flipkart and invest in the company rather than grow independently.
“The market has been overheated, not rational, and probably over-invested in too many companies. It’s been a very unhealthy e-commerce dynamic for a few years. The conclusion was, it was going to have to consolidate, that fewer parties were probably a good thing for the market,” Wenig had said.
While its true that one needed and still needs a big appetite to compete in India’s e-commerce space, the flurry of investments only began flowing after 2014. For the first decade, eBay simply did not focus on becoming a dominant player in India, unlike how its peers who set up shop in the subsequent years did, according to Devangshu Dutta, Chief Executive at Third Eyesight.
“It comes down to the importance you give the market. Flipkart’s focus was winning the India market and Amazon entered India with the strategic mindset that this was an important market. Whereas India didn’t really figure very high on eBay’s plans. They saw India as another market to be in,” added Dutta.
Moreover, with eBay’s global business beginning to falter, the company’s India unit paid the price. The company cut employment and scaled down its business twice after 2014. While it continues to have a development centre here, one could say eBay has failed at even using India’s technology prowess which other retailers such as Amazon, Walmart and Target has done so well.
Even now as eBay plans a second stint in India, it’s focus is on cross-border retail which is still only a tiny chunk of the country’s e-commerce potential. Moreover, the US online retailer will have to once again build up a base of retailers who can list products to sell on its global platform. On the consumer front, players like Alibaba and even Amazon are already making strong headway in making it easy for Indian consumers to shop for products from overseas retailers.
“The anticipation is that we will come back into the Indian market both through an import and an export strategy. We will start with export meaning Indian sellers selling on other marketplace platforms around the world that was something that we turned over to Flipkart. We are going to get that back upon the closing of the transaction,” said Wenig in a call with investors announcing the company’s second-quarter results this month.