Failed merger with Snapdeal may actually benefit Flipkart
Venture capital experts believe that the failed merger talks between online marketplaces Snapdeal and Flipkart may, in fact, work in favour of the latter. Flipkart is expected to benefit out of Snapdeal's decision to call off merger talks, with the company now channelising all its focus on keeping rival Amazon at bay.
Experts believe that Snapdeal, by calling off the deal, has saved Flipkart the trouble of absorbing a complicated asset that would be of little value in business terms. The already struggling Snapdeal, experts believe may have just weighed down Flipkart's efforts to compete with rival Amazon India which is currently leading the market in terms of app downloads and usage.
Earlier this week, Snapdeal turned down Flipkart's offer to buy the online venture for $850 million in stock. The founders decided to stay independent but the company's largest investor, SoftBank Group Corp is continuing talks to buy shares worth $1.5 billion in Flipkart, according to reports.
Flipkart's investors are said to have considered too high. Experts believed that the deal was a sweetheart for Snapdeal whose monthly gross sales have dropped to less than Rs 350 crore. The e-commerce marketplace in India has also seen a cooling off since 2016, clearly showing that there is hardly place for two retailers.
Flipkart on Tuesday announced that it was absorbing eBay India. Experts believe that Snapdeal would have added more burden. Venture capital experts believe that with the deal failing, Flipkart has saved itself from an unnecessary headache. On the market face value, Snapdeal's market share has slumped over the past year. At the start of 2017, it was forced to cut hundreds of jobs and slash spending on other areas. The e-commerce site's performance was less than impressive for Flipkart to have bought it.
App usage wise, a mere 11.7 per cent Indian smartphone users had Snapdeal's app while 29.8 per cent used the Flipkart app. Amazon is leading in numbers with 39.6 per cent according to a research firm's data.