Image Source: Tropicalpost, 2014
For most of us within the country, the Flipkart-Myntra merger seemed a little pre-nascent a few months ago. The social media space has mostly been occupied with, well social media. A new smart phone is first and foremost loaded with social networking apps rather than e-shopping apps. A majority of domestic internet users still preferred to only browse for products online before they walk into distant stores to make purchases. Shopping as an experience ranked highly for the masses and such an experience was clearly missing in the e-commerce space. A lot many things changed with Flipkart and Myntra. With the increase in penetration of technology and effective advertising through tele-commercials, these e-commerce companies started making a statement. People were beginning to distinguish brand offerings and were starting to understand the brand values. Very few customers though, may have got into double/triple digits in terms of orders placed on either of these companies and it therefore seemed natural for people to perceive this merger as pre-nascent. However, it was far from so.
FDI in e-commerce is not knocking on India’s door. It is an over-staying guest with a bazooka about to blow our doors to dust. The imminent elections proposed several possibilities for the future which could radically change the way these portals do business. Furthermore, the learning curve for these companies was exposed to several hurdles unlike international markets. Therefore, any investment by venture capitalists needed to be for a long haul. Amazon then, gate crashed the party.
Consolidation and managing the risk of their investments was of paramount importance for investors. The industry was in its infancy, with only a few companies dilly dallying while looking across their shoulders to competitors with specific domain strengths. (X-Men references edited) Amazon wearing a hip hat and deep pocketed cargos, not only brought with itself a superior technology platform and partner promoted sales channel, they also came with a reputation that could change the retail industry of our country. E-tailers began to look upwards to their estimates rather than sideways at their competitors. To consolidate their positions, a merger made sense as it is always easier to fight a common enemy by uniting institutional strengths and building economies of scale. Both companies as a unit could also be in a better position to drive down procurement costs. Despite a small headstart, both companies will continue to benefit from their employee base which is a talent that is physically connected to the local market in real time.
However, from the customer’s point of view, it does eliminate a purchase option when competitors unite. This could be for various reasons apart from price compare or brand loyalty, and this could leave their existing customer base confused. In my opinion, a merger is usually a marriage of skills but only one entity holds the wallet and a customer rarely gets to know which one. Merged entities therefore embark on re-branding campaigns or advertising innovation. Myntra’s ‘Live for Likes’ campaign seems to be one impressive attempt at inviting user generated content through the trendy social networking platform to build a brand association. Three girl’s taking a selfie wearing Myntra partnered apparel offers a direct benefit perception.
On the other hand, Amazon with its ‘Easy returns’ advertisement offers a direct value perception. The latter makes more sense for a mature e-commerce industry, but is India one? Strap in to witness a fascinating battle in this segment.
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Tanmay Muthe is a Business Consultant with projects in various domains like Technology, Finance, Retail and Education. His expertise lies in the retail domain specializing in business strategy and tech facilitation. He has been a liaison between culturally and geographically diverse teams while designing customized business solutions for clients.
Disclaimer: The views expressed in this article are solely those of the author and do not in any way reflect the opinions of his employer or clients.
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