Kartik Yadav, Doctoral Student, IIM Bangalore
'Merger will ensure Flipkart survives till India market matures'
That Amazon - the giant of e-retail with colossal sales and soaring shares - is not profi table is common knowledge. After a debacle in China, it is going all out to make a success story of India, delving into its deep pockets to gain market share.
In such a market, Flipkart's decision to buy Myntra makes a lot of economic, if not accounting, sense. With their common investors (Tiger Global, Accel Partners and Sofi na), Flipkart and Myntra are natural allies, and it would have cost them a bomb to stay relevant separately. Flipkart's dominance lies in electronics and books, but the big margins lie in fashion and apparel, where Myntra has a lead. Flipkart's superior backend and delivery mechanism can in turn benefi t Myntra. These synergies are going to be crucial. Apart from saving on technological investments, together they can hope to analyse mountains of big data better - the core strength of Amazon.In pursuit of revenue growth and market share at any cost, these players too (like Amazon) are incurring losses despite soaring sales. But Flipkart at least makes a profit per transaction, so the day it stops expanding and investing in technology, it can become profi table. Pursuit of market share will come handy once the market matures and then explodes as in China. The consolidation by Flipkart will go a long way in ensuring it survives till then and doesn't get rolled over by Amazon.