Amazon India is on a high as its subscription service Prime is performing exceedingly well. The etailer witnessed two-fold increase in membership base of Amazon Prime and as of now 30% of all orders come from Prime members.
A surprising trend is that nearly half of the Prime orders originate from tier 2 & 3 cities. Order value too increased during the Great Indian Sale held in May this year and 1 out of 3 units that are shipped by Amazon are ordered by Prime customers.
While Amazon would continue to enhance its Prime service, the American biggie is already planning its next big move. That is acquiring Big Basket.
Bigbasket signs exclusivity agreement pact with Amazon
IOS reported how it is being speculated that the online grocery leader BigBasket and Amazon are negotiating a possible acquisition deal. The speculation is now confirmed to an extent, as the e-grocer has entered into a 60-day exclusivity pact with the online marketplace.
A source disclosed,
“Typically in M&A deals, exclusivity periods extend to about 30 days so it’s clear there’s only one interested party to buy BigBasket presently. For BigBasket a sale to Amazon will give them a cash exit even if some part comes through in Amazon stock as they are a listed entity.”
The exclusivity agreement would ensure that BigBasket doesn’t engage with other companies (Flipkart?) for sale talks. It would also give Amazon enough time to conduct due diligence of the online grocery player to determine its worth. But BigBasket is free to approach financial investors to raise funds.
Amazon ahead of Flipkart in terms of unit sales and GMS
Experts believe that Amazon’s urgency to acquire Big Basket and dissuade others from buying it by signing exclusivity pact is due to Flipkart’s rapid acquisition.
Flipkart gained a fashionable advantage by acquiring Myntra and Jabong. Amazon doesn’t want to give another lead to its rival by losing in grocery.
“They lost leadership in the fashion vertical after rival Flipkart acquired Myntra and Jabong. And the battle with Flipkart for e-commerce leadership will not be ending anytime soon,” said an insider.
Keeping the fashion vertical aside, Amazon firmly believes that it is ahead of Flipkart in terms on unit sales and gross merchandise sale (GMS).
Amazon India Head, Amit Agarwal asserted,
“We know from our numbers that our units (shipment) are far greater than anybody else’s and we have the same opinion about GMS, too. Also our growth rate, which we have been publicly reporting, in Q1 was 85% year-on-year whereas the overall industry reported flat to negative numbers. So you have to tie these numbers and ask yourself how to evaluate them. If there was a very clear market segment measurement that is substantiated, I will be more than happy to refer to that.”
The two competitors are neck to neck in terms of strategies to win Indian ecommerce market. Flipkart has high-value shoppers in its kitty, while Amazon’s localization strategy might help them to win in the long-term. Sachin Bansal is focusing on building affordable brand ‘Billion’ and mega app and Amazon is working on digital payments service.