Flipkart-Snapdeal merger rumours have been buzzing around since last few days. The ongoing negotiation, for sale of Snapdeal to its…
(Getty Images)
Flipkart-Snapdeal merger rumours have been buzzing around since last few days. The ongoing negotiation, for sale of Snapdeal to its larger competitor Flipkart, have been making employees nervous of losing their jobs due to consolidation. Now it's out, Flipkart is buying Snapdeal to strengthen its muscles in highly competitive e-commerce market.
The initiator of the talks is Softbank Corp, which is a Japanese investor in Snapdeal, wants US-based Tiger Global, the biggest investor in Flipkart, to consider a merger, according to media reports.
But what really triggered the talks? Is it just a process to lead the e-commerce industry? The answer is No.
Advertisement
Snapdeal has been struggling to sustain in the growing market since a few years.
“Over the last two-three years, with all the capital coming into this market, our entire industry, including ourselves, started making mistakes,” Snapdeal founders, Kunal Bahl and Rohit Bansal, said in a letter to their employees.
“We also started diversifying and starting new projects while we still hadn’t perfected the first or made it profitable,” they added.
Snapdeal has nearly one million customers on its site daily. The company posted losses of nearly Rs.3,000 crore in financial year 2015-16 which is double that of the previous year.
The deal could be profitable as rationalising infrastructure, generating operational efficiency, lower store expenses and savings in energy cost will give both the companies an opportunity to compete with other players in the industry.
Meanwhile, Flipkart has over 100 million customers and other troubles. The deal will give Flipkart an opportunity to fight with its direct competitor Amazon.
Amazon has managed to maintain its growth by providing a massive selection for the shoppers with low prices.
In online space, customer doesn’t care for the company but thinks of low price and better quality. To ensure long-term profits in the industry, the deal may be helpful for the companies to gain handsome profits.
Advertisement
